Whether you’re planning a destination wedding or you’re a part of the wedding party, the cost of travel may make you think otherwise. Flights alone have increased 12.7% since 2021, but thankfully, you can fund your wedding or be present for the big day by using a travel loan.
What are Vacation or Travel Loans?
A vacation or travel loan is a type of personal loan that you can use to pay for travel expenses. As travel loans are often unsecured, you don’t have to put up collateral, like money or other assets, to use one. Your credit will determine the amount you’ll receive at interest percentage.
Why Should You Get a Vacation or Travel Loans?
Let’s say you or your friend is planning a fancy wedding in Sweden, but you don’t have enough money to attend this trip out of pocket. A travel loan can give you the capital you need to go overseas and enjoy yourself. But you can do this with nearly any loan, credit card, or credit line.
With that said, you’ll want to use a vacation or travel loan for the following reasons:
- Travel loans have a short approval process. You can find a personal loan application online at most banks, so you don’t have to make an appointment to sign the paperwork.
- Travel loans are often installment loans that come with fixed monthly payments. This lowers the chance of you incurring a lot of debt because there’s a set payoff date.
- Travel loans have flexible loan terms. You can choose to shorten the term to decrease the amount of incurred interest or lengthen the term to give yourself more time.
- Travel loans often have lower interest rates than most credit cards. However, that may not be the case if you have bad credit or you declared bankruptcy within the last 3 years.
Travel loans are the best option for your needs if you need to fund a vacation as quickly as possible. If you’re not in any rush, consider saving up for the trip to avoid incurring loan debt.
What Factors Should You Consider When Choosing a Loan?
Most banks offer vacation or travel loans, so it’s likely your current bank will offer this loan option. However, you should never get a loan without comparing lenders first. Feel free to use comparison sites to quickly examine which loan is appropriate for your financial situation.
It’s also important to read the fine print. Travel loans, like any other loan, could come with hidden fees, strict payoff schedules, and low borrowing limits, which could limit your options.
When comparing vacation loan lenders, examine the following factors:
- Annual Percentage Rate (APR)
APR is the yearly interest generated by a sum charged to borrowers. Prime borrowers will receive 8.83% to 22.74%, but subprime borrowers will experience a much higher APR that could range from 25% to 35%.
- Borrowing Limit
Travel loans have a borrowing limit between $1,000 to $100,000. The amount you can borrow will depend on your income and debt-to-credit ratio.
- Hidden, Annual, and Other Fees
Some lenders will charge an origination fee, which costs a percentage of the borrowed amount. However, many loans won’t tack on a fee. Be sure to consider late payment fees, prepayment penalties, and other loan fees.
- Loan Length
Travel loans are either short-term (12 to 18 months) or long-term (19 to 60 months). Longer loans will incur more interest, especially if you borrow a large sum.
Some loans may come with unique perks, such as fast funding or a return window that lets you pay off part of the loan without a penalty. If you want to borrow from an institution that isn’t a part of the Big Four, read reviews and research the lender before filling out an application form.
