A foreign trip without falling into a debt trap

A foreign holiday brings with it lots of long-lasting memories and fun, but also steep expenses. By smartly planning your finances, you can enjoy your trip, manage your expenses, and not find yourself in a situation where you’re out of money in a foreign land. Here are some ideas to help the process of raising funds for your trip.

Create a travel savings fund
Having a savings fund dedicated for your international travel is the first step to raise adequate capital for your trip. Calculate the approximate amount of money that you may need for the trip and devise a savings strategy accordingly. Do take into account currency rate fluctuations. You may even consider a travel-specific savings fund. For example, State Bank of India offers such an account where you can start a recurring deposit by parking your savings every month for a year. This fund can be used exclusively to avail a holiday package from a well-known travel operator. At the end of 12 months, the maturity proceeds are transferred by the bank to the operator to pay for your selected holiday package. Alternatively, you can also opt for a regular fixed or recurring deposit with your bank to save money periodically. The idea is to lock the money in a safe, liquid, risk-free instrument offering conservative returns. In this case, you could also try using liquid mutual funds since they do not have a one-year exit load.

Find more avenues for savings
Foreign travel rarely is cheap. Therefore you may need to cut some corners in the short term to be able to raise your travel fund. Find avenues in your budget for reductions in spending. You can also allocate seasonal income such as your annual performance bonus towards your travel needs.

Take a personal loan
We believe travel is a discretionary expense and therefore you should try to fund it using your savings. However, should you fall short of your funding targets, you can apply for a personal loan. Several banks also offer a travel loan, which is a variant of a personal loan. You can go online to avail an instant, paperless loan by comparing loan options from various lenders. You can also approach your own bank or credit card provider to check on pre-approved offers tailored for you. Before you take a loan, do ascertain your ability to pay the EMIs in a timely manner, since the interest rates for unsecured loans are steep.

Opt for travel operator financing scheme
Many travel operators offer financing schemes that allow you to pay your travel holiday package cost in EMIs. Travel agencies tie-up with banks and NBFCs covering all travel related expenses including flights, food, lodging and boarding up to a pre-determined limit. The repayment tenure for such travel finances schemes can vary from one to five years with interest rates similar to personal loans. Alternatively, you can also choose to book tickets or hotels directly using credit card and availing the EMI option of various tenures.

Use a global  or travel credit card
If you have an internationalor travel credit card with a high spending limit, you can use it to cover several parts of your vacation expenses. However, you need to intimate your bank about your travel so that the card remains activated on tour. A feature-rich credit card could also help you access premium airport lounge at discounted rates, flier miles, and discounted air tickets. These premium cards typically have an annual fees, so weigh your costs before buying.

Lastly, don’t fly sans health insurance
You may wonder why we should take a health insurance. Medical inflation means that in the event of a medical emergency abroad, you may lose your cash reserves quickly. Because of this, some countries require visitors to mandatorily have health insurance. Buying an optimally-sized health insurance may increase your overall travel expenses, but the protection offered will ensure that any healthcare expenses do not derail your holiday plans.

If you love travelling, you must top up and manage your travel funds actively. This would keep you worry-free when it is time to fly.

The writer is the CEO of BankBazaar.com