A consumer is required to pay a certain amount of total cost of their package tour as an initial payment
The COVID-19 pandemic has impacted several industries in terms of business. The hospitality and travel and tourism industries have been amongst the worst hit by the pandemic. Due to several travel restrictions as well as the devastating second wave in April, the travel sector was impacted severely. Now, with slight ease in travel restrictions as well as the rampant vaccination drives across the country, the travel industry has found a glimmer of hope. Although the ability to recover entirely will remain slow for this sector, they are coming up with lucrative schemes and deals to attract customers.
One such offering is the ‘holiday now pay later' scheme. According to this scheme, a consumer can opt for a holiday package and is only required to pay for it upon returning. This option can be availed by consumers who have a good credit score. The consumer's credit score will be evaluated by the Non-Banking Finance Company (NBFC) that is partnered with the travel agency.
Once approved, the consumer is required to pay a certain amount of the total cost of their package tour as an initial payment. They can opt to clear the balance on return as a lumpsum payment, for which they will not be charged any additional amount. However, if the consumer opts to pay the balance amount through monthly instalments, the NBFC will levy an interest.
How effective is the scheme?
This scheme is an innovative way for the badly-hit travel industry to revive itself. Travel firms are launching this scheme as a means for people to benefit from traveling in an inexpensive manner by offering them the flexibility of paying later. However, as attractive as this scheme may appear, it may not necessarily be the best option for consumers.
Risk of defaulting on payments
If a person avails of this scheme, it is important to ensure they are able to clear their entire balance as a lump sum payment. However, if a person isn't opting for lumpsum payment, and instead decides to clear the balance through instalments, then she/he runs the risk of defaulting. In such a scenario, the penalty becomes the same as it is for any loan defaulter. Not paying the balance amount will greatly affect their credit score. It will also make it difficult for the person to be able to apply for loans in the future.
Risk of debt
Secondly, if you are using your credit card to pay for the balance, you're carrying the risk of debt — a debt that may take many months or even years to clear. Also, in case a person opts for an equated monthly instalment, she/he needs to factor in the extra charges they would incur on the trip — parking, spending money during the holiday, and the COVID-19 tests to be taken before the trip.
