5 Alternative Ways to Fund Your Dream Trip Even With Bad Credit

Many of us love travelling and like to explore new places at least once or twice a year. However, travelling is quite a cost-intensive hobby and having the requisite funds at your disposal is not always feasible. Moreover, if you travel with your family, then your travelling costs can be even higher.

A go-to solution for funding your travelling expenses is to opt for a travel loan. But a good credit score is imperative to obtain such a loan for travel. If you apply with a bad credit score, you will most definitely struggle to qualify for a loan. Fortunately, there are quite a few alternatives to fund your dream vacation even with a bad credit profile.

In this blog, we are going to discuss five different ways of financing your trip, even if you are currently struggling with bad credit. We're also going to tell you how to borrow responsibly for travel, control your travel expenditure, and plan your loan repayment accordingly.

5 Ways to Fund Your Trip Even if You Have Bad Credit

If your CIBIL score is anywhere below 620, it is considered a low or poor score. It can be very difficult to secure a Personal Loan for travel, and even if you get one, it will most definitely be lent at very high interest rates.

So, here are some alternative ways that you can consider to fund your next trip, even if you have a bad credit score in India:

1. Get a Secured Travel Loan Against Assets

Personal loans are unsecured loans, and hence, having a good credit score is one of the most fundamental eligibility criteria. However, in emergency cases, where you have a bad credit score but need an instant travel loan to fund your trip, a secured loan emerges as the best alternative.

When you provide collateral, like gold jewellery, fixed deposits, mutual funds, or any valuable asset, the lender's risk is reduced and your chances of approval increase. However, if you fail to repay on time, lenders may recover the dues by seizing your assets.

Here are some things that you should consider if you are applying for secured loans:

• Ensure the asset you pledge has a clear title and ownership proof.
• Check for foreclosure and prepayment charges.
• Only borrow from reputed banks and RBI-registered NBFCs. 
• Borrow only what you can comfortably repay on time.
• Review the loan tenure and repayment structure before signing the loan agreement.
• Keep copies of all loan and collateral-related documents.

2. Make the Best Use of Your Existing Credit Cards

Getting a Personal Loan for travel can be difficult if you have inconsistent credit behaviour or repayment habits. However, you can use your existing credit card to cover your travel expenses and repay when your bill is generated. You can use it for booking flights, accommodation, or transportation for your travel plans.

Here's how to make the best use of your credit card:

Redeem your reward points.

Most credit cards allow you to redeem accumulated reward points for flight tickets, hotel stays, or travel vouchers. Check your card’s rewards portal to see if you can offset part of your trip cost using these points. Or if you still have some time left, you can use your card to collect reward points, which can reduce your travel spend, but make sure to pay your bills on time and in full.

Convert your expenses into EMIs

If your card issuer allows, you can convert high-value travel transactions into monthly EMIs. This helps you manage repayments easily without taking a separate loan. However, timely payments are essential to avoid additional charges or interest hikes.

Note: The eligibility to access EMI facilities depends upon your current credit card conduct. If you are regular with your credit card payments, then you can convert the eligible transactions into EMIs, even if your credit score is low.

3. Try to Use Saving Plans or Travel Funds

A very smart and hassle-free way to finance your dream vacation is to use travel savings plans. Most people underestimate the power of small but consistent savings.

Save a percentage of your monthly income in a dedicated holiday fund bank account. There are a lot of banks and apps that let you set aside a portion of your income every month for holiday expenses automatically.

Therefore, doing this will protect you from financial strain and the pain of repaying the loan in the future. You will also become more aware of your budget and can make arrangements for your vacation plans according to your savings.

This alternative will take time, but it's absolutely free of hassle, doesn't involve any loan, and allows you to enjoy your holiday with peace of mind.

4. Temporarily Borrow from a Reliable Friend or Family Member

At times of emergency travel needs when you're struggling with bad credit, consider seeking help from close friends and family. You can also check whether your employer offers a salary advance under such emergency circumstances. 

Even though this method is different from a quick travel loan, it can be a lifesaver in times of urgent travel needs when you're struggling with a bad credit score. However, you must diligently repay the borrowed amount and work toward building a good credit profile for future loan requirements.

5. Consider Applying for a Loan with a Co-Applicant or Guarantor

If your credit score is low, you can apply for a travel loan with a guarantor or co-applicant for increased prospects of acceptance. A co-applicant with good credit history and financial stability can help you get loan approval, although failed repayments will reflect in their credit report as well.

Both applicants will be required to provide necessary information, like work details, and documents like ID proof, bank account statements, electricity bills, and residence proof.

You can select a repayment period suitable for your budget and opt for flexible tenure or flexible repayment periods to ease the burden. However, before you apply, make sure that you are comfortable with your travel loan's monthly repayment budget. Utilise an EMI calculator to plan monthly repayments in advance.

How to Improve Your Bad Credit Score?

If you have hit rock bottom with your credit score, it is common to get the feeling that it is impossible to bounce back. However, that's not the case. Here are some tips that can help you gradually build your credit history and CIBIL score:

• Pay off all the outstanding amounts: Prioritise clearing all your outstanding dues first. Start by paying off high-interest credit accounts first. Defaults, settlements, overdues hamper your credit profile the most. Once you've cleared out outstanding dues, focus on building a habit of making on-time payments consistently.
• Reduce your credit utilisation to less than 30%: Reducing your credit utilisation is a proven way to boost your credit score, as high credit utilisation brings your credit score down. Budget your credit card expenses and clear total outstanding dues with each bill to maintain utilisation below 30%.
• Do not apply for credit frequently: Refrain from frequently applying for too many credit cards or loans within a short period. Doing this affects your credit score even if you're paying your bills on time.
• Improve your credit profile by mixing it up: A mix of diverse credit accounts will help you build a better profile, as the lenders perceive that you are able to manage multiple credit accounts without default. Build a mix of credit cards and secured, as well as unsecured loans in your credit profile.

How to Convert Your Credit Card Payments into EMIs?

Retail transactions for travel include items like flight and hotel bookings, paying for transportation or making travel-related purchases on merchant websites. These can usually be converted into EMIs if they meet your bank’s minimum transaction value.

Here's a standard method that will give you an idea of how to convert the credit card payments into EMIs, which will provide some financial support:

• Make a purchase using your credit card that meets your bank's minimum transaction amount eligible for EMI conversion.
• Using your bank's digital channels, like net banking, mobile app, or through customer care, check if you are eligible to convert the specific transaction on your credit card bill into EMI.
• Choose the transaction that you wish to convert into EMI. The EMI option is usually available for recent transactions only.
• Select the EMI tenure, review the competitive interest rates, and check the processing fees.
• Confirm the conversion, and your total cost will be split into equal monthly payments, including interest charges.

Remember to repay your EMI every month to avoid late fees, penalties, and negative credit impacts.

Documents Required to Apply for a Personal Loan for Travel

The documentation required to get a Personal Loan for travel expenses varies from lender to lender and also depends on your credit score. However, here are some important and essential documents required to apply:

• Proof of identity (Aadhaar card, PAN card, or passport)
• Address proof (electricity or utility bills, rent agreement, or voter ID)
• Last 3-6 months bank statements
• Salary slips or work details for income verification
• Details about your holiday plan or travel plans.

To Conclude

Availing a loan to finance your travel expenses with bad credit is very difficult. It is during these times that you can resort to secured loans like a Gold Loan to get quick access to funds. You can also utilise credit card benefits to pay for eligible travel-related expenses. However, in the long run, fixing your credit profile and improving your credit score is imperative to qualify for quick and unsecured funding options like a Personal Loan.

To start fixing a poor credit profile, it is recommended to clear your outstanding dues first, be consistent with timely repayments, bring down your credit utilisation ratio and refrain from applying for too many loans/credit cards frequently. In addition, check your CIBIL score regularly to ensure that errors in your report are not leading to bad credit.

Frequently Asked Questions

Am I eligible for a travel loan if I am self-employed or a freelancer?

Yes, certain lenders provide unsecured Personal Loan for travel to self-employed individuals and freelancers alike. You'll have to furnish proof of monthly income, including financial documents such as bank statements.

Can a poor credit record raise the interest rate on my travel loan?

Yes, a poor credit report can cause you to pay a higher interest rate since lenders consider you to be a riskier customer.

Can I get a Personal Loan for domestic and foreign travel?

Yes. A Personal Loan for travel can be taken for foreign travel or travel in India, or even on tour packages. However, a good credit score offers benefits like instant loan approval.

Is there any cap on the loan amount I can borrow for travelling?

Yes, your loan amount would be based on your income, repayment capacity, and the lender's eligibility limits.

Can I prepay my travel loan before the end of the repayment period?

Yes, you can prepay, but refer to your loan contract for prepayment fees or other charges.

How quick is loan disbursal for an instant travel loan?

You get your loan approved instantly within 24–48 hours if your documents are in order and you qualify. However, a good credit score ensures quick approval and affordable rates.

Will taking multiple loans have an impact on my credit score?

Yes, taking several loans simultaneously actually harms your credit score. This is why you should refrain from applying for too many loans/credit cards frequently.

Can I avail a travel loan without a guarantor or a co-applicant?

Yes, you can avail of a travel loan without a guarantor or collateral. However, for this, you need to apply with a good credit score and a timely repayment history.

What happens if I miss an EMI on my travel loan?

Missing an EMI decreases your credit score and will lead to penalties. This is why, you must plan your monthly repayment budget in advance.

Can I include shopping or dining expenses other than travel expenses in my holiday loan?

Yes, holiday loans include all the costs associated with travel, including holiday expenditures such as food, activities, or even airport pickups.