It was a spur-of-the-moment holiday plan for Arvind Singh, a 36-year-old IT professional in Bengaluru, and his family. His wife, Amrita, told him that their two children, ages 10 and 6, had a three-day holiday coming up and they were all very keen to go somewhere. If they tacked on another two days, they could do a five-day trip to Kerala. The only hitch? Some of Singh’s money was stuck in the form of delayed travel reimbursements from his office.
“So I searched online and took a loan. The good thing was I didn’t have to run around to get it processed,” says Singh, who took a holiday loan of Rs 70,000 from digital lender Qbera at 14% interest, a rate he is comfortable with, especially when the repayment period is stretched over a year. Singh says he will definitely consider the same option the next time they make a spontaneous holiday plan.
Singh is one of the many customers driving the sudden spurt of Indians taking a loan to go on a holiday. The market is at a nascent age but players in both the travel and lending industries confirm that the initial signs are promising. Thomas CookNSE 0.74 %, in its Summer Trends 2019 report, reported a 50-60% jump in travel loans over the past one year while online travel booking firm MakeMyTrip says travel loans are the fastest growing payment option on its platform today. Digital lender Kissht, which enables customers to pay through EMIs for making purchases even without owning a credit card, says the travel loan segment has grown 60% in the last couple of years (admittedly, on a low base). Similarly, Tata Capital Financial Services says travel is one of the top two reasons customers are availing of personal loans, a category that’s been growing 60-65% in the past year-and-a-half for the company.
This is a sea change from a few years ago when, Thomas Cook says, there were hardly any takers for the personal loan option it offered to customers making bookings through the company. “It did not take off then because people felt travel was not something they should take a loan for. So we started something called a ‘holiday savings account’ where you could save for a holiday you will take the next year through a recurring deposit, which is the opposite of a holiday loan. But in the last two years, the loan segment has suddenly opened up,” says Abraham Alapatt, president, Thomas Cook India.
Daniel D’Souza, president and country head (leisure), SOTC, says the company had a similar experience: when it offered the option of paying for travel via loans, 15 years ago, there were no takers. “But in the past 1-2 years, this has changed and we are also pursuing this aggressively,” says D’Souza.
Multiple reasons are driving this trend, including the overall surge in the number of Indians travelling, both abroad and within the country. According to the UN World Tourism Organisation, 50 million Indians are estimated to travel abroad in 2019, more than double the number in 2017. Domestic tourist visits, too, have increased multi-fold, to 1.65 billion in 2017 from 220 million in 2000. The desire for instant gratification is another driver, with millennial customers, in particular, preferring to travel sooner and not being averse to taking loans for it.
Then there is the “affordability and accessibility” of credit, says Qbera founder Aditya Kumar, particularly with the entry of digital lending players that offer instant loans with less cumbersome procedures. If your credit score and other data are in order, the money can hit your account the same day. “These are typically unsecured loans given to customers on the basis of their risk profile and the companies they work with. The rate of interest, about 13-14%, is not too high,” says Vivek Chopra, chief product officer, Tata Capital Financial Services.
“There is growing awareness over the last few years about using credit to pay for things. That’s why we are seeing this jump,” says IndiaLends cofounder Mayank Kachhwaha, adding that unsecured credit in general continues to be an under-penetrated category. An IndiaLends study found a surge of 50% in loan applications in the holiday season.
Customers typically tend to be between the ages of 25 and 35 years, are located in metro cities and have incomes starting at Rs 35,000 take-home pay a month. Loan sizes vary from Rs 30,000 to a couple of lakhs. “The average would be Rs 50,000,” says Lizzie Chapman, cofounder of online lender ZestMoney, which is seeing travel loans growing 100% year-on-year.
A quick loan also suggests that travellers do not have to make plans much in advance. SOTC’s D’Souza says the company has had customers who wanted to travel to Phuket the next day for a holiday. “And we have helped facilitate that.”
Buoyed by the spike, both travel and lending companies are optimistic about prospects. This is also considered a relatively low-risk category of borrower, since travel indicates a degree of affluence unlike, say, a personal loan to cover hospital expenses.
MakeMyTrip, which launched its own credit offering nine months ago apart from tie-ups for loans with banks, is planning to double down on the category. “We are gung-ho about this and are in advanced talks to tie up with two more NBFC partners,” says Sumit Agarwal, vice president of online products at MakeMyTrip. Tata Capital Financial Services is running a beta version to offer existing customers end-to-end instant personal loans online, which will be sanctioned in two hours. “Very clearly, there’s a shift from asset-based lending to consumption-driven lending,” says Tata Capital’s Chopra, who says this growth is likely to continue.
Ranvir Singh, founder of Kissht, says, “It’s a category with a big opportunity, if trends in countries like China are anything to go by.”