Are you filling your vision board with dreams of a trip to places like Paris, Rome, Tokyo, or Dubai but looking for money or cash to borrow to afford the vacation? Vacation and travel through a loan is a way for people of all ages to expand their world, learn about different cultures, and learn about themselves. The only problem with world-expanding vacations like these is that they cost money. A lot of it. So, what are your options?
One of your options may be taking out a travel loan. But what is a travel loan, and how do you go about getting one?
It’s actually very simple. A travel loan is simply a type of an unsecured personal loan that is mean specifically for travel purposes. It can be used to help cover the costs that are connected with you trip. Those costs can include costs like airfares, accommodation, tours, and even purchases you make while traveling.
The Low Down On Travel Loans
So how do they work? Basically, an unsecured personal loan used for travel works in the exact same way that an unsecured personal loan works for anything else. Typically, you can borrow anywhere between $4,000 and $50,000. Depending on your credit score, financial history, and more, you can also search for a loan term anywhere between one and seven years.
Just like other personal loans, the length of your payment term will be decided by how much you are able to pay back in monthly installments. Just like other loans, the higher the monthly payments, the shorter the payment term, and the less interest and added fees you will accrue overtime.
In terms of getting you money, the amount of what you are borrowing will be paid to you in one lump sum. It will be wired directly to your account and you will be able to use it to start planning your trip as soon as you’ve got your cash in hand.
Just like other loans, your travel loan comes with a set repayment schedule for the entire life on the loan. Repayments will typically automatically be direct debited from a bank account of your choosing, at the frequency of your choosing, over the entire life of your loan. While you are going to make sure that you have enough money in your account every time a withdrawal is coming up, you don’t have to worry about missing an upcoming payment.
A personal loan is a potential avenue that you can take to make your vacation dreams a reality without having to spend months or even years saving up. So what are the benefits of a travel loan?
Benefits of Travel Loans
One benefit of travel loans is that they operate on a fixed interest rate. That means that your repayment amounts for travel financing will stay the same throughout the life of your loan, making it easy and simple for you to budget for future payments. It also gives your structure to your repayment because you will not only know exactly when you will have to pay, but how much.
Another upside of travel loans is that they save you loads of time. While you may have to spend months or even years saving up bit by bit to afford a trip of your dreams, a travel loan helps you cut those corners in a big way. Typically, once the loan is approved, the funds will generally be deposited into your account within five days. That will allow you to get on your way to excitedly planning your trip within a week!
Another added benefit of travel loans is that, if you are planning on going abroad, you will be able to exchange cash at the onset of your arrival as opposed to taking out cash from international ATMs. Not only will this save you money in terms of international withdrawal fees and cash advance fees, it can also help protect you from getting your cards stolen.
It’s also important to consider that if you are responsible with borrowing and are able to responsibly pay back your loan, it can go a long way in improving your credit score. Of course, in order to take out an unsecured personal loan, your credit score is already going to have to be quite high, but it can always be higher!
Another benefit of a travel loan is that even though you are borrowing quite a bit of money, you won’t have to pay it all at once. That will help you feel less of a financial impact of your vacation, even if it is an expensive trip!
Of course, it is important to remember the risks of all personal loans.
Considerations When Applying For A Travel Loan
The primary risk is that you let the interest rates get the better of you and you end up paying hundreds or even thousands of dollars’ worth of interest overtime. The best way to avoid large overall interest payments is to try and make your payment term as short as possible.
Another possible downside of taking out a personal travel loan is that you might face penalties for early-payoff. Basically, an early-payoff fee occurs when you end up paying off your loan before the end of your payment term. If you think you may be able to pay off your loan before the end of your payment term, it is important for you to check and see if you could face any pre-payment penalties.