Everyone dreams of taking their family on an amazing vacation. But with the average cost for a family vacation running more than $4,580, paying for that trip is tough. Credit cards can help, but putting thousands of dollars on the card can cost you in high-interest payments. And if you don’t have tons of savings, you won’t have enough cash to cover the costs. That’s where using loans for vacation expenses can help. But there’s more to taking out a loan than rushing to your favorite bank or lender. Here are a few tips to help you get the most out of your loan.
1. Know the Types of Loans for Vacation Expenses
There are different types of personal loans available. And you can use them for just about any purchase you can imagine. This includes your vacation expenses. But you’ll want to choose the right type of loan before you start booking your trip.
Personal Installment Loans
Personal loans are a great choice and allow you to borrow larger amounts of money. For large families or those looking to take the trip of a lifetime, these loans are a great choice. You’re able to pay the balance off over time, breaking up your vacation expenses into more manageable payments each month. As long as you pay the loan off by the end of the term, you’re good to go. Keep in mind that many of these loans take time. Because they’re for a larger amount, the approval process takes longer and you might not get your money as quickly as you’d like.
If you need money upfront to pay for airplane tickets and know your paycheck will cover it, a payday loan may be the best choice. These loans give you an advance on your paycheck and once that paycheck reaches your bank account, the loan plus any interest gets repaid in full.
Payday loans are easy to get. All you need is proof of employment, your bank account information, and your past few pay stubs. Once the lender has the information, they’ll be able to get you the money in as little as a few hours. You can learn more about payday loans on this page.
2. Borrow Only What You Need
Taking any type of loan out means going into debt. The more debt you have, the more it can hurt your credit score.
The key to financing your vacation with a loan is to only borrow what you need. This makes the payments more manageable over time and helps keep your debt levels as low as possible. When planning your vacation, take the time to plan a firm budget. Look at the cost of transportation, hotels, and food as fixed expenses. You’ll need these things to enjoy your vacation.
Then, consider the types of activities you and your family enjoy most. Call around for information on the current prices for those activities, and add those to the estimated cost of your trip. Once you have these numbers, add them to the fixed costs. This is the amount you’ll want to borrow. If you end up not using the full amount of the loan, you can use the leftover money to pay down the principal amount faster.
3. Apply for the Loan Ahead of Time
If you’re taking out a payday loan, you’re fine applying for it the same day you need it. But if you’re looking for any other type of financing, apply ahead of time. Depending on the lender, it can take several days for the application to get approved and then another week for you to get your money. You’ll want to make sure you have the money before you leave on your trip. Otherwise, you’ll be stuck relying on credit cards and paying their high-interest rates. And with an average interest rate of more than 16 percent, that could make your trip far more expensive.
4. Use Credit Card Rewards
Most credit cards offer some type of rewards program, whether it’s airline miles, cash-back, hotel points, or gas rewards. And those rewards can help extend your vacation budget. Take a look at your card and see if you qualify for any rewards. If you do, consider cashing them out before your vacation. The more rewards you can use, the less money you’ll have to pay out-of-pocket for your vacation expenses. And the best part? You can use these in conjunction with your loan without a problem.
5. Have a Repayment Plan Prepared
No matter how much or little you spent on your vacation, you’ll want to start paying it off as soon as you can. This helps you avoid making higher interest payments. As soon as you take out a loan, make sure you have a repayment plan in place. The lender will outline your expected monthly payments which will let you pay off the loan by the end of the loan term. But you can always pay more each month. The more you pay, the more you’ll save on interest. Look at your monthly budget and see how much you can afford to pay over the minimum. Then, make a plan to pay that amount until the loan is repaid in full.
6. Use Your Savings Whenever Possible
Even if you’re taking out a loan or looking for vacation financing, it’s always best to use your savings to offset your debt. That doesn’t mean you have to deplete your savings completely. Just use your discretion. The more you save up for your vacation, the less you’ll have to borrow. And the less you borrow, the less debt you’ll carry from month to month.
Everyone deserves to enjoy themselves on vacation. And if that means you need to take out loans for vacation expenses, do it! Just make sure to follow these tips so you get the most out of that loan. For more helpful tips on saving money while traveling, check out this post.