How to get Travel and Vacation Loans in CanadaSeptember 15, 2022
Traveling is one of those things that people tend to dream about but don’t always do as often as they would like. One reason for this is money, but what if you could make it happen? Well, when it comes to borrowing money for a vacation, it is more common than you think.
Table of Contents Contents
Not only can you approach your bank or credit union, but there are plenty of online lenders that offer travel loans. Some travel companies even offer different payment options to help you cover vacation expenses.
How can you finance a vacation?
In order to finance a vacation and travel expenses, there are a few different ways to go about it. You can either take out a personal vacation loan, use a credit card, or get a home equity loan or line of credit.
Personal vacation loans
You can get a personal vacation loan from a bank, credit union, or an alternative lender. These loans allow you to get cash upfront and pay it back in fixed payments over time. A few reasons why someone would choose to get a personal loan for a vacation is that they usually have a relatively low-interest rate, although that mostly depends on your credit report.
Travel loans are also unsecured personal loans. This means that there is no collateral involved if you default on the payments. This, however, does mean that there is more of a risk to the lender that the interest will be higher than a secured loan. Most personal loans, though, are open loans, meaning you can pay off the principal whenever you feel like it, not just with fixed monthly payments. If this option is used, it will save you a lot of money in interest.
While credit cards have much higher interest rates than personal loans, they also offer points and incentives. Many of these incentives are geared towards traveling. With many different airlines, if you book flights using their credit cards then you can earn cashback, free flights, and even flight incentives. However, the payment process is just like any other credit card. You have a minimum monthly payment and if you only make the monthly payments, it could take a very long time to pay that money off.
These cards are meant to be used and then paid off immediately, if you let the balance linger you pay more interest. Having a high credit card balance also has a negative impact on your credit score.
Home Equity Loan
Lastly, another option you have is a home equity loan or line of credit. While this option is only available to you if you own your home, it can also be a good option to get a low interest loan if you need it. Because this loan is based on the value of your home, it is considered to be a secured loan which means it has one of the lowest interest rates you could get with a loan. In order to get a home equity loan, you can apply through any lender. The amount you are able to borrow is based on the value of your home.
With a home equity loan, you are able to access up to 80% of your home’s value minus what you owe on your home. For example: if your home is assessed at $500,000 and you have $250,000 left owing on your mortgage, the lender can approve you for up to 80% of $250,000.
While home equity loans are the fastest way to have access to funds and have the lowest interest rates, they are secured. Because of this, if you default on your payments, you do risk your home being repossessed. This means that it is important to make sure you are reasonably able to afford the loan before taking it out.
Travel Loans for Bad Credit
While it is easier to obtain the loans above if you have a good credit score, it is still possible if you have bad credit. Chances are though, it will be more difficult to get one through a bank so you would have to go through an alternative lender.
There are many online lenders that can finance a personal loan, but due to a lower credit score, the company is taking a higher risk, so your interest rate is likely to be higher. Most of these loans are also unsecured loans which would also result in a higher interest rate. In some cases, you still might not get approved, and in that case, you may have to turn to payday loans.
Payday loans have extremely high interest rates and often have a shorter payback time than personal loans. These loans also do not help to build your credit, so it can be hard to get out of the cycle once you have started taking them out.
Travel Loans with No Credit Check
If you have bad credit, it is also possible to get a personal vacation loan that does not require a credit check. While these exist, it is important to keep in mind that they also have very high interest rates.
Travel Now and Pay Later Vacations
Another option, instead of going through a lender, is to book a vacation with a loan that you can pay back on monthly payments. Some travel companies and websites offer this service. The great thing about these is that you can have these payments automatically taken from your account in fixed monthly installments. Some offer no late fees and allow you to make payments on the principal whenever you like. Because so many different travel companies offer this, you can compare vacation loans before credit and underwriting approval. This allows you to make an informed decision before agreeing to any loan terms.
The thing with these services though is that they do require a soft credit check, this will give them a rough idea of your credit history as well as confirm your identity. A hard credit check is done when finalizing a loan. You are able to travel anytime after the loan agreement has been made and you can see the total cost of the loan before agreeing to anything. Included in the cost of the vacation is travel insurance as well. Keep in mind that while this is a convenient option, you will still have to pay the interest on the vacation.
Depending on which travel company you choose to travel with, a deposit may be required for the loan, however, this isn’t always the case. There is even the odd travel company that offers this service without a credit check.
Payment Plan Vacations
Instead of taking out a loan for a vacation, some travel companies and websites offer payment plans. This allows you to book your vacation early and pay it back over time, often with fixed monthly payments. However, the vacation would have to be paid for before you can travel. You are able to adjust dates and make cancellations as well if you need more time to make the payments or are suddenly unable to afford them. The only thing that is required at the time of booking is a deposit, then arrangements are made for the rest of the payments.
Whether you are booking a full vacation or just flights, most companies will offer this option to you. Not only does this make vacations more doable, but it also makes it so you don’t have to stress about saving the money before you book, giving you the opportunity to get a better deal.
Travel Loans for Students
Travel loans for students are just like other personal loans. Once you have submitted your loan applications, lenders take a look at your income; credit score and credit history then decide how much money you could get approved for. Many students don’t have a lot of experience with credit or make a lot of income because they are going to school, because of this most lenders will let you apply for a loan with a cosigner.
When you are looking for a travel loan it is important to pay attention to:
- Interest rate
- Loan term
- Whether there is a soft or hard credit check
This will all make a difference in how much the loan will end up costing you in the end. If you want to keep track of your credit score to help gauge approval for your anticipated loan amount, many banks and credit unions will show you a free credit score on the app.
In order to get a travel loan as a student, lenders will require:
- Contact information
- SIN number
- Bank information
- Any information for the cosigner
It is important to verify that you can reasonably afford the loan before signing any loan documents. Defaulting on any loan can negatively impact your credit score and stay on your credit report for up to 7 years.
Different types of travel loans for students
Instead of using a personal loan to travel, you could also use student loans and student lines of credit. and student credit cards in order to travel. These types of loans give lower interest rates and often offer more flexible payment arrangements. Many allow you to just make the interest payments until you have completed school.
Loans to Travel Abroad
Traveling abroad as a student studying abroad gives you even more flexibility in payment options. Not only do you have the option of student loans, lines of credit, and credit cards, but you also have grants and scholarships available to you.
A lot of scholarship programs will cover some of all of your travel expenses as well as your tuition. With scholarships and grants, it is important to read the requirements before you apply so you are certain that you will be able to fulfill them and keep the money you are given.
What are the Best Loans for Traveling?
While there are plenty of different types of loans available for traveling, your best bet is to go through your bank or line of credit. Because they already have a relationship with you, they are more likely to give you a lower interest rate and offer the best option that they have available. Also, if you have had a credit check done with them in the last year, they will not have to run another one.
Another reason to go with your bank is they can often amalgamate the loan into a loan you already have. This cuts down on the interest payments that you have to make and only adds a small monthly amount to the current loan payment that you already have.
Interest-free travel loans
While there really aren’t any interest-free travel loans, choosing a payment plan to pay for your vacation may not cost you interest with some companies. Some travel credit cards also have an interest-free period. If you choose either of these options, it is important to pay them off in the time frame given otherwise you could incur higher than average interest rates.
Is it Okay to Finance a Vacation?
Financing a vacation is actually quite common and one of the most frequently listed reasons why people take out a loan. As long as you can reasonably afford the payments and aren’t stretching yourself too thin, it can make your vacation dreams a reality.
Even if people can afford the flights for a vacation, they often use credit cards as spending money and to pay for hotels, so it really isn’t that uncommon. If you pay attention to interest rates and make overpayments, you actually won’t end up spending too much more than if you paid for the vacation in cash.
Should you Borrow Money to go on Vacation?
While it is always better to pay for what you can in cash, there are some benefits to borrowing for a vacation. For one, it can help to build your credit score and, if you use a personal loan, instead of a credit card, you can pay it off early which boosts your credit score and saves you money in interest.
Can Spring Financial help?
Spring Financial is a reputable online lender that helps people obtain personal loans for all different reasons, including vacation. We also help people with all types of credit scores. Our personal loans range from $500 – $35,000 and allow you to pay the principal back anytime without penalties. We offer great rates on our personal loans and can get you the money in just a few hours after approval with E-transfer. Applying is easy. You can apply online in just a few minutes and get approved as soon as the same day. You can also reach us by phone at 1-888-781-8439.