Travel Now, Pay Later is the new 2022 travel trend. Is it worth it?
Now that summer is in full swing, all you want to do is travel to a beach or a cool hill station and chillax! With many countries easing travel restrictions, travellers are getting ready to hit the airports again with their airport looks. Let's face it: everyone needs a travel break. But with fuel prices going through the roof and inflation hitting hard, the travel industry is being forced to make efforts to look ''affordable''.
You might have seen the slow sprouting of a scheme called 'Travel Now, Pay Later' (TNPL) on an increasing number of travel websites recently. If you haven't yet, it is already visible on MakeMyTrip's website.
So, what is this scheme and how does one avail it?
Also, is it worth it?
Here is everything you need to know about the Travel Now, Pay Later scheme that the travel industry is seeing more of these days.
WHAT IS THE TRAVEL NOW, PAY LATER SCHEME?
Just like you pay back your car and home loans in monthly installments, the Travel Now Pay Later option allows you to repay your travel expenses in installments over time. Thus, customers can make their vacation payments in installments instead of paying a lump sum at the time of booking. The only catch is that this option is a tad costly at times.
If a service provider (say eg: Delta Airlines) gives an option to pay later, customers can do either of the two things:
1. Sign up for a payment plan when they're buying a plane ticket on the Delta Airlines' website, or
2. Opt for a loan on the loan provider's website before they purchase the ticket.
When you opt for the loan option, you have to share your debit card details or bank information. This allows the financier to automate your EMI payments according to the financier's terms.
Before you sign any loan documents in the lure of getting a loan in 2 minutes, however, we suggest you take your time to read the terms and conditions. Why? Loans like these will usually will have really detailed terms and conditions and might also cost you more. Though some companies offer a 0% rate of interest, many companies charge interest rates above 30% for such financial arrangements.
WHO PROVIDES THESE SERVICES?
Travel booking companies (like MakeMyTrip) and airline companies tie up with banks, financing companies to provide this alternate payment option to customers. Internationally, Delta Airlines has partnered with American Express to allow customers to pay for their flights over time.
In India, Thomas Cook and SOTC launched a similar 'Holiday First, Pay Later' scheme in June 2021 where they partnered with various non-banking financial institutions to offer this service. Recently, MakeMyTrip partnered with 15 banks, NBFCs and fintech players to offer a similar payment credit when customers book flight or hotel tickets.
WHAT'S THE CATCH?
Are you ready to read the fineprint of your contract like a lawyer and do your due-diligence? Because you might have to pay a hefty interest rate if your loan is a long-term one; ie. more than 3 months long.
(In case of MakeMyTrip, 75% of their customers use the no-cost 3 month EMI option, whereas the rest go for the long term option.)
Also, do your money habits show a decent credit score? Non-banking finance institutes and banks usually look at customer's credit scores to decide if they are worth lending to and deserving of a travel EMI. Also, once a travel loan or credit is given to a customer, this will also subsequently affect their existing credit score.
SO, IS IT WORTH IT?
If your priority is to travel and spending on interest costs doesn't matter to you, then yes, go for it. But if you are someone for whom every penny matters, then take your time to read through the fine print, find an estimate of additional costs you might have to bear. Add these additional interest charges and late fee costs to your budget and then evaluate so that you make an informed choice.