Travel loans can help community members enjoy a memorable vacation without depleting rainy day funds or financing a trip on a high-interest credit card. These loan products rank among the go-to options offered by local lenders. But if working families are going to borrow the funds to travel across the country or to a foreign land, it’s important to get the best bang for your buck possible. By understanding the intricacies of securing travel loans and planning your trip sensibly, you can maximize the peaceful enjoyment of your time away and minimize expenses.
It’s important to understand there is not necessarily a lending option exclusively known as a “travel loan.” While the terms can sometimes be used interchangeably, most travel loans are similar to personal loans. Qualified individuals can secure a personal loan at a fixed-interest rate and it can be repaid in equal monthly installments. While the money gets transferred to your account in a lump sum, the interest rates are based on credit scores and incomes. While personal loans are a great option for financing a dream vacation, these great alternatives are worth investigating.
It’s also feasible to use a vacation payment plan. Companies that offer all-inclusive resort holidays may be willing to finance the cost. But like payday loans, the interest rates and fees tend to be significantly higher than working with a local lender to secure a personal loan. Although there are a wide variety of borrowing options to consider, it’s crucial to understand the costs, benefits, and risks associated with these and other borrowing options. Before completely narrowing down your travel loan options, make sure you address these next steps.
The first step in maximizing your travel loan funds involves careful financial planning. Consider creating an Excel or Google Sheet file that places relevant travel costs into specific line items. For instance, costs such as airfare, cabs, rideshares, accommodations, dining out, souvenir shopping, tipping, and entertainment can all be estimated and listed separately. One of the great things about using an Excel sheet to calculate travel costs is that it can be revised as needed and provides a tally at the bottom. Planning your budget carefully helps prevent vacationers from outspending travel loans they secured.
Not every travel loan is created equal. Some banks may load them down with unnecessary fees and high interest rates. It’s critical to take your time and read through the terms and conditions, sometimes called the “fine print.”
When applying for travel loans, it is prudent to work with a trusted local lender and schedule an in-person appointment. This provides an opportunity to ask questions and discuss the best product to serve your travel costs and other needs.
Your credit score plays a critical role in loan approvals as well as the interest rates and repayment terms. Because most travel loans are not secured by collateral, lenders predominantly base approvals, denials, interest rates, and repayment terms on income and credit history.
Before submitting a loan application, contact one of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. You can request a free copy of your credit report every 12 months by filling out an online form or through snail mail. Once you receive a copy, review it thoroughly for any errors or omissions.
Promptly request changes that negatively impact your three-digit score. You may also have time to cure any outstanding debts, lower credit card balances, and make other changes to improve your FICO score. This will only help you get a reasonable interest rate and more favorable repayment terms.
By conducting thorough due diligence and using other budgeting tools, you can arrive at a reasonably accurate travel estimate. While it may seem enticing to borrow a little extra and splurge, remember that travel loans must be repaid on time and with interest. Smart budgeting calls for minimizing ongoing monthly expenses. Given you are about to add an expense that draws from other areas, it would not be prudent to increase the fixed installments. Borrow only what you need to have a memorable vacation.
Local credit unions are not-for-profit lenders who are not pressured into charging unnecessary fees and high interest rates. Their mission is to provide borrowing opportunities for members, not generate profits for shareholders.
That’s why working with a trusted local credit union to acquire a travel loan typically saves community members money.
If you are looking at financing options to help your vacation dream become a reality, Allegiance Credit Union is ready to help. Our borrowing solutions can help you maximize your leisure experience without breaking the bank. If you are unsure which of our travel loan options is right for you, contact us today. We are happy to review our personal loan, home equity line of credit, fast cash loan, and credit card options to see which is best for your unique financial situation.