5 Facts Everyone Should Know About Travel Loans

Traveling to exotic destinations sounds very tempting, but not all of us have enough money to simply decide where we want to go and take off. Even if you succeed in finding very cheap transport, you will still need to cover your hostel/hotel, your food, emergency funds…  Chances are, if you haven’t saved up quite a significant stack of money, you will need to borrow it. Especially if you are a student.

It is not uncommon for well-experienced travelers to borrow money. Usually, it is the credit card loan, or a personal loan, even though they might sometimes borrow some money from their family and friends. I would say that the other option is much safer, but plenty of people do not have such an opportunity.  

You are probably wondering if doing something like this is a good idea. And let me tell you, it is probably not the best one. There are enough debts and loans that we have to pay off every month, and that one more loan comes just like an icing on our perfectly broke cake. Just kidding. Although it may not be the smartest idea if done for the wrong reasons, travel loans can be a very useful way of meeting new people and new cultures through traveling, only if done correctly.

Here are some of the ways to help you evaluate whether or not you should even take a personal loan, and how to take the most out of it:

1. Don’t Do It If You Don’t Really Need It  

Travel loans sound very tempting – they are always accessible and offer plenty of cash in advance. But taking a loan just because it is tempting and without any real need for it is just nonsense. Think thoroughly about your decision. Put your finances on paper and decide whether or not taking a travel loan is the right choice in the first place. Maybe you do not want to cut into your savings bank account, but if you have some personal savings, you might as well use those. It will cut cost in the long run, since you will avoid paying an interest rate on top of it.  

2. Compare Travel Loans And Credit Cards

While on the first look, these two methods for funding the travels may sound pretty much the same, there are some differences between credit cards loan and travel loan that you should be wary about. Travel loan is the same as any other personal loan – bank lends you a certain amount of money for your travels, you sign to agree to the terms and conditions (you also agree on the interest rate and any other relevant expenses), and you set the payment schedule. Travel loans do not have the same perks as credit cards – such as reward points, warranties, and purchase protection. On the other hand, travel and personal loans can be much more beneficial in terms of expenses, as the interest rate is much lower, and can be fixed. Another great thing is that travel loans offer a fixed repayment schedule, on your terms. Considering the fact that interest rates, repaying conditions and benefits vary from bank to bank, make sure to thoroughly consider all of your options. Invest your time in finding the best travel loans, as expenses differ significantly.  

3. Don’t Borrow What You Can’t Repay

Before you even start thinking about a credit card loan or a travel loan, make sure that you can afford it. It is easy to fall in the trap of thinking that you can repay it later, that it is not that much, etc. That is why a travel loan is so tempting – someone will literally give you loads of money, and you have plenty of time to repay it. At least that is what you think. In order to get in debt to go traveling, you need to have secure cash flow, and to take only the amount of money that you easily repay. Put into consideration that the monthly repayment should never go over 50% of your monthly earnings. If that happens, your other financial goals will get in jeopardy. Think how would you feel if you had to sacrifice your retirement or child’s educational savings? Probably not that good. Traveling is a great way to expand your knowledge and worldviews, but it should never come before basic needs. It is also important to say that you should try not to miss monthly repayments since it can unfavorably affect your credit scores, and lower your chances at taking other loans later in life (when you might actually really need it).  

4. Don’t Make That Decision Alone

Depending on what your family/marital status is, you should definitely consult with your spouse, and/or other family members in your household. Travel loan is going to affect your family’s everyday financial life, so it is very important for your spouse and/or dependents to approve your decision. If you live with your parents, you can always take them as a guarantor. If you find yourself accountable, it will only help you repaying your debt and sticking to the repayment schedule.  

5. Make The Most Out Of It

Before taking the loan, make sure to write down all the possible travel expenses. That way, you will lower the possibility to borrow way more than you actually need. And I am sure you don’t want to be repaying that one-holiday debt for years. It is easy to fall into the reckless trap and plan your incredible holiday with many (usually expensive) activities. But be realistic. Plan your holiday within your means, and make sure to make the most out of what you can afford! Use the loan to cover only the essential expenses, such as accommodation, airplane/bus tickets, food, and a one or two very important activity (if there are such at the destination you’ve chosen). Other than that, be creative. Research what it is that you can explore to get the full experience of your holiday, and to save some money at the same time. You will be surprised at how many possibilities there are!

Whatever you decide, credit cards, or a travel loan, or no loan at all, know that there is much more to life than just finances. Being careful doesn’t have to mean any fun at all – it just means that you should always set your priorities and not to be reckless with the money. There is nothing wrong with a loan here or there if it is going to bring you unforgettable memories with your loved ones.