Planning to Take a Travelling Loan? Is There a Better Option?
We all have our own personal travel goals, both near and far. Unfortunately, not everyone has the funds for it.
After all, travelling is so hard to save for. We’ve all seen it in Disney’s movie, Up.
All they ever wanted was to go to Paradise Falls, and they did their best to save for the journey.
However, there’s always an emergency that comes up, forcing them to use it. If only there was a way for them to get the money they needed instead of relying on their savings.
What Is a Travel Loan?
That’s what a travel or holiday loan is. It’s a type of unsecured personal loan that financial institutions provide specifically for travel or celebration.
We understand, however, how most people are wary of borrowing money for travel. After all, it’s categorized under “bad debt”. Good debt is borrowing money as an investment or in order to start a business. You know that there’s an opportunity to grow the money you get and that eventually, your investment will be more than enough to pay for the loan itself and even let you earn on top of it, such as when you’re taking out a car loan with the intention of using it to start a ride-sharing business.
Bad debt, on the other hand, is borrowing money that will not grow in value, such as when you’re swiping your credit card for groceries. But travel and groceries are two very different things.
Who can put a value on the memories you’ll be experiencing? Who’s to say that it’s not going to be worth it? That it won’t be an investment that will increase in value through time?
Travel Loans and Credit Scores
If you do decide on applying for a travel loan, you’ll find out that one of the biggest factors that can influence the amount of money that you are going to get is your credit score. This is mainly because it is an unsecured loan. The financial institution will only rely on your credit score as their basis on your capacity to pay. They won’t be holding any collateral for it.
Hence, we recommend improving your credit score, even for just a bit, before applying. There are personal loans for fair credit, for any type of credit score really, that you can apply for online. However, your chances of getting approved do improve the better score you have.
How to Compare and Choose the Best Option
Aside from actual travel loans, though, and different personal loan plans, there are still other options that you can opt for to get the money you require for travel, and each of them have their own pros and cons. For instance, there are travel credit cards that you can apply for that allows you to earn travel-related points, free miles, and even cashback rewards. Another benefit of getting a credit card is being able to borrow the money that you need as you go.
After all, personal loans provide you with a fixed amount that will force you to limit your spending to it. Getting a travel credit card is a good idea if you’re not even sure how much you really need.
On the other hand, travel credit cards usually come with high-interest rates. You might find yourself paying double the amount that you have actually spent on your trip.
Thus, we also recommend that you look into getting a low-interest credit card instead. Sure, you won’t be able to enjoy the side perks that the travel credit card provides, but its low-interest rates will allow you to save significantly.
Apart from the different loan options that we have mentioned above, here are the other things that you should consider before applying for any type of travel loan:
- Your Budget. How much are you really thinking of spending? We have mentioned above that getting a credit card is best if you simply can’t estimate how much you’re going to need for your trip. That doesn’t mean, though, that it’s a smart way to go. It would still be wise, even to just roughly draft a budget, in order to get an idea of how much money you will need to borrow and gauge whether you can actually pay it back later on.
- Your Repayment Strategy. Speaking of paying it back, while we believe this trip is of utmost importance to you, we also know that no trip is worth ruining your life. Remember, the main reason for taking this trip in the first place is because you know that it’s going to help increase the quality of your life and not the opposite. Hence, it’s better to have a repayment strategy in place before you even apply for your loan and hop on that train. This will bring us back to why it’s crucial to set a budget for your journey.
- Your Travel Plans. Where are you going? What do you plan to do when you arrive? What are your absolute priorities? When are you going? These are all important, not only to help you determine the amount that you need, but also to plan when you’re going to apply for the loan itself. You don’t want to apply too soon in fear of spending the money beforehand. You also don’t want to get accepted too late that you’d have to cancel or adjust your plans.
Finally, here’s a question that we usually get from our readers: is getting a travel loan worth it? The answer is both yes and no. If this trip really means a lot to you, just like what Paradise Falls meant to Carl and Ellie from Up, or your dream is to travel to Paris, and you have a solid repayment plan, then yes, it’s going to be really worth it.
However, if you’re just going on a trip to have more interesting pictures on social media, or because you’re being pressured to do so whether directly or indirectly, and you know that you’ll probably be spending the next five years of your life paying for it, then no it’s not. In the end, it’s up to you to decide.
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Have a safe trip!