For today's "Me First" generation, the era of easy and fast loans - enabled by a slew of financial technology ventures - is proving a godsend for international travel and frequent weekend getaways.
Personal finance for travel now account for between 12 per cent and 20 per cent of the total loan portfolio of these lenders. For some, it's the biggest segment, alongside auto finance.
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Abhinandan Sangam, co-founder and CTO of peer-topeer lender Finzy, says it's mostly salaried professionals between the ages of 28 and 35 who take these loans. And they take amounts of between Rs 2.5 lakh and Rs 5 lakh, mostly for international destinations. The trend encouraged Finzy to partner with travel aggregators to help the latter sell destinations like Europe, Australia and South Africa to travellers who might otherwise choose regular haunts in Goa, Thailand or Sri Lanka. "The cost of the total package, of Rs 1.5-2 lakh, can be daunting prospect for young professionals. But when you convert that into a EMIs of Rs 3,500, then it strikes them as manageable. Our travel partners too are very happy," says Sangam.
Loans also enable a better overall experience - better hotels, more cash for shopping. Short weekend getaways on borrowed money too have become big. Akshay Mehrotra, co-founder and CEO of lender EarlySalary, says every time there is a long weekend with some government holidays on a Friday or Monday, the company site sees thousands of applications. "And the locations would be very close to the applicant's residence. For instance, Mumbaikars like to travel to Goa or Lonavala," he says. His travel customers are typically 25- to 26-year-olds.
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Rajat Gandhi, co-founder of peer-to-peer lender Faircent, says pre-engagement or post-wedding travel - not including honeymoons - has become a trend. Mehrotra says people are going to places like Thailand for their pre-wedding bachelor parties. "They want to hang out on the beaches with their friends and get that perfect Instagram shot. And they are willing to pay for it," he says. Wedding-related travel constitutes 8-10 per cent of Faircent's loan portfolio and leisure travel a little less than 8 per cent.
Peer-to-peer lending platforms connect individual investors to individual borrowers. Participating investors decide who they want to give the loan to and the interest rate. In some cases, algorithms make the decisions for an investor. These ventures have a simple format to obtain loans. It typically involves an online application, with some supporting bank and salary documents, and PAN number.
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Unlike banks that look primarily at a borrower's CIBIL score, these ventures consider a variety of other information, including what is available online - like social media - to assess a borrower's credit worthiness. The ventures say they find many with low CIBIL scores eminently fundable. Sangam says, "We assess our borrowers on more than 130 parameters."
In EarlySalary, where the finance amounts are lower, the loan may land in the customer's bank account the same day. In the case of others, it takes two-three days. Gandhi says lenders on the Faircent platform charge between 18 per cent and 20 per cent for personal loans. In some cases, it can be even lower.