travel loan interest rates in India: how to compare banks

ever wondered if that "travel loan" a bank advertises is really any different from a regular personal loan?

most banks do not run a separate travel loan product. a standard personal loan is labelled for travel and marketed for holidays. the money is disbursed as a lump sum and repaid in equated monthly instalments (EMIs) over 1 to 5 years.

the amount approved depends on net monthly income, the credit score, existing loan obligations, and employment type.

public sector banks such as SBI and Bank of Baroda offer lower rates with stricter approval criteria. private banks such as HDFC and ICICI process faster and lend larger amounts at slightly higher interest. non-banking financial companies (NBFCs) such as Bajaj Finserv approve quickest, sometimes within hours, and charge the most.

the lender does not restrict how the money is used. a personal loan taken for travel costs the same as one taken for medical expenses or home renovation, because it is the same product at the same rate under different marketing.

now about those rates in 2026.

SBI starts at 10.5% and goes up to 12.5%. HDFC and ICICI begin at 10.75% and go up to 13.5% or 14%. Axis starts at 11%. Kotak goes up to 15%. Bajaj Finserv ranges from 11.5% to 15%. Tata Capital sits between 11% and 14%. IDFC First Bank matches HDFC at 10.75% to 13.5%.

the processing fees vary too. SBI charges up to 1% plus goods and services tax (GST). most private banks take up to 2.5%. Bajaj Finserv goes as high as 3.5%. on a ₹3 lakh loan, that's the difference between ₹3,540 and ₹12,390. before the loan even starts.

here's where it gets interesting.

the range within a single lender comes down to the credit score. SBI quoting 10.5% to one applicant and 12.5% to another reflects that difference: above 750 attracts the lower end of the range, 700 to 750 the middle, and below 700 a higher rate or a rejection.

on a ₹3 lakh loan over 3 years, a 2% higher rate adds roughly ₹10,000 to the total interest.

the advertised rate.

where bank A quotes 11% and bank B quotes 12%, bank A appears cheaper on the headline rate alone.

not necessarily.

bank A charges a 2.5% processing fee. that's ₹7,500 on a ₹3 lakh loan. bank B charges only 0.5%: ₹1,500. bank B's EMI is slightly higher: ₹9,960 versus ₹9,820. but after 3 years, Bank A costs ₹61,020 total. bank B costs ₹60,060.

the higher rate loan ended up cheaper. because the fee was lower.

this is why the annual percentage rate matters. it folds in everything: interest, processing fees, prepayment charges, late payment penalties. compare the annual percentage rate, not the headline rate.

then there's the interest calculation method.

most personal loans in India use reducing balance. interest recalculates every month on whatever principal remains. some NBFCs still quote flat rates to look cheaper.

on a ₹1 lakh loan at 12% over 2 years, the reducing balance method produces about ₹13,000 in total interest against ₹24,000 on a flat rate, which puts the effective rate of the flat rate loan at 21.5% per annum.

the sanction letter always mentions the method. worth checking.

other charges to watch for:

prepayment penalty runs 2% to 5% of the outstanding amount and usually applies within the first 6 to 24 months. the late payment fee is about ₹500 to ₹1,000 per missed EMI. stamp duty and legal fees vary by state and lender. some lenders restrict part-payment altogether.

all these get folded into the annual percentage rate. that's why it's the only number that matters.

tenure selection is another place where borrowers lose money.

on a ₹3 lakh loan at 12%, a 1-year tenure gives an EMI of ₹26,650 and total interest of ₹19,800. stretching it to 5 years drops the EMI to ₹6,670 and raises total interest to ₹1,00,200.

the 5-year option is easier to carry month to month and costs substantially more in total. travel is a consumption expense that generates no return, which is the argument for the shortest tenure the budget can absorb.

credit score drives the rate more than anything else.

750 and above: 10.5% to 11.5%. 700 to 749 to 11.5% to 13%. 650 to 699 to 13% to 15%. below 650: rejection or 15%+.

borrower with 780 score and ₹1 lakh monthly income gets lower end. borrower with 680 score and same income gets 1.5 to 2% higher. on a ₹3 lakh loan for 3 years, that 2% adds about ₹10,000 to total interest.

banks and NBFCs operate differently.

public sector banks like SBI and Bank of Baroda have lower rates: 10.5% to 12.5%. but their eligibility is stricter, processing runs longer, 2 to 7 days, and fees are lower at 0.5% to 1.5%. they also lend smaller amounts to non-salaried applicants.

private banks like HDFC, ICICI, Axis, and Kotak sit in the middle: rates from 10.75% to 14%, processing in 1 to 3 days, fees up to 2.5%. they offer higher amounts and more flexible eligibility.

NBFCs like Bajaj Finserv and Tata Capital charge the most, 11.5% to 16%, but process fastest, sometimes the same day. their fees go up to 3.5%, and eligibility is most flexible. the catch? limited preclosure flexibility.

application these days runs mostly digital.

check eligibility on the lender’s app or website. enter the amount, tenure, and applicant details. upload Aadhaar, permanent account number (PAN), bank statements, and salary slips. complete video or in-person know your customer (KYC) verification. sign electronically. banks disburse in 1 to 3 working days, and NBFCs often within 24 hours.

documents needed: Aadhaar, PAN, last 3 months of salary slips or income proof, last 6 months of bank statements, Form 16 or income tax return (ITR) for self-employed folks, and two passport-sized photos.

mistakes happen often

borrowers compare only the advertised rate and ignore everything else. they don't check whether interest is reducing balance or flat rate. they stretch the tenure to lower the EMI, not realising how much more they pay in total. they don't read the prepayment terms.

before signing, check the annual percentage rate, confirm the loan uses reducing balance rather than flat rate, and calculate the processing fee in rupees. read the prepayment and part-payment terms. match the tenure to the actual requirement, since shorter is better for travel. read the full agreement rather than the first page. compare at least 3 to 4 lenders across one public bank, one private bank and one NBFC, and check eligibility before applying, because multiple hard enquiries lower the credit score.

frequently Asked Questions

which bank offers the lowest travel loan interest rate?

SBI generally gives the lowest rates among public sector banks, starting at 10.5% for borrowers with strong credit. HDFC and ICICI are competitive among private lenders, with rates starting around 10.75%.

does credit score affect travel loan interest rates?

a score of 750 or above gets the best rates. between 700 and 749 gets moderate rates. below 700 gets higher rates or rejection. A 2% difference on a ₹3 lakh loan for 3 years adds about ₹10,000 to total interest.

how to compare travel loan interest rates across banks?

compare the annual percentage rate, not the headline rate. the annual percentage rate includes interest, processing fees, prepayment charges, and other costs. also check if the loan uses reducing balance or flat rate the effective cost can be very different.

should a borrower take a travel loan or use a credit card for travel expenses?

for amounts under ₹1 lakh repaid within a month, a credit card with no interest works fine. for amounts above ₹2 lakh or repayments stretching beyond a month, a travel loan is cheaper. credit cards charge 36% to 48% annual interest on outstanding balances. travel loans start at 10.5%.