Who doesn’t love to travel?
Taking a holiday is on everyone’s to-do list. Taking in the sights and sounds, mingling with the locals in a different culture, enjoying delicious food and lounging around under the sun; travel does much more than recharge our batteries. It enriches us, broadens our understanding of the world, and creates timeless memories.
If you had travel plans cancelled in the past few years thanks to COVID-19, a lack of money, or both, it stands to reason that you might be ready to hop on a flight and head to somewhere wonderful. Holidays have proven health benefits. It’s a fact. But sadly, going on holiday can be expensive, and financial stress is not good for your health.
Travelling comes at a price
So how are you going to pay for that holiday? Is it a good idea to take out a personal loan for it?
If you’re considering using borrowed money to go away somewhere fun, it’s important to think carefully about whether it is actually a good idea to take out a loan to go on holiday.
As wonderful as taking a holiday can be for your mental health, it’s not a necessary expense like a roof over your head. So, as tempting as it may be to borrow the money to take an amazing trip, just be aware that it isn’t typically a good idea.
When a travel loan can make sense
However, there are times when you may well decide to go on a trip you can’t afford despite the financial downsides. If that’s the case, using a travel loan can make sense. Personal loans can be better than credit cards if you’re going to borrow to go on a holiday. Just know you could be paying off your holiday over several years.
Personal loans can work better than credit cards
Using a personal loan to pay for a holiday can stop you from mindlessly spending as you might with credit cards. Getting a lump sum beforehand can help prepay for certain expenses such as hotels, flights and activities. This can help you keep better track of your spending.
Secondly, personal loans can be better than credit cards for funding a trip because they have a fixed repayment schedule and a definite payoff date. You’ll know when you take the loan out exactly when your loan needs to be paid off, how much your monthly or weekly repayments are and how much the total loan will cost you. You’ll be able to make a more informed choice as to whether borrowing is worth it, as opposed to just sticking the trip on a credit card and hoping, then paying it off with minimum payments, potentially over many years.
So, if you do take out a personal loan to get to your dream destination, you should borrow the minimum possible and choose the shortest repayment term you can afford. The less you borrow, the lower the loan interest rate, and the less time you pay interest. The more affordable it will be to take out a loan for your trip.
There are also alternatives to taking out a loan for holidays
• Start a holiday savings fund. Put money aside, perhaps in a high-yield savings account. If you save a small amount each month to cover holiday costs, you should have the money that you need when the time comes to get away, especially if you have a timeline of, say, six months to a year before you want to make the trip.
• Look for inexpensive holiday destinations. Save your tropical holiday or two weeks in Europe for when you won’t have to go into debt to pay for it.
• Booking at the last minute can mean taking advantage of special deals. If at all possible, avoid the school holidays. Travel during the off-season or visit tourist destinations in the shoulder seasons and both hotels and flights are likely to be cheaper. Plus, there should be fewer other tourists to contend with – a win-win. Staying closer to home can also help make your holiday much more affordable. Driving can be a cheaper option than flying and driving two or three hours to somewhere you haven’t been before can be just as refreshing and rewarding as flying somewhere more ‘exotic’.
A travel loan can get you on that special trip
A holiday loan can eliminate the potentially years-long wait to save up for your next vacation. A travel loan can also mean you get to go on that very special once-in-a-lifetime trip, such as a family wedding or going to that reunion of friends and family from all across the globe.
Just make a fully informed choice about borrowing for your holiday and remember, if you decide to take out a travel loan and then your income takes a hit, or a financial emergency crops up, you might not be able to make your loan payments as originally planned. This could put your financial situation at serious risk.