Personal Finance en Wed Nov 02 10:37:51 IST 2022 borrow-an-experience <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The idea of travelling has transformed in the last decade. Today, millennials want to immerse themselves in life-changing experiences. Whether it is the hills or the beaches, a long break or just a short weekend getaway, travel has a profound impact on one's well-being. It rejuvenates, gives rest to the working mind and, more than anything, helps in self-reflection.</p> <p>&nbsp;</p> <p>By providing such benefits, it becomes one of the most important tools for preparing ourselves for the future.</p> <p>&nbsp;</p> <p>For example, there are annual expeditions to Ladakh, where responsible travellers from around the world congregate. They trek, swim and cycle to reach a village that has never seen electricity. And then, they electrify that village using solar power. There are villages in the forgotten hills, where entrepreneurs offer home stays and natural experiences such as folklore interpretation, agriculture learning, trekking and camping. Sometimes, these villages are opened to tourists to be part of their local festivities as well. Today, there are art trails, food trails and rural tours that are all experiential in nature.</p> <p>&nbsp;</p> <p>In fact, a few companies which place the welfare of their employees at the core offer sabbaticals or short-term opportunities to work remotely. Even though they are few, we will see more such employee engagement programmes being adopted by companies in future. It could be offered to all employees or only to high-performing candidates. Companies would do this because they realise that travelling has become a way of life and it has a positive impact on performance outcomes.</p> <p>&nbsp;</p> <p>One vacation a year is a thing of the past. Recent findings on the travel patterns of millennials suggest that they go on more vacations than their parents. Once the holiday schedule is out, travel weekends are often blocked. This is beyond the 7 to 14 days vacation during summers or winters. For them to take advantage of everything that travel has to offer, the core issue is finance. To travel frequently, to make travel an experience or to explore new destinations, good inflow of money is required. Often, travel becomes a challenge due to limited savings, lower salaries or even less credit available on credit card. But this generation is internet savvy and is open to adopting online financial services.</p> <p>&nbsp;</p> <p>Holiday destination research starts on digital and social platforms and financial aid is readily available from online lending companies. Many such online financial institutions offer holiday loans that help millennials fuel their desire for travel. Without the need to submit one’s travel details and with a flexible repayment structure, these loans are a really good option to fund entire vacations. Holiday or travel loans are available from Rs50,000 to Rs5 lakh for a long tenure (12 to 24 months) to accommodate travel cost within salaries. Keeping in mind this generation’s appetite for digital processes, these platforms ensure that the loan application process is pretty straightforward. You can apply online without having to report in person anywhere. Also, holiday loans from fintechs are cheaper than a credit card.</p> <p>&nbsp;</p> <p>A simple online application along with a valid identity proof, bank statement, address proof and a couple of salary slips will get the job done. Once approved, the amount is disbursed to the beneficiary within 24 to 36 hours of the initial loan application.</p> <p>&nbsp;</p> <p>All Indians, and not just those in the millennial segment, are travelling more. This shows that holiday loans will become more popular. With reasons ranging from understanding different cultures to having an envious Instagram feed, millennials are determined and passionate about integrating travel into their lives. Holiday loans make sure that they do not need to maximise their credit card limits or go broke while travelling.</p> <p>&nbsp;</p> <p><i>Kumar is cofounder and CEO of LoanTap.</i></p> Fri Jun 07 17:36:50 IST 2019 rationalising-ratio <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>A good credit score, the result of prudent financial management practices, can come in handy when you dream of having a car or a home financed in the future. Easy to build yet easier to ruin, a credit score is the sum of a few judicious calculations in terms of utilising your available credit options vis-a-vis your income. Lenders can squarely judge whether you are experiencing financial stress or not, going by your debt-to-income ratio and credit-utilisation ratio (CUR). Thus, keeping key ratios related to utilisation, debt levels and balance to limit can improve your overall credit score, and get you a better appraisal from lenders.</p> <p>&nbsp;</p> <p>Let us understand more about these simple ratios:</p> <p>&nbsp;</p> <p>Debt-to-income ratio: It is the ratio of the amount that goes towards paying debts and other financial obligations expressed as a percentage of gross income. For example, if you earn Rs 25,000 a month and spend Rs 12,500 to pay credit card bills and other debt obligations, including loan EMIs, your monthly debt-to-income ratio would be 50 per cent. Even though the debt-to-income ratio does not directly influence your credit score, it forms a critical part of your overall credit health and it is considered by lenders in loan application process.</p> <p>&nbsp;</p> <p>Credit-utilisation ratio: Credit-utilisation ratio is a measure of your credit card balances versus the credit card limit. This is one of the factors influencing your credit score. To elucidate further, if a person’s overall credit card spending limit is Rs 1 lakh and his current outstanding balance is Rs 40,000, then, his CUR stands at 40 per cent. As against this, another individual who spends around Rs 40,000 a month, after acquiring a larger credit card limit of Rs 2 lakh manages to keep his CUR at a constant level of 20 per cent.</p> <p>&nbsp;</p> <p>Both debt-to-income ratio and credit card utilisation are a measure of the financial leverage one has built over time. While there is no single cut off defined for these parameters, a continued increase in leverage could lead to drop in score. No single ratio is considered in isolation while calculating your credit score and your repayment regularity, level of borrowing, type of borrowing, etc, are other important aspects. However, the two key ratios say a lot about your efficient debt management and controlled spending, it holds much insight for a lender about your bonafide intentions when it comes to servicing debt obligations and hence influence the lending decision for lenders.</p> <p>&nbsp;</p> <p><b>Jayaraman is MD, Decision Analytics at Experian Asia Pacific.</b></p> Fri Apr 05 14:28:47 IST 2019 have-money-will-travel <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Unlike the previous generation, millennials today place more value in acquiring experiences than commodities. Did you know that 62 per cent of Indian millennials travel between two to five times a year, from short domestic trips to longer international sojourns?</p> <p>&nbsp;</p> <p>With Indians travelling more than before, banks and financial institutions are offering loans at lucrative interest rates. Travel loans are quickly emerging as the preferred credit option; they are cheaper than credit cards, and have a faster disbursement turnaround time, less documentation and flexible repayment terms. If you are planning to take a travel loan, here are some points to keep in mind:</p> <p>&nbsp;</p> <p><b>TAKE ONLY WHAT YOU REQUIRE</b></p> <p>Typically, a travel loan can range from Rs10,000 to Rs25,00,000, with interest rates ranging from 11 per cent to 21 per cent. However, the higher the loan amount, the more you will have to repay. Hence, it is important to assess how much of the travel cost you can cover with your savings, and then decide on how much money, if any, needs to be taken on loan.</p> <p>&nbsp;</p> <p><b>CHECK SECURED VERSUS UNSECURED CREDIT EXPOSURE</b></p> <p>A right mix of secured and unsecured loans is important to maintain a good credit history and a high credit score. If you already have a large number of active unsecured loans (loans without collateral), such as an education loan, multiple credit cards and personal loans, it is not advisable to add to the burden with a travel loan.</p> <p>&nbsp;</p> <p>A high number of unsecured loans on your credit report can negatively impact your credit score and may impede your chances to get a loan in future, especially during emergencies. Avoid falling into the debt trap by ensuring that the total EMIs you pay only amount to 30 per cent of your monthly income.</p> <p>&nbsp;</p> <p><b>HAVE ALL DOCUMENTS AT HAND</b></p> <p>Though getting a travel loan does not need a lot of documentation, you will need your address proof, identity proof, bank statement, salary slips and passport size photographs, in case you are a salaried individual. If you are self-employed or not yet employed, the requirements may vary. Some lenders might also require additional details such as your income, airfare, accommodation bookings and travel plans. Check with your lender and keep all your documents at hand to expedite the loan disbursement.</p> <p>&nbsp;</p> <p><b>CHOOSE YOUR REPAYMENT TERM CAREFULLY</b></p> <p>Usually, the repayment tenure on travel loans ranges between 12 and 60 months after the loan is availed. The interest rates on these tenures will also vary. Though you might consider a longer repayment term with a lower interest rate, the truth is you will pay more than what you would pay if you opt for a shorter one with a relatively higher interest rate. Also, check the lender’s terms and conditions about a prepayment option if you would like to pay more in case you have a bit of excess cash in hand, like from a bonus received.</p> <p>&nbsp;</p> <p>In the midst of your travel plans and excitement, remember to keep your account funded for any upcoming EMIs scheduled for while you are away. Ensure you do not miss a single payment due date, which can impact your credit score. And always remember to monitor your credit score and report regularly. This will help you keep a tab on your credit portfolio, watch for score trends and ensure you are not taking on more credit than you can responsibly manage.</p> <p>&nbsp;</p> <p><b>Ahlawat is head, direct to consumer interactive, TransUnion CIBIL.</b></p> Fri Feb 08 15:42:42 IST 2019