Opting for a ‘holiday first, pay later’ scheme? Know this first
New Delhi: Travel and hospitality sectors have faced the toughest impact of the COVID-19 pandemic, worsened after the deadly second wave in April and May. While recovery will be slow, the industry is coming up with innovative ideas to attract travellers. With properties across the country witnessing around 90% booking cancellations, and with revenues having dropped between 75%-80% in 2020; the industry is in dire need of a rescue.
Thomas Cook and SOTC can possibly ease the pain for hoteliers with their new scheme called TravShield & Holiday First and Pay When You Return.
In Thomas Cook’s quest to address the increasing positive travel sentiment in India, the company in collaboration with SOTC surveyed Indian residents and discovered that 69% of respondents indicated a keen interest to travel in 2021.
While tourism can holistically be revived only after travel restrictions are lifted worldwide, Thomas Cook’s latest offering can be the new reality for travellers.
52% of respondents to Thomas Cook’s survey preferred a complete re-sanitation of rooms for their holiday stay, while 48% preferred properties with vaccinated staff. TravShield – conceptualised in partnership with Apollo Clinics is therefore just what the doctor ordered for Thomas Cook’s illustrious clientele.
The more interesting proposition however is the Holiday First and Pay When You Return scheme. It is mindboggling to imagine allowing guests to enjoy a travel package with no advance payment, especially after Covid-19 has brought the travel industry to its knees.
What’s the scheme?
Travelers with a good credit history are eligible to apply for this scheme. The applicant’s creditworthiness will be evaluated by the NBFCs partnered with the travel firm. The traveler needs to pay 15-20 per cent of the cost of their domestic package and the balance after returning from holidays to the NBFC. If the entire remaining amount is paid in a lump sum to NBFC there are no additional charges. But, if you opt to pay in equated monthly instalments, then NBFC will charge interest.
The terms in the agreement of the ‘Holiday-Now-Pay-Later’ scheme are similar to the ‘Buy-Now-Pay-Later’ scheme. In the ‘Holiday-now-pay-later’ scheme, if you default to pay instalments to partnered NBFC after returning from the holiday, your credit score will take a hit that could affect getting loans in the future at the best interest rates.
Should you borrow?
Financial planners make a distinction between a good loan, like an education or home loan, which adds value to your life, and a bad loan, like a loan to buy a consumer product or to a holiday. In these times, one needs to think twice before taking a good loan. A bad loan is an absolute no-no. If you need a loan to fund a holiday, you are already in a terrible situation. How will you repay on return, should be the first question, in your mind. We suggest saving money via a recurring deposit or a systematic investment plan in an ultra-short-term debt fund to self-finance a holiday a year later. These schemes are suited for people who have money. They will not have to block their own money in advance, as happens usually. The cost is zero if they repay before the EMI starts.
If you decide to borrow If you decide to rake a loan, check a few things. Obtain clarity on the interest rate, repayment schedule, and the total liability you will incur.
What if you fail to pay up?
People who fail to pay upon return from their holiday will face the same action taken against loan defaulters. This will also be reflected in their credit worthiness and will have direct consequences on securing loans in the future.