Complete Guide to Travel Financing
Posted by Frank Gogol in Loans | Updated on May 30, 2023
Going on a trip can make anyone happy. You get to see new places while spending time with your family or friends, and you can forget about your daily struggles for a while. After all the social distancing they’ve endured, people are now beginning to look for travel options again, being eager to see the world.
But as excited as you might be to book that flight and pack your things for a well-deserved vacation, you may not be able to afford it. Sometimes, plane travel can be quite expensive, depending on the destination, the time of booking the ticket, the time of the year you’re traveling, how much luggage you bring with you, and so on. Travel financing can save you from this unfortunate scenario by providing you with the funds you need for your journey.
So, what are your travel financing options? Let’s find out.
Table of Contents
What Is a Travel Loan?
A travel loan is a type of financing you can take out to fund a trip when you’re on a budget. You have the chance to take out a loan that has scheduled monthly payments along with a fixed interest rate. Besides, travel loans are seen as personal loans – this means you do not have to use your car or house as collateral.
People have the chance to borrow up to $100,000, depending on the lender and how much money they need. Of course, travel loans should only be an option when you do not have other alternatives, such as saving money.
How to Find and Choose a Travel Loan?
It takes time to find a travel loan, mainly because there are just too many options out there and it’s hard to make up your mind. Each loan is unique, with some lenders offering higher amounts with better terms and others having a higher interest rate.
Fortunately, the Internet makes it easy to look for loans nowadays. All you have to do is compare each lender and find the best deal.
Here are some factors to take into account while hunting for travel loans:
Low Fees or None at All
Nobody likes fees, especially high ones. The sad reality is that many personal loans have terrible fees, with people either giving up on the financing altogether or committing to large payments.
Some lenders will charge loan origination fees, late fees, and prepayment penalties. Others don’t charge fees at all.
Ideally, you should go for a loan with either low fees or no fees.
The APR always comes into play when comparing loans, and you should not ignore it. Ideally, the APR should be as low as possible. High APRs mean you will pay more over time – this is why having a lower one is so important.
Always check out APRs and make sure you pick a convenient one along with other good features.
Each loan is unique and offers different things. Lenders like to give their loans special features that make them more desirable. For example, some offer “return windows” so you have the chance to pay off the loan without dealing with penalties. Others will come with discounts if you sign up for autopay.
Check out the unique perks of a loan and you might make the next years of debt less troublesome.
There is no better person to tell you what to expect from a company than someone who’s already tried their services. Similarly, someone who has already gotten a travel loan from a lender will know what the good and bad points are.
Look up some reviews for the lenders you are comparing and see which one has more positive or negative reviews. Check for certain praises or complaints that repeat throughout the reviews – it will give you an idea of things you might experience after taking out the finances.
Lenders that Offer Travel Loans
There are multiple lenders offering travel financing. Even though you know which aspects to take into account while comparing lenders, you might still want some recommendations to look into.
Let’s check out some examples:
- Prosper – Prosper is one of the fastest loans you can get for travel. They have an APR between 7.95% and 35.99%. In order to qualify, your credit score must be at least 640.
- Upstart – Upstart has an APR range of 4.37% – 35.99%. The minimum credit score required is 600. Therefore, if you don’t have the best credit rate, this service is great for you.
- Best Egg – With Best Egg, you will experience the best online prequalification process. Their APR ranges from 5.99% to 35.99%. However, your credit score must be at least 700 to qualify.
Pros and Cons of Travel Loans
Travel loans are amazing, but besides the numerous advantages, there are also a few disadvantages. Here are the pros and cons of travel financing:
- You might get a personal loan with a lower APR than people who go for credit cards
- The loans are given to you very quickly
- You do not need to use your property to secure the loan
- Your credit will be affected if you do not pay off the loan
- You’ll deal with debt for the next years
- You’ll have to pay interest
Cost of a Travel Loan
The costs of travel loans vary from one lender to another, but they are also affected by your credit history and your debt-to-income ratio. If your DTI and credit history are good, you will be able to experience a lower APR. As such, the travel loan will not be that expensive.
Generally, APRs go from 4.00% and 36.00% for travel loans. How high your rates are will depend on your APR. You can pay a few thousand in interest depending on how high the APR is.
Buy Now, Pay Later as a Travel Loan Alternative
When you need money to travel, there is also a buy now, pay later alternative you can consider.
What Is BNPL?
A BNPL works by breaking your payment down into multiple smaller payments. Instead of paying the full amount instantly, you pay it over a longer period, making it more affordable for you. The first payment will have to be made at checkout.
Should You Take a BNPL Travel Loan?
BNPL travel loans should only be considered in a few cases. For instance, you should only consider them if you can pay off the loan on time, or if you need money to pay for emergency travel. Also, they represent a good option as long as you are eligible for a 0% APR.
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Travel financing is available to those who need it in the form of travel loans or BNPL financing. Whichever you choose depends on your financial situation and the reason for the trip. Make sure to compare options before choosing so you can get the best rates.