Many of us dream of exploring the world to see incredible places, visit loved ones, and experience other cultures. However, a one-week vacation costs an average of nearly $2,000 for just one person in the U.S.
Many people wonder, “Can you finance a vacation?” and the answer is yes because, with the right plan, you can take a trip without financial regret. From the experts at Western Shamrock, here’s how to finance a vacation to make your travel dreams come true.
Assess Your Vacation Costs
There are many costs associated with travel, such as airfare, lodging, food, entertainment, activities, and local transportation. Calculate the average fees for these travel expenses since seasonal trends and inflation can impact the actual prices while you’re on your trip.
Before even considering how to finance a vacation, it’s a smart idea to create a vacation budget or use a travel budget calculator to understand how much you can afford to spend.
Save First, Travel Later
From a financial perspective, the best option is to save for your future travels before booking a flight or planning a trip.
When you save over time, you gain peace of mind that your trip won’t put you in a bad financial situation when you return. You will also save money in the long run by not having to pay extra interest fees. Savings challenges and budgeting apps can keep you accountable to your goals and help you stick to your plan.
When It Makes Sense to Research How to Finance Traveling
Financing a vacation makes sense for once-in-a-lifetime trips like honeymoons and big family reunions. It may be necessary when emergency travel is required, such as when a loved one has a serious illness, or you need to attend a funeral.
As you learn about the options for how to finance a trip, look for short-term, low-interest options and how you can strategically use reward points. Establishing a clear repayment plan before borrowing money with a vacation loan is crucial.
Four Ways to Finance a Vacation
Can you finance a vacation? Yes, you can, and here are four common approaches to consider.
Personal Vacation Loans
Personal loans, like the ones we offer at Western Shamrock, are versatile and can be used for anything, including travel. They are traditional installment loans that you pay back in monthly predictable installments and have fixed interest rates. You can often get lower rates with personal vacation loans than credit cards.
But like all loans, they add to your long-term debt, and interest and fees can increase the total cost of your vacation. If you miss a payment, you risk hurting your credit score.
Travel Rewards Credit Cards
Some credit cards offer sign-up bonuses, cash-back rewards, and miles or points for travel. Your card might even provide free bag allowances, hotel discounts, or trip insurance.
However, credit cards often have high interest rates if you don’t pay the balance in full, which can encourage overspending on vacations.
Buy Now, Pay Later Services
BNPL services like Uplift and Affirm can be used for travel. They may offer instant approval, flexible payment options, and deals and discounts with travel partners. However, missed payments result in interest charges and late fees. Refunds are often complicated, and there is a credit risk if you miss payments.
Home Equity and 401(k) Loans
Although home equity and 401(k) loans are possible for travel, they are generally discouraged and a bad idea. These high-risk options can jeopardize your home or retirement savings as you increase your debt burden and face variable interest rates.
Alternatives to How to Finance a Vacation
If these solutions for how to finance a vacation aren’t for you, consider one of these alternatives instead:
- Take a more affordable “staycation” locally
- Postpone your trip for the off-season when rates are cheaper
- Book your trip with others and split the lodging and transport costs
- Search for last-minute deals, travel auctions, and error fares
- Look into volunteer trips and work-exchange programs
Preparing for Financing Your Trip
Once you’ve decided how to finance traveling for your vacation, check your credit score and compare the APR, fees, loan terms, and funding speed between different lenders.
Try to get prequalified for a vacation loan without affecting your credit, and don’t borrow more than you need to for your trip. Before you commit to a loan, calculate the total repayment cost and create a post-trip repayment plan before you leave.
Final Tips for Responsible Vacation Planning
With the rising costs of travel, the vacation you crave might feel out of reach. We hope these tips for how to finance a vacation have helped you understand your options. With better financial insight and perhaps trip insurance for peace of mind, you can plan future trips confidently and without straining your finances.
