What do you see in your travel fantasies?
We all have different dreams! Some of us see mountains and snow. Others see white sand beaches and sunshine that never ends. Still others see mud and mountain bikes, rafts and rapids or even foodie adventures on the other side of the world. After being cooped up at home for a while, post-pandemic travel is big.
Sometimes it’s hard to make those big dreams a reality. According to studies, a week-long vacation can run $2000 or more. With financial demands for our cars, homes, and children, saving money for that dream vacation may not be a priority.
But there’s good news: a vacation loan might help you make that dream trip a reality. Read on to learn about vacation loans and how to decide if they’re a good option for you.
Vacation loans are personal installment loans, that is, loans you pay off gradually over a set period. Vacation loans often have a set interest rate and may allow you to choose how long you have to pay your loan off. This can allow you to choose a monthly payment that will work in your budget. Here are 21 tips for the cheapest ways to travel on a budget.
It’s always important to be cautious about borrowing money for an unnecessary expense. For one thing, your purchase will always cost more with loan interest than if you save up ahead of time and pay with cash you already have. It’s best to only borrow what you think you can reasonably pay off in three to six months so it doesn’t affect your future budget or other financial goals.
What’s good about vacation loans? What’s not so good? Here are some things to consider.
Vacation loans are a pretty low-cost option for lending. If you have good credit, a vacation loan may give you a much better rate than a credit card. If your credit isn’t so good, make sure you compare rates. As we mentioned, vacation loans also have flexible terms, so you can usually find a payment that will fit in your budget. Even better, you can usually pay off your loan early with no penalty, so you can save that interest money.
If your credit isn’t so good, you may want to view these 4 things that may help your credit score. With bad credit, your rate for a vacation loan could be higher, and may not be better than a credit card. And that interest adds to the price of your trip. Fees may do the same. After your vacation ends, the debt won’t – you could still be paying for your trip for months afterward. Also, when you choose a vacation loan, you miss out on the miles or other benefits offered by a credit card. Take these into consideration too when comparing your options.
Some things to consider when you’re financing a vacation:
Save up! It sounds obvious, but sometimes people assume they have to finance the entire trip. It’s much better if you can create a budget and find ways to save what you can ahead of time. Then you aren’t paying as much interest or paying for as long.
Take advantage of a travel rewards credit card. If you qualify, using a travel rewards credit card may be a good option for the kinds of expenses that earn benefits. Just be sure you can pay off the complete balance before the end of the month or billing cycle so you don’t pay interest! It’s like borrowing the card company’s money for a month – while possibly getting benefits that will offset the cost of your trip.
Think about an unsecured vacation loan. (An unsecured loan doesn’t require collateral.) These loans are best for whatever remaining costs you can’t pay ahead or pay off on a rewards credit card. Remember, vacation loans should have lower interest than a credit card and give you the option to pay over time.
Shop around. Look around for unsecured vacation loans, which might also be called signature or personal loans. Compare interest rates and repayment terms. Look for loans with no or low fees and no penalty for early repayment. And look for a lender with positive reviews from other customers.
Build up your credit in the months before applying. Make sure you’re paying all your bills on time in the months ahead of your loan application. Take a look at your credit report to make sure everything is accurate, and call the credit bureau if it isn’t.
Figure out how much you need. When you’re approved for a $5000 vacation loan and you had planned a $2000 vacation, it can be tempting to pull out all the stops and go for the dreamiest vacation you can think of. Don’t. Figure out how much you need and borrow that amount, or you could be stuck with payments you struggle to afford. You may also be kicking yourself in the months or years it takes you to pay off funds you didn’t really need. At the same time, be sure you budget well and borrow enough or unexpected expected charges could catch you off guard. Be sensible!
Make a detailed budget. Just like making a grocery list cuts down on impulse purchases, a travel budget can do the same. It’ll help you cut back on impulse spending and help you catch yourself if you’re tempted by an extravagant expense.
Look for savings opportunities. Consider traveling during the off season. Shop around for flights. And go somewhere you can afford so you have enough in your budget to fully enjoy the experience (for example, being able to eat out sometimes vs. packed PB&Js every meal)!
A vacation loan may be available to borrowers across a range of credit scores. But the better your credit, the better the terms you may be able to find. If you have challenging credit, you may pay higher interest rates and not have as much flexibility in when and how you pay. That’s why it’s important to do whatever credit cleanup you can (see above) and generally work to raise your credit score. By the way, there are ways to monitor your credit score for free.
The process for taking out a vacation loan is usually the same as with any personal loan. After you have shopped for the best loan, you’ll complete an application. The lender will review your credit score and other factors to determine how much risk is involved in lending you money. Then the lender will make a decision to approve or deny your application, and notify you.
If you’re approved, you can often get your money that day or the next day, in-person or by direct deposit. You’ll use the money to pay for your vacation expenses, and must make payments each month the way you agreed in your loan terms.
If you are denied, you can always apply with a different lender or a co-signer. If you are just building your credit, you can ask someone you trust to cosign with you on the loan. This boosts your chances of approval. Just keep in mind, that person is on the hook if you fail to pay.
So how do you apply for a vacation (installment) loan? The good news is, the application process is the same as for any installment loan. The application is usually pretty simple. Depending on the lender, the process can be completed online, at a physical location, or through a combination of the two.
Aside from a completed application, you’ll need to gather some documents to apply. These usually include the following:
We hope this information will help you decide if a vacation loan could be right for you!
Editorial Policy: The information contained in Check `n Go’s Finance Academy Learning Center is for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding any legal issues. Check `n Go does not act as a credit counseling, repair service, or debt consolidation service in providing this content. Please understand that Check `n Go policies change over time. Blog posts reflect Check `n Go policy at the time of writing. While maintained for your information, archived posts may not reflect current Check `n Go policy.
The information contained in our blog posts are the author’s own opinions, not those of Check `n Go or any other company. Any pros and cons are developed by our editorial team based on independent research. Some of the products, services, and offers on this page may not be available from Check `n Go. In Texas only: Check `n Go does not act as a credit services organization in providing this content.