Traveling for business, personal work, or a vacation can cost you a significant amount of money, but sometimes it is unavoidable. The challenge manifests itself when you are short of cash, but have to undertake an urgent trip.
In such a situation, a practical option may be to take out a personal loan to pay for your travel expenses. There are many lending companies that offer personal loans specifically designed to cover your travel costs.
Even if you are skilled at finding great hotel deals and airline vouchers, travel is still not going to be cheap. Americans spend $583 on domestic trips and $3,723 on international travel in a year on average.
Ideally, these expenses should come out of your savings account. But sometimes you might to travel more frequently than what your savings allow for. This is where travel loans and vacation loans (personal loans for travel) can help fund your trip.
Personal Loans are Better than Credit Cards
There are usually only two options to fund for a trip when you do not have the savings. You can either use your credit cards or take up a personal loan.
Cards make it difficult to budget your trip and have higher interest rates. You also tie up your available credit in paying for your trip rather than daily expenses. Hence, a personal loan is the more useful option.
They are more affordable than credit cards as they come with lower interest rates. The rates can be better depending upon your creditworthiness.
You can apply for unsecured personal loans through banks, credit unions or through multiple online lenders. Needless to say you need a decent credit score for approval.
Interest rates generally fall between 4% and 40%. These vary as per your loan amount, credit history, and the lender. You can request a loan for as high as $50,000. However, it is never sagacious to borrow more than you need. Keep things simple and obtain a loan for the amount you need to pay for a comfortable vacation.
Once you are approved personal loan funds can be used however way you choose. You can use it towards paying for your dream vacation or cancel vacation plans and have your home remodeled instead. This flexibility offered by a personal loan makes them a salient choice to pay for your travel expenses.
Advantages of Using a Personal Loan
These are some of the advantages of using a personal loan to pay for vacation expenses.
1. No Collateral
You can borrow through a personal loan without using your assets such as home or car as collateral. However, you need to have a decent credit score to qualify for an unsecured loan. A personal loan is the ideal option to pay for your travel expenses (though the best way still is to use cash and to save up for it and to not go further into debt). You need to ensure that you borrow within your financial capabilities.
2. Finance Life Events
Vacations should ideally come out of your savings and if you spend money like Elaine did in Seinfeld you may not ever have any savings – well that was her company’s money right?!. However, there are a few milestone moments in life that need to be celebrated right away. For instance, you cannot delay your honeymoon after getting married while waiting for savings to accumulate.
Other major moments like 10th anniversary also call for celebratory memories. You might find the debt worth it as these landmarks do not come around often.
3. Be There for Your Loved Ones
Life can catch you by surprise. Your best friend might decide on a destination wedding and insist you to be by their side. On a more somber note, a relative might fall gravely ill or pass away.
Both these situations require travel and not everyone has emergency funds to pay for the expenses. A personal loan can come in very handy in such situations.
4. Less Expensive
Personal loans are in fact cheaper than charging last minute deals to your credit cards. You might be approved for really low interest rates if you have a good credit standing. As per the controversial Federal Reserve, the average interest rate for a 2 year personal loan was just 10% while the average interest rate for credit cards was 15%.
Personal loans might come with origination fee. However, many online lenders waive off this fee to acquire your business. It is best to shop around and review all loan terms before settling on an option. Make sure you apply for multiple loans within a short window period.
Lenders perform a hard credit check when you apply for a personal loan. This can temporarily shave off a few points from your credit score. However, credit agencies treat multiple inquiries in a short period of time (such as 15 days) as one inquiry.
5. Live the Moment
Vacations are not just about skipping work or detoxing your body, both mentally and physically. It is more about living in the moment and not delaying gratification. You do not have to wait to make memories with your loved ones or your friends.
A personal loan is just the thing to provide quick cash when you need it the most. You can use a personal loan to literally jump on a great flight and experience memorable hotel stays. The costs are spread over a period of time allowing you to repay the loan without experiencing a financial setback.
And with those amazing setbacks and the economy humming along, you can take more risks because of the strength of the US economy.
6. Beat Inflation
It is no secret that inflation is a very real thing. Airline ticket prices are not the same as they used to be a year ago. You can save more than a couple hundred by taking your vacation right now.
It might be more expensive to wait for your savings to accumulate to take that vacation. It is quite likely that your savings might not even catch up because hotel rates tend to increase significantly year on year.
Depending on your situation, you may have to finance your vacation or pay for your business travel with a personal loan. While it is best to pay for a trip from your own savings, it may not be possible every time. Personal loans may be more cost-effective than paying for your travel through your credit cards.
They also help you in terms of budgeting for this vacation because you know exactly how much you can afford before you even start the trip. It is best to apply for a personal loan a few months before your expected travel. This way you can save by planning for your trip in advance.