Travel can be a rewarding and even life-changing experience. It can also be costly. According to a survey by the U.S. Department of Labor, Americans who travel out of the country spend on average $271 per person a day.If a golden travel opportunity comes your way, though, you don’t want to miss out on it because of the cost. Personal loans for travel can help make travel more affordable.Advantages of getting a travel loan when you are planning a last minute trip.Take a look at this blog post to learn about the travel loan.
The Benefits or Travel Loans
With personal loans, you can get your money as soon as you’re approved. For this reason, they’re perfect for last-minute trips when you need cash quickly.
Personal loans are easier to get and to pay back. They require minimal paperwork, because they don’t deal with any property or assets. Repayment terms are also flexible and can be customized based on the needs of the borrower, especially if their credit is good.
Because a loan for travel is a personal loan, it comes with very few restrictions on how it can be used. This allows you to be flexible in your travels and enjoy yourself more freely.
Travel Loans vs. Credit Cards
Credit cards, especially those with travel rewards, are another popular method of paying for travel. Personal loans, however, have a few advantages over credit cards.
For one, personal loan rates are often lower than rates for credit cards, so they’ll save you money. Personal loans with fixed rates are for a specific amount and paid off over a predetermined period. This means you can’t spend more than you have and ruin your credit score like you could with a credit card. The utilization ratio of your credit lines also isn’t affected by personal loans, which improves your credits score.
Just because you’re using a loan doesn’t mean you have to lose your travel rewards though. Just charge your expenses to your card and then repay them immediately with a personal loan.
Choosing a Travel Loan
There are several different options when it comes to travel loans. The right loan for you depends on your travel plans.
If you’re going on a last-minute trip, a fixed personal loan may be the right choice, because you receive the entire amount upfront, budgeting will be easier and the monthly payments will likely cost you less.
If you’re paying for a future trip with your loan, consider a personal line of credit. This will give you more flexibility and enable you to make payments intermittently, including during your trip.
Of course, you’ll also want to consider the interest rate of a loan and look for the lowest rate you can get. Personal loan rate decisions are usually made mostly based on the lender’s assigned credit grade. Rates can range widely from 6% to 30%. Check out more loan information here.
The Role of Credit Score
Your credit score will most likely affect your ability to get a personal loan and what kind of loan you can get. Find out what yours is before you apply for a loan.
Each lender will develop their own system for determining credit grades based on things like the default rates of past borrowers, FICO scores, credit history and debt-to-income ratios. Many lenders require a FICO score of at least 640 before they’ll award a personal loan, but there are some that will lend to those with lower scores.
If you have a lower credit score, you may still be able to get a loan from a lender who doesn’t look at FICO scores. These lenders will sometimes offer a loan if your recent credit is good.
Subprime personal lenders are another option. They offer loans to people with credit scores under 600 at an interest rate of around 25% to 35% and make decisions based on factors like job stability, income and the presence of other debts.
When to Borrow for Travel
Taking out a loan for travel is generally a good idea only if you can save money by doing it and can pay back the loan quickly.
If you don’t foresee having the money to pay it back anytime in the near future, you may want to avoid a loan. If you’re expecting a holiday bonus, tax refund or big paycheck soon that you can use to pay it back though and can save money by purchasing your trip now, it might be a practical decision.
Personal loans for travel can enable people to take advantage of once-in-a-lifetime travel opportunities and enjoy the vacations of their dreams. Be sure to examine your financial situation and carefully review the terms of any travel loan you’re considering before agreeing to them. Once all that is done, your payment plan is finalized and your vacation is planned, all you have to do is head out on the adventure of a lifetime!
Ethan Butler is a personal finance consultant who shares his knowledge, and passion, about all things money online.