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Going on vacation is an excellent way to relax and reboot. But it can also be quite expensive. The average cost of a vacation for two people in the US is around $3,840. Luckily, there are some options to consider if you don’t have money on hand to pay for your trip upfront. And vacation loans are probably one of the most popular ways of financing.
Let’s take a look at what a vacation loan is and how to find the best one, even if you have bad credit and are looking for a no-credit-check option.
A vacation loan is an amount borrowed to cover your travel-related expenses of any kind. However, it’s not a particular form of borrowing. Any vacation loan is a type of unsecured personal loan that a borrower can use for any needs. This kind of debt doesn’t require collateral and has an installment structure.
Personal loans for vacation typically have fixed interest rates between 6% and 36%. However, your particular rate will depend on several factors, such as:
Credit score; Payment history; Debt-to-income ratio and debt utilization; Lender’s policy and current economic conditions.
If you get $4,000 for two years with an APR of 12%, your total interest paid will be nearly $519. The amount of your monthly payment will be approximately $188. To calculate the total cost for your specific loan, use a personal loan calculator.
Vacation loans can be great helpers when you want to take a much-needed break from the daily grind. However, like any other type of loan, they have the other side of the coin. Here are the pros and cons of vacation loans that will help you decide whether they are the right choice for you.
|Convenient payouts that allow you to get a lump-sum deposit in your bank account to cover your vacation-related expenses.||You obtain additional debt that can increase the financial burden.|
|Flexible payment schedule with a series of fixed monthly installments.||You will be obliged to repay your loan long after you’ve turned back home.|
|Affordable interest rates may be offered if you have a good credit score.||A lender that offers personal loans for vacation may review your credit report details through major credit bureaus. This may drop your credit score.|
When shopping around for the best unsecured personal loans for vacation, do your research carefully. Here are a few tips that will help you avoid unnecessary fees and charges and pay attention to what is really important:
Not all vacation loans are consumer friendly. Some of them may have sky-high interest rates or hidden fees that will leave you disappointed in the end. Ask a lender about its charges and inquire for a calculation to fully understand the cost.
This will help you save time by understanding whether you meet a lender’s minimum credit score requirements. If your credit history is less than ideal, consider online lenders with more relaxed eligibility criteria instead of turning to banks or credit unions. Also, you can try to improve your FICO rating to get a better deal.
Make sure your loan amount doesn’t exceed the sum you need to reach your specific vacation goal. Try to avoid unnecessary spending. Keep in mind that the debt will stay with you for a long time.
Sometimes you may find options that will fit you better if you know what alternative ways of financing you can access.
If you need money for a trip, a vacation loan is not your one and only option. Here are a few alternatives.
A travel rewards credit card allows you to earn points that you can spend toward your travel expenses. Such cards often offer sign-up bonuses that can be high enough to cover the cost of your flight or accommodation.
Instead of using loan funds, you can revise the budget and set aside money in advance. By doing this, you can save significantly on interest.
A 0% APR credit card is a great option for people who don’t want to pay interest while using borrowed funds. How is it possible? You can avoid interest payments if you pay off the balance within an interest-free grace period.
After you make sure this form of financing is right for you, follow a few simple steps:
Pay attention to how much this loan costs, read customer reviews, and compare various travel loan options.
Make sure you meet them to save time.
Check out the lender’s document requirements in advance. You may need an ID, bank statements, tax returns, and more.
Some lenders may offer an online process, while others will ask you to visit their store in person.
After the lender makes a hard or a soft credit check, it will inform you about a loan decision. It can also reach out to you during the loan process to clarify some details.
If you want to borrow money to cover your travel expenses, vacation loans can be a great option to use. However, it’s still debt that needs to be repaid long after you’ve returned from your trip. That is why travel loans should be considered responsibly and used cautiously. Also, make sure to choose an option with the best possible loan terms. Pay attention to factors that may affect your loan cost, including repayment terms, prepayment fees, late fees, and other penalties.
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.