Is it smart to use personal loan to fund your next trip?
Most of the rise in holiday loans is from non-metro India. In 2025, 71% of borrowers came from Tier-2 and Tier-3 cities, up from 68% in 2023. Cities such as Lucknow, Surat, Jaipur, Patna, and Durgapur have been major contributors.In comparison, Tier-1 cities made up 29% of such borrowers, slightly down from 32%, showing that smaller cities are driving the trend.Among Tier-1 metros, Delhi leads with 35% of holiday loan borrowers, followed by Hyderabad at 18%. Mumbai accounts for 15% and Bangalore 14%, while Chennai, Kolkata, and Ahmedabad each have a 6% share.YOUNGER BORROWERS LEAD THE DEMANDThe report points to a sharp increase in borrowing among younger travellers. Gen Z, under the age of 30, made up almost 30% of borrowers in the first half of 2025, more than double their share in 2023. Millennials, aged 30 to 40, remain the largest group at 47%.Borrowers are also showing a preference for smaller loan sizes. About 30% borrowed between Rs 1 lakh and Rs 3 lakh, while 20% borrowed between Rs 50,000 and Rs 1 lakh. This suggests that many prefer to keep repayments manageable and avoid long-term debt.Private sector salaried employees form the largest share of holiday loan borrowers at 65%. Business owners' share has risen from 12% in 2023 to 17% in 2025. Self-employed professionals account for 12%, while government employees make up 6%.PEAK SEASONS AND POPULAR DESTINATIONSThe highest demand for holiday loans was in January, May, and June 2025, with January alone contributing 21%. These months align with popular winter and summer travel seasons.Goa is the top domestic holiday destination for borrowers, with 18% choosing it, followed by Kashmir (16%) and Himachal Pradesh (14%). Internationally, South East Asia is the most popular region with 44% of borrowers, including destinations such as Thailand, Vietnam, Singapore, and Bali. The Middle East attracts 32%, while the USA and UK together account for 20%.advertisementThe report indicates that financing travel through personal loans is becoming a mainstream choice. Rising financial confidence in smaller cities, the growing participation of younger borrowers, and a preference for smaller loan amounts suggest this trend will continue.IS IT PRACTICAL TO GO ON A HOLIDAY WITH LOAN MONEYHolidays for most people mean going out with family or friends, spending time on a hill station, beach, or maybe on a riverside to get freedom from work and stress. However, in some cases, going on a vacation on your loan money might just do the opposite to you.Abhishek Kumar, Sebi RIA and Founder of SahajMoney, said that while personal loans for travel may seem practical because of easy access and repayment flexibility, the high interest costs make them expensive. 'It could be used as a last option when one is facing a liquidity issue but has stable income and can comfortably manage monthly EMIs,' he said.Kumar advises first-time borrowers to avoid taking a loan for a holiday as it can lead to reliance on credit for non-essential spending. 'Ideally, one should not use a loan for travel as it could lead to a situation where one would start using it as the first option and then fall into a debt trap,' he warned.advertisementInstead, he recommends building a dedicated travel fund that covers all trip-related expenses.If borrowing is unavoidable, Kumar suggests maintaining a credit score above 685–730 to get favourable rates, comparing offers from multiple lenders, and ensuring EMIs do not exceed 20–30% of monthly income.On the growing trend of holiday loans, he observed that it reflects the 'YOLO' mindset of the younger generation, who are more willing to take loans for lifestyle expenses rather than essential needs.This, he cautioned, mirrors risky financial behaviour that could lead to future stress when repayments clash with regular expenses.Kumar points out that better alternatives exist, such as saving through recurring deposits or liquid funds, which maintain liquidity while earning returns. For short trips, he notes that credit cards can be cost-effective if the bill is paid in full within the 40–50 day interest-free period.Whether planning a beach escape in Goa or an overseas holiday in Southeast Asia, more Indians are relying on personal loans to turn their travel plans into reality, but experts warn that disciplined financial planning remains the safest route.advertisement(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- Ends
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