Vacations aren’t just a way to take a break from real life.
Scientific studies show that vacations reduce stress, help prevent heart disease, function better and improve your sleep.
Not to mention the emotional connections that form when spending dedicated time with loved ones.
But can you take a vacation when you don’t have the money saved up? Read on to learn all about vacation loans.
We’ll cover the pros and cons of personal loans for vacations so that you can decide if that’s the right decision for you this year.
What Are Personal Loans for Vacations?
Getting a loan for traveling is just like a regular loan. Even if a bank or other lender market a loan as a “vacation loan,” it works the same way as any other personal loan.
Typically, you can borrow up to $40,000. Your interest rate could be anywhere between 5-36%.
A personal loan for vacation, home renovation or anything else usually comes with a fixed term. That term could be one to seven years. You often get a set monthly amount that you’ll need to pay until you finish paying off the loan.
Many personal loans are unsecured. This means you don’t have to give the lender collateral in order to secure the loan. But, if you have bad or no credit, you likely will not qualify for these types of loans.
Instead, you can look for loans no credit companies that specialize in these loans.
What Take Out a Loan for Travelling?
There are several reasons why you would take out loans for vacations. Here are some for you to consider.
Vacation Loans Are Often Easier to Qualify For
One reason why you would choose to take out personal loans for vacations is that they are often easier to come by. Unlike large loans to buy a house or do massive renovations, a vacation loan is often a smaller lump sum.
Lower Interest Rates
A loan for traveling comes with a lower interest rate compared to most credit cards. That means that your monthly payments will be easier to repay than if you use a credit card.
Plus, the better your credit rating, the more likely you are to get the best possible rate.
With a vacation loan, you can travel now and pay later. But unlike a credit card, you know exactly how much you’ll spend because you have a set loan amount. And you know what the repayment terms are beforehand.
Go Away Now
The obvious reason why taking a personal loan for vacation is beneficial is because it lets you take your vacation now.
There may be reasons why a trip now is better than saving for it and going later. Maybe you are pregnant, maybe your grandfather in your home country is getting old, or maybe you have the time off work now but won’t later.
If you are comfortable with the future monthly payments for x amount of years, then the ability to go away now thanks to a loan for traveling is wonderful.
Cons of Loans for Vacations
Financial advisors will tell you that you should never get into debt for consumables. In other words, things that you pay for long after the experience is over.
It can be discouraging to still be paying for a vacation years later. Then, when you want to take a vacation again, you still have the expense from your first trip to consider.
Smart financial saving habits dictate that you should save up for your vacations first, and then take the trip. That way, you don’t have to pay interest on your travels. This makes the total cost of the trip less expensive.
Using loans to pay for unnecessary expenses like a honeymoon or trip to an exotic destination can get you into serious financial trouble down the line. The last thing you want is for your dream vacation to become your living nightmare in a year.
Getting a loan for vacations means that you pay much more than the sticker price of the trip.
But, if you have to borrow money for a trip, a personal loan is a better option for how to finance a vacation instead of racking up a credit card.
How to Finance a Vacation
Besides getting a personal loan for vacation, there are other options you can consider when you are full of wanderlust and need to go away.
Many resorts, cruise lines, and vacation planning companies let you pay for your vacation in monthly payments ahead of time.
This helps you pay for your vacation in advance without the temptation of spending the vacation funds that may be sitting in the account.
But, these plans often only cover transportation and accommodations. You’ll still have to cover the cost of shopping, dining and tourist activities. If you splurge, this could be a big bill on your credit card.
Saving is the cheapest way to fund your dream trip. And if you are careful and plan well, your dream trip can cost a lot less than you think.
There are lots of small and simple budgeting things you can do now that can help you set aside more traveling adventures.
Find Affordable Trips
Maybe you dream of going to Tahiti but can’t afford it right now. Why not go to Florida instead?
You can enjoy snorkeling, the warm weather and tropical fauna for a fraction of the price.
You can even find affordable honeymoon destinations that let you enjoy the magic of being newlyweds without sacrificing your budget.
Final Thoughts on Vacation Loans
Thanks for reading. We hope this article helps you consider whether or not vacation loans are a good option for you.
Before you go, check out these 15 secrets to learn how to travel like a local instead of a tourist.