How You Can Benefit from a Travel Loan

Your vacation is meant to make memories and provide you a respite from the normal stressors of daily life. Planning an expense budget in advance of your trip improves your vacation experience tremendously. Unexpected expenses might still arise, however. Additional excursions or experiences might suddenly become desirable to you and your family. Fortunately, many lenders offer travel loans to ensure you are financially prepared for every expense and opportunity you experience during your travels. Continue reading to learn how you can benefit from a travel loan for your next vacation.

If You Never Heard of a Travel Loan, Here’s What You Need to Know

Travel loans are also referred to as vacation loans. Travel loans are personal loans used to pay for all expenses applicable to a vacation or extended trip. Some personal loans offered by lenders are not necessarily titled as travel loans, even though the money is made available for whatever purpose you choose. The funds are usable to pay for airline or train tickets. Funds are also usable for cruise line or hotel accommodations. Discretionary funds are available for whatever experiences arise in addition to your planned itinerary.

Funds borrowed in travel loans range widely in amounts. Loans from $1,000 to $100,000 or more are made available based on the lender and your qualifying credit and other factors. Is taking out a travel loan the best idea for you financially? Continue reading to learn more about the types of loans and interest rates available.

Secured vs. Unsecured Borrowing

If you have a home mortgage or ever financed a vehicle you are familiar with secured loans. A secured loan provides borrowed funds, which are secured by some type of collateral. In the case of a home mortgage loan, the home becomes the collateral. For automobile loans the vehicle title is the collateral. Secured loans typically offer more favorable interest rates for borrowers because lenders know their money is secured by an item of equal or comparable value to the borrowed funds. Most travel loans are not secured, however, unless a borrower is willing to pledge some type of alternate collateral a lender will accept.

Unsecured loans typically have higher annual percentage rates (APRs) than secured loans. Sometimes the APR on a secured loan is higher than the APR on low-interest credit cards as well. Not all credit cards have long-term favorable rates, however. For example, even introductory zero or low-interest credit card rates increase after three, six, nine or twelve months. Unsecured loans maintain the same APR for the entire life of the loan. This makes unsecured loans a better option than many credit card choices unless you can pay off your vacation debt and expenses before your credit card account APR increases.

Travel Loan APRs

Travel loan APRs vary greatly in number based on multiple factors. The primary factor is your credit (FICO) score. FICO scores are three-digit numbers, which indicate the creditworthiness of a borrower. FICO scores range between 300 and 850, with an 850-score indicating absolute perfect credit. A higher FICO score awards you a lower APR when borrowing money. APRs on travel loans tend to range between five and thirty-six percent based on your FICO score and additional factors.

Other factors impacting the APR on your travel loan might include your employment and residential history. The amount of money you have in checking and savings accounts might also impact the APR on a travel loan. Lenders look at numerous factors when determining what APRs to charge borrowers for unsecured personal loans. The better you present your creditworthiness, the more favorable APRs, and terms you will be offered.

Improving Your FICO Score

Improving your FICO score before applying for a travel loan is possible. The AnnualCreditReport.com website is a secure legitimate source for downloading a free copy of your credit report from all three major credit bureaus once per year. Review your credit report in advance of submitting any loan applications. Have unwarranted debts or inaccurately reported late payments corrected or removed as applicable. Pay down the balances on your accounts across the board. If possible, pay off at least one debt entirely. Make on-time payments for a minimum of six consecutive months and avoid applying for any other credit leading up to applying for your travel loan.

Different Types of Travel Loans

Travel loans are available as secured and unsecured loans. If you have a high FICO score and are eligible for a zero-interest introductory credit card offer, it is possible to secure travels funds using this approach as well. The catch with using a credit card to pay for your vacation is knowing you can pay off the full amount of debt prior to the APR increasing after the promotional period ends.

Some companies offer pay-in-4 financing options as well. Affirm is one of the most popular companies with this type of payment plan available. Luggage, airfare, hotel bookings and resort stays are all purchasable using Affirm’s pay-in-4 feature. These point-of-sale loans are helpful if you do not qualify for or want to take out a travel loan but need some financial flexibility to afford your trip. PayPal also offers pay-in-4 options in addition to outright PayPal Credit offers. Uplift is another popular source for buy-now-pay-later (BNPL) financing for travel and other purchases.

Of course, it is also an option to save money each month towards upcoming vacations to reduce the amount you need to borrow for your travels. While this is the most financially beneficial way to fund your vacations, it is not always possible to accomplish. Fortunately, therefore pay-in-4 options plus personal loans are available.

Best Travel Loan Lenders for Your Next Vacation

Finding the right lender for you travel loan begins with assessing your FICO score and improving it as needed. Once you know your FICO score and creditworthiness have reached their current highest potential, it is time to begin comparison shopping between lenders. In today’s world, seemingly endless numbers of lenders are available online and through traditional banks and/or credit unions. Qualified borrowers might receive unsecured personal loans through banks such as Wells Fargo for an APR under six percent. Credit union members might receive even lower APRs when borrowing from their own credit union with qualifying credit.

The Lending Tree is a useful and popular resource for comparing loan rates and referring borrowers to the best lenders for their needs. Services are free, as the Lending Tree makes its money from successfully referred lenders. Using a rate-comparison and personal loan referral resource such as the Lending Tree or Bankrate helps you get the best APRs and terms for your travel needs. Additional lenders and resources for the best personal travel loan rates and terms available today include:

Lightstream.

Best Egg.

SoFi.

AmONE.

Lending Club.

Discover.