Top personal loan providers can offer lower interest rates than credit cards, making them cheaper overall to pay back.
In this guide, we offer 10 tips for using a personal loan for vacation:
- Don’t get sucked in by ‘vacation loans’
- Shop around for the best personal loan deals
- Use a personal loan calculator
- Schedule in payment reminders
- A word about vacation loans for bad credit
- Save for your vacation
- Make a vacation budget
- Look for good vacation deals
- Use rewards credit cards
- Get travel insurance
Here are all the details you need to know in order to make the most of your vacation and make sure you're still financially secure when you return home.
1. Don’t get sucked in by ‘vacation loans’
When you begin shopping around for vacation financing, you may see some advertisements for ‘vacation loans’. Technically speaking, there is no such thing as a vacation loan. A vacation loan is just an unsecured personal loan that you can choose to use for a vacation or any other purpose. If you’re in the market for vacation financing, we recommend searching directly for personal loans and ignoring any marketing spin.
2. Shop around for the best personal loan deals
Whatever you’re planning to use a personal loan for – it could be a vacation, home renovation, large purchase, or anything else – always shop around. The personal loans market is incredibly competitive, and rates are low right now, so comparing lenders is the best way to find the cheapest deals and most flexible repayment terms. Never accept the first deal you find. Always, compare several lenders before making a borrowing decision.
3. Use a personal loan calculator
Personal loans almost always come with a fixed rate, which has the benefit of predictably monthly payments. When shopping around for personal loans, it’s a good idea to use a personal loan calculator to see your monthly payments and total interest paid. Just search ‘personal loan calculator’ in Google, choose from one of the top options, and enter your loan amount, interest rate, and repayment term, to see how much it will cost you.
4. Schedule in payment reminders
A vacation is a time to see new places, enjoy being with loved ones, and escape from the daily grind of the 9-5. A vacation should be an enjoyable experience, but pre-vacation and post-vacation are just as important. In order to avoid the financial stress of late payment penalties or defaulting on a loan, make sure to schedule payment reminders in your diary and get that personal loan paid off on time.
5. A word about vacation loans for bad credit
Your credit score is the most important factor when it comes to applying for a personal loan. Borrowers with the best credit score the best rates, while borrowers with average or poor credit rarely get approved. Many of the lenders that appeal to low-credit borrowers are in the business of payday loans or other shady dealings. Before agreeing to take a loan, always check independent reviews to make sure you’re dealing with a reputable lender.
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6. Save for your vacation
Just because a lender offers you five or ten thousand dollars doesn’t mean you should spend the entire amount on your vacation. One way to cut the cost of borrowing is to save some money for your vacation and only borrow a small amount to pay off the remaining amount that you’re unable to pay out of pocket. If you’re planning a big vacation, then start putting away a bit of money each week to ensure you don’t come under financial stress later on.
7. Make a vacation budget
Another way to avoid borrowing too much is to make a travel budget. One of the benefits a personal loan has compared to a credit card is that a personal loan gives you a fixed, lump sum. So, make a tight vacation budget and only take out a personal loan for the amount you need.
8. Look for good vacation deals
Prices for flights, hotels, and car rentals can fluctuate wildly, so shopping around is the best way to find great deals. The key to getting a good vacation deal is to be flexible: flights and accommodation tend to be more expensive over the weekends and busy vacation periods. If you’re willing to move your plans back or forward a day, you may be able to save money on your vacation (and on the personal loan you use to fund it).
9. Use rewards credit cards
In the intro to this article, we stated that personal loans are better than credit cards. The one time a credit card can be useful for funding a vacation is when it’s what’s known as a rewards credit card. Rewards credit cards come with points tied to great vacation deals, helping score you discounts on things like flights and hotels.
10. Get travel insurance
This doesn’t have anything to do with personal loans, but we feel it’s important to mention. When booking a vacation, always take out travel insurance. There’s always the risk something could happen between the time you book and the time your vacation begins (coronavirus is causing many people to cancel or postpone vacation plans), so travel insurance is the only way to protect yourself.
Enjoy Your Vacation
Few things in life are better than a well-earned vacation. With solid planning and financial discipline, the next vacation may be your best one yet!