Top Vacation Personal Loan Providers
What Is a Vacation Loan?
A holiday loan, also called a vacation loan, is an unsecured personal loan that helps you pay for a vacation. These loans can be used to cover flights, hotels, activities, and other travel expenses. Several lenders offer personal loans for vacations, including banks, credit unions, and online lenders. These personal loans are repaid in fixed installments — so you’ll pay the same amount each month over the life of the loan.
Travel Loans: Key Terms to Know
You should familiarize yourself with the following terms when looking at loan options:
- Annual Percentage Rate (APR) – The rate of interest charged on a vacation loan, expressed at an annual rate.
- Term length: Lenders can present you with a variety of choices, typically spanning from one to seven years in duration. Loans with longer terms tend to result in lower monthly payments but typically incur higher overall costs.
- Principal – The amount of money owed on a loan, excluding the charged interest or APR.
- Unsecured Loan – Most personal loans online are not collateralized. However, car loans may be secured or collateralized with the car the borrower plans to purchase. If you take out a personal loan for a vehicle that is unsecured, the lender assesses your ability to pay, based primarily on your credit score.
How Do Vacation Loans Work?
If you are approved for a vacation loan, you should receive funds within a few days. The funds are typically disbursed as a lump-sum payment. These funds can be used to cover travel expenses in a variety of ways.
Depending on your travel schedule, repayment usually begins within the first month after disbursement of funds. It's advisable to enroll in autopay immediately upon receiving the loan in order to make timely payments regardless of when you need to begin repaying the loan. Rates for vacation loans vary from 4% to 26%, with terms ranging from one to seven years.
Pros and Cons of Vacation Loans
Pros |
Cons |
Flexibility: You can use your personal loan for any type of vacation expense you want. |
Credit Score Risk: Missing a loan payment can hurt your credit score. |
Low-Interest Rates: If you have a high credit score and good income, you could qualify for a low interest rate on your holiday loan. |
Potential Fees and High-Interest Rates: Depending on your credit score, the interest rates on your loan could be higher and some lenders also charge extra fees for loan origination and early repayment. |
Fixed Repayments: Because personal loans have fixed monthly payments, you’ll pay the same amount each month. |
Harder to Save: Loans can make it harder to save up for your next vacation due to continuous repayment instead of using a credit card. |
Accessibility: A holiday loan gives you access to a large lump sum of money all at once. |
Added Debt: A personal loan for vacations becomes another financial obligation that could require years of repayments. |
How to Apply for a Vacation Loan
To apply for a personal loan for a vacation, you will need to take the following steps.
- Check your credit: Before applying for a holiday loan, it’s a good idea to review your credit report. Check for any inaccurate information that you might need to have removed by the credit bureaus, as well as other factors that might be hurting your credit score that you can fix (like a delinquent account). Cleaning up your credit report and improving your score can help you get a better interest rate on your loan — and it could even affect whether you qualify for a personal loan for vacation travel in the first place. Many lenders have minimum credit score requirements to qualify for a loan.
- Prequalify and compare lenders: It’s generally best to prequalify with three or more lenders so you can see what options are available to you. Aside from lower interest rates, other factors to consider could include loan features like the ability to manage your loan with a mobile app or fast funding. Some companies specialize in funding holiday loans, so they could offer more competitive rates.
- Provide necessary documents: As with other personal loans, you’ll need to provide some key documents to qualify for a holiday loan:
- Personal identification (such as a driver’s license or passport)
- Social Security Number
- Proof of income (W-2 or pay stub)
- Bank account information (for transferring the loan)
- Review and sign your application: It’s a good idea to double-check your paperwork and make sure the interest rate and loan terms are a good fit for your budget before you complete your application. Once you are approved for the loan, you’ll need to start making payments each month.
READ MORE: THE ULTIMATE GUIDE FOR VACATION LOANS
How to Choose a Personal Loan for Vacations
When trying to choose a lender for a holiday loan, there are a few important factors to consider:
Interest rate and APR: The interest rate on your personal loan is the amount of interest you’ll need to pay for your loan, in addition to the principal (or the amount of money you originally borrowed). The APR (annual percentage rate) includes both your interest rate and other lender fees. Your interest rate is largely determined by your credit score and other information from your credit report. The higher your interest rate, the more expensive your monthly payments and total loan costs will be.
The interest rate you’ll be offered for a vacation loan will depend on your credit score. Generally, vacation loan rates range from 4% - about 26%.
Repayment terms: A personal loan for vacation expenses could have repayment terms ranging from a few months to a few years. Longer repayment terms result in lower monthly payments, but you’ll end up paying more in interest over the life of the loan. Shorter repayment terms have higher monthly payments, but you’ll pay less overall. Consider the total amount of money you’d have to pay and what works best for your budget.
Best Vacation Loan Reviews
Alternatives to Vacation Loans
You don’t necessarily have to take out a personal loan for vacation travel. Several alternatives could be a better financial solution:
- Create a vacation savings account: The cheapest way to travel is to open a separate account to save money for your next trip. Money placed in a high-yield savings account will also earn interest, helping to grow your vacation savings. Using these savings will help you avoid taking on debt to go on vacation.
- Use your credit card: Many credit cards have generous travel rewards programs that allow you to earn rewards points for vacation spending. Be mindful of your credit card’s interest rate when using it for vacation expenses. Paying off the balance in full by your next billing date will allow you to avoid interest charges. Those with good credit could also apply for cards with 0% intro APR financing, giving them more time to pay off their charges without any interest.
- Get a part-time job: If you’re trying to save for a big vacation, consider getting a part-time job. Save all the money you earn from the extra work toward your trip so you can cover your expenses without taking on debt.
- Borrow from friends or family: You might be able to borrow money from a trusted friend or family member instead of taking out a loan. Be sure to agree on repayment terms in advance to prevent possible misunderstandings.
- Take a staycation instead: A staycation can be a fun, low-cost alternative to an expensive trip. Explore your local area and stay at your own home to enjoy a fun, relaxing break without stressing your budget.
Conclusion
Travel loans offer a convenient way to finance your vacation by giving you access to funds for flights, accommodations, and other holiday-related expenses. These loans come with both advantages and drawbacks. They offer flexibility in spending, the potential for low interest rates with good credit, and predictable monthly payments. However, they also risk negatively impacting your credit score if payments are missed and may incur additional fees and interest charges. Choosing the right financial solution for your vacation should align with your goals and priorities.