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What is a Vacation Loan and How Does It Work?

Dreaming of a vacation? We'll cover the different types of vacation loans available and how to apply for a loan. So whether you're planning a trip to Europe, the Caribbean, or just across the country, read on to learn how a vacation loan can help you make your dream vacation a reality!

What is a Vacation Loan?

Vacation loans are unsecured personal loans, meaning they’re not backed by collateral, tailored for funding your travels. Like car or home equity loans, it's meant for specific expenses—in this case, for travel. With fixed rates and terms, vacation loans let you predict your monthly payments, aiding in budget planning. To secure one, approach a lender with evidence of steady income and a solid credit score. Upon approval, you'll get the amount in a single payment, ready to finance your trip.

  • Fixed APR: 7.49 - 35.99%
  • Loan Term: 12-84 months
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  • APR: 8.99-25.81%
  • Loan Term: 24-84 months
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  • APR: 5.99-35.99%
  • Loan Term: 3-72 months
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Key terms to know

In order to understand how vacation loans work, let's get familiar with some of the most common terms you might come across.

  • Principal: This is the initial amount you borrow for your vacation. It doesn't include interest or any additional fees. For example, if you take out a vacation loan for $3,000, that's your principal.
  • Interest Rate: The percentage of the loan amount that you'll pay in addition to the principal. This is how lenders earn from giving you a loan. A lower interest rate generally means you'll pay less over the life of the loan.
  • Term: The duration of time you have to repay the loan. A longer term might mean smaller monthly payments, but it can also mean more interest paid over time.
  • Unsecured Loan: Unlike secured loans that require collateral, an unsecured loan does not require you to pledge any asset. Vacation loans are typically unsecured, meaning they might have higher interest rates due to the increased risk to lenders.
  • APR (Annual Percentage Rate): The yearly cost of your loan, including both the interest rate and any associated fees. This provides a comprehensive view of what the loan will cost you annually.

How Do Vacation Loans Work?

Once your vacation loan is approved, you'll generally get the funds within a few days, either through direct deposit or a check. These funds can cover most travel-related costs. Payments usually begin the month following the fund disbursement. Based on your travel schedule and when you get the money, payments might kick-off before, during, or post-trip. Consider setting up autopay soon after securing the loan to ensure timely payments. Loan terms often span from one to seven years with interest rates varying between 4% and 26%.

How to Apply for a Vacation Loan

If you’re interested in a vacation loan, you can apply in four simple steps:

    1. Check Your Credit Report: See whether you’re putting your best foot forward. Address any delinquent accounts or errors before you apply.
    2. Set Your Budget: Before applying for a travel loan, establish what you can afford using our personal loan calculator to gauge monthly payments and loan duration.
    3. Compare and Explore Lenders:  Shop around and see what each lender offers and decide which loan features are important to you.
    4. Pre-qualify With Multiple Lenders: See which lender can offer you the lowest rates and repayment terms that fit your budget. Remember that when you pre-qualify for a vacation loan, it doesn’t affect your credit score.
    5. Select the Ideal Lender: While many opt for the most cost-effective choice, return to your preferred lender and finalize the application. They'll likely conduct a thorough credit check, which might briefly affect your score.
    6. Prepare Necessary Documentation: Collate essential documents like ID proof, W-2s, pay stubs, Social Security Number, and bank details to complete your application.
    7. Stay Connected: Lenders may require additional details during the evaluation. Be proactive in checking for communications to speed up the loan process.


Vacation loans can be a great way to finance your next trip. However, it's important to compare interest rates and terms from different lenders before you apply. You should also make sure that you can afford the monthly payments before you take out a loan.