The answer to this question will never be straightforward. Logic demands you only take out a loan on appreciating assets but if you’ve been feeling burned out, uninspired, or sad, satisfying your wanderlust might just be what you need. In the UK, a low rate personal loan is one of the most convenient ways to pay for your dream holiday. While your savings is ideally the right choice, a personal loan could ease the burden of payment if your personal savings won’t fund your trip to a far-off location.
When applying for a travel loan, here are some things to help you avoid common mistakes
Set a budget: Before borrowing money for your trip, set a budget. Figure out the cost of a plane ticket, hotels, meals, transport, insurance and other miscellaneous expenses. Once you have a figure in mind, you’ll know exactly how much you need.
Credit cards or personal loans? These are the two main ways to borrow for your holiday. A personal loan has a fixed interest rate, monthly payment and repayment schedule. The application process is easy online but it can be safer to go with a personal loan because it forces you to be frugal and live within your set budget. No matter which one you go for, always have a budget set and stick to it.
Credit card and personal loan: A new option is to combine both a personal loan and credit card. If you plan ahead early and you have a good credit score, you can tap into reward points benefits to cover the cost of hotel and flight tickets. Combine it with the lower interest rate of a personal loan to cover expenses on the trip.
Don’t borrow if you don’t need to: If you’re going to borrow money to travel it has to be worth it. If you borrow a large amount, you could be paying off your debt or personal loan for years, and don’t forget about applicable fees and interest. For example, you borrow £5,000 for a trip to New York and you’re paying it back over ten years. You could end up paying up to £10,000 as the total fee.
Find the right loan that fits your travel needs: Before taking a loan, check the interest rates and only consider lenders with the lowest rates. Is it secured or unsecured? Unsecured loans have a higher interest rate but protects your assets against foreclosure.
Only borrow what you can pay back within a year: When taking out a loan, think of how long it will take to pay it back. As a rule of thumb, travel loans should be paid up within a year. The value shouldn’t be so large that it stretches your payment or you’re spending more than you bargained on interest.
When considering a travel loan, you should check your income, expenses and savings. Do you have a stable job that lets you pay for the loan without crippling your income? Do you have other debts you’re paying off? A trip to some of the best locations doesn’t come cheap but an inexpensive travel loan can take you there and back without tipping your budget.