Is ‘Travel Now, Pay Later’ a good option for your vacation?

Planning a last-minute summer holiday but don’t have enough savings to fund the trip? Some travel aggregators, such as MakeMyTrip and Expedia, have started offering a pay later financing option, commonly known as Vacation Now, Pay Later, at the time of booking checkout that allows customers to book the holiday without paying for it immediately. 

Vacation Now, Pay Later service gives digital credit that is disbursed by the partner bank or non-banking finance company (NBFC) of the travel aggregator. Annual interest rate on these loans can range anywhere between 13% and 30% and repayment tenure can go up to 18 months. Repayment in the form of monthly instalments kicks in a month after the booking is made, which means that, contrary to the name of the loan, you won’t necessarily be paying back the loan after your vacation if you make the booking well in advance. 

Some aggregators may offer you zero interest rate for full repayment done within 15 days of taking the credit. Defaulting on instalments attract a penalty of 2-3% monthly interest or a flat late payment fee with each default.

An important thing to note with these loans is that aggregators may not allow credit on every expense related to the trip. For instance, some aggregators give credit only on packages available on their platform, while others do not allow flight bookings or visa fees through the pay later financing option. In the case of the former, you may have to compromise on your itinerary just to be able to fund your holiday. 

Also, check whether the aggregator allows you to cancel the loan if the trip is cancelled and whether you will be required to cough up an extra fee for cancellation. 

“Vacations involve cancellations, sometimes from the traveller’s end and sometimes from the airline’s or travel agency’s end, which may lead to a lot of hassle for the borrower as they will have to deal with not just the aggregator but also the lender. The experience could leave a sour taste in your mouth. It is better to use a credit card,” said Amit Suri, a Delhi-based financial planner.

A travel credit card may be a better option as you not only save on interest if you pay back on time but also earn reward points that can be used for flight and hotel bookings later.