As travel curbs across the globe continue to get eased, travellers are leaving no stone unturned to satiate their wanderlust. And amid rising ticket fares, many Indian tourists are opting for loans to fund their foreign travel plans. According to recent reports, Travel Now, Pay Later (TNPL) offers from banks, travel companies and third-party lenders have found many takers in Indian travellers. Although, it currently forms just 1% of the gross merchandise value (GMV) of travel agents, these loans are expected to increase to 5% of the total GMV by next year. The growth in the TNPL segment is primarily being fuelled by IT professionals and honeymooners, adds the report.
What is the TNPL scheme?
By offering the option to pay off a travel plan either through a website or directly from a loan provider, TNPL schemes allow you to travel on EMIs. One can make payments in instalments until they pay off the amount, plus interest, if applicable. The payments are then deducted in an automated way via credit card, debit card or bank details.
“The Travel Now, Pay Later feature is gaining momentum in the country as it provides a convenient option to travellers who would like to visit their dream destination while avoiding any financial crunch. We have been receiving a positive response from consumers,” says Bharatt Malik, senior vice president, Flights, Yatra.com.
Megha Saraf, who works with an IT firm in Gurugram, recalls her experience: “I travelled to Mauritius with my friends on TNPL and paid off my EMIs within four months. I really like this process as it is quite hassle-free without putting any financial burden on me . I’m also planning an Egypt trip the same way, soon.”
How TNPL works
Under this scheme, travel firms either tie up with banks, FinTech companies, loan apps, third-party lenders or offer credit through their own FinTech partners. “We have witnessed a 7x surge in queries among customers opting for TNPL, and have received over 1,000 requests recently,” informs Daniel D’Souza, president and country head, holidays, SOTC Travel.
Similarly, Rajeev Kale, president and country head, holidays, MICE, Visa at Thomas Cook (India) Limited, says they have witnessed over 25% increase in consumers seeking viable options to fund their holidays. “This formed the genesis of our Travel Now and Pay on Return initiative with a FinTech partner,” he says.
Also, TripMoney, the FinTech arm of MakeMyTrip has seen a 4x growth within this segment in the last two years. “To power our BNPL offerings, we work with leading banks and Non Banking Financial Companies,” says a spokesperson at MakeMyTrip.
In case you fail to pay your EMI, there are penalties, one of them being a drop in your credit scores.
Popular destinations
Europe, UK, Australia, Turkey, Jordan and Egypt are some of the leading international destinations that tourists avail these offers for. Closer home destinations with easier visa norms such as Dubai, Abu Dhabi, island destinations like the Maldives and Mauritius, and Southeast Asian destinations like Singapore, Thailand, Malaysia and Indonesia, also rank high among Indian tourists opting for TNPL.
A plethora of offers
At Yatra.com, while the average transaction size of the loan for domestic destinations is ₹14,000 to ₹15,000, travellers can avail loans of ₹65,000 – ₹70,000 on their trip to international destinations. They can pay back the money in three to six equal interest-free instalments. Meanwhile, D’Souza informs that the average transaction size for an international travel loan at SOTC is ₹1,50,000. “If the customer chooses to repay the travel loan within a period of six months, they are eligible to avail the loan at 0% interest rate. However, for repayment terms higher than that, the interest rate is about 1% per month/12% per annum,” he adds.
MakeMyTrip’s TNPL facility starts at ₹500 and goes up to ₹1 lakh. “75% of our users opt for no-cost short term credit, while the rest prefer a longer tenure, and our average TNPL till date is ₹7,000,” says a spokesperson. And, Kale from Thomas Cook informs they offer credit facilities with multiple bank partners, with payment in 3-to-13-month instalments.