Maybe you are looking to finally go on that vacation to Europe you’ve been wanting for so long. Saving up to go on an international trip is no joke, and costs are higher than they’ve ever been before. If you’re having difficulty saving up for that trip, you might have been considering alternative methods of funding your venture.
You might be wondering if it’s worth getting that personal loan to help you finance your trips. Things to consider before deciding if getting a personal loan for vacation is the right move.
Should You Get a Personal Loan for Vacation?
Lower Interest Rates
Depending on your current credit score, you might be able to qualify for a lower interest rate on a personal loan than you would with a credit card. Credit cards are notorious for accumulating massive amounts of interest, so it might be worthwhile to see if you can get a lower rate.
The downside to this of course is that applying to a bunch of loan companies means you’re going to get dinged by hard credit checks. So think carefully before making this decision. You can read into how to obtain your credit score yourself, or read this blog about credit score to understand credit better. You are generally able to review your credit score once per year without receiving a hit.
They May Be Easier To Obtain
If you have a history of bad credit, it might be easier for you to apply for a personal loan than it would be to apply for a credit card. Keep in mind that with a lower credit score you may face higher interest rates and higher APR.
Depending on the reason that you want to travel this can alter your decision. If you’re travelling in order to relocate for a better paying job, it might make sense to choose a personal loan option. If you are just looking to go on a vacation with your friends, it might be in your best interest to save and increase your credit score prior to going.
If you already have a credit card, obtaining a personal loan can actually increase your credit score. Around 10% of your credit rating will be based on the types of credit that you have, so a larger variety may increase your rating.
However, your credit is also based on how much you have owing on your credit as well. If you have a portion of your vacation or travel expenses saved, it might make sense to use a personal loan to increase your credit by paying it off quickly. Otherwise, you’ll have to wait until you have paid a portion of the loan until you reap the rewards of a higher score.
Budgeting Before Borrowing
Ultimately, you want to budget prior to borrowing any money. If you have money available to you from a personal loan you are going to be tempted to spend that amount on your vacation. The less money you spend, the less you’re going to need to pay back. If you have the option of getting a loan with a lower interest rate, don’t borrow more than you need.
In this case getting a personal loan will be worth it, otherwise you’re going to borrow too much money and it would have been better not to use a loan. Borrowed amounts that are higher also means that you will be making higher monthly payments, so get an estimate prior to accepting a loan.
The Upside To Credit Cards
Personal loans are not the end all be all options compared to credit cards. Although credit cards come with hefty rates, they do offer options like reward points whereas personal loans do not. They also allow you to pay your debt as you continue to travel using your credit card.
If you’re looking to have a credit variety to increase your rating using both a loan and a credit card is a good option. Although, this is not a good option if you are simply borrowing more money than you can afford to pay off. Budget accordingly and see where your expenses lay, keeping monthly payments in mind.
The key concept with borrowing any amount of money is making sure that you will be able to afford to pay it back. A two week vacation of fun isn’t going to make up for months of missed payments in the future, so stay within your budget.
Use other methods of saving money like booking flights and hotels far ahead of time to meet your budgetary goals. If done correctly a personal loan can certainly be worth looking into in order to go on your vacation.