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An In-depth Look at Travel Loans

Have you heard of travel loans? If you have always dreamed of spending a couple of months traveling through Europe, taking a once in a lifetime African safari, or spending a mouth making your way down the coast of Australia, taking out a travel loan may be exactly what you need to make your dream a reality. The following takes an in-depth look at travel loans, including what they are, what you should consider before applying, and the application process.

What is a Travel Loan?
Travel loans, which are also referred to as vacation loans, are most often a personal loan that is usually not secured by collateral, such as your car or home. As a personal loan, you have two options.

1. Opt for a loan for a specific amount of money with a fixed interest rate that you pay back on a regular schedule. A travel loan is ideal if you are going on an all-inclusive trip. Just be sure to budget for incidentals, such as shopping.

Opt for a personal line of credit, which means that you are drawing funds against your credit line for a period of time known as a draw period. (This is done using a debit card that is attached to your line of credit. According to the Consumer Financial Protection Bureau, a personal line of credit usually has variable interest rates. You are responsible for paying interest on the amounts drawn against your line of credit. This is a better option if you do not know exactly how much your trip will cost.

What to Consider Before Taking Out a Travel Loan

First, be sure this is really the right decision for you. Can you really afford to take out a travel loan? To make this decision, look at what you are earning vs. what you are spending. Also, factor in the stability of your job and other impending financial commitments. For example, if your car is on its last leg, you’ll probably have to replace it sooner rather than later. Will you still be able to pay your travel loan’s monthly premium?

Also look at your credit score. If you have a credit score that is less than stellar, you’ll be hit with higher interest rates. It may be beneficial to put your travel plans on hold for a few months while you work on building your credit score. This should help you get a lower interest rate.

Don’t automatically go with the first travel loan you find. Look for flexible travel loans. For example, a loan that charges no additional fees for repaying the loan early or allows you to make lump sum repayments may be beneficial.

Applying for a Travel Loan

You may be able to get a travel loan through the bank or credit union you already use. If not, Encompass Credit Union, Lending Tree, and Traveler Financer are well known options you may want to look into. When choosing where to apply, pay close attention to the interest rate and whether it is fixed or variable, the length of loan, your monthly payment, and the possibility of additional fees, such as access fees on a personal line of credit.

When applying for a loan, you will be asked to provide the same type of documentation you would for any other type of loan, such as proof of income.

A travel loan can provide you with the amazing opportunity to visit a place you would otherwise never have the chance to see. That being said, treat a travel loan as you would any other type of loan and use it responsibly.

© Corsairfly 2010