As travel restrictions ease and a growing number of destinations reopen for tourists, a much-deserved vacation is now within reach of many of us who are in great need of the rejuvenation and priceless experiences it can provide. But if your savings account isn’t flush with funds designated for summer travel, the idea of booking your trip can seem a daunting, and potentially stress-inducing, undertaking.
Thankfully, there are a variety of new forms of financing as well as more traditional travel loans available to those who are not prepared to pay for their travel expenses upfront, or who simply want to lock in lower prices or limited-time package deals without dipping too deeply into their savings. Whether your vacation plans are strictly leisure, or you have an urgent need to travel, you’re likely to find the financing you need by exploring one or more of these options:
Vacation Layaway Plans
Plenty of travel companies offer vacation payment plans that allow you to book with an initial deposit, and then continue making multiple payments until a set date before your departure. For example, Sandals and Beaches Resorts offers the Layaway and Playaway program, Disney has the Disney Vacation Account for its resorts and parks, and G Adventures provides a layaway plan with plenty of flexibility for their signature, award-winning escorted tours.
If you have the time to save, layaway vacation plans often make good sense. Since they are not loans, you generally don’t pay interest or fees, which allows you to pay less overall for your travel expenses, and avoid incurring debt. Moreover, as Finder.com points out, vacation payment plans can enable you to take advantage of limited-time promotions and great deals without becoming cash-strapped. However, you generally must pay the balance in full by the date required. For instance, Disney lets you book a vacation package with an initial deposit of only $250, but you must pay the balance in full 45 days before departure.
Vacation Payment Plans That Let You Travel Before Paying Off Your Loan
There may be times where your need to travel is urgent or time-sensitive, or when fully funding a layaway vacation plan before you leave may not be realistic. In this case, a more viable option might be to obtain financing through a travel provider. Travel brands such as Expedia, Southwest Vacations, Funjet Vacations, United Vacations and Delta Vacations partner with financial technology firms like Affirm and Uplift to offer what are referred to as “point-of-sale” travel loans. In other words, you can obtain financing when you book your trip (flight, hotel, activities, etc.) through their travel site by choosing the Monthly Payments option at checkout.
According to NerdWallet, lenders who offer point-of-sale financing tends to target people with mediocre credit who may not qualify for a travel credit card. Especially if you have an established history with the lender, qualifying for a point-of-sale loan may be easier than qualifying for a credit card. Unlike a credit card, interest does not compound with an installment loan. Instead, you make fixed payments at a
set annual percentage rate and term length.
Before accepting financing, you’ll need to undergo a hard credit check, which can impact your credit score temporarily. Interest rates for these types of vacation loans generally run 0% to 36 %, with repayment terms that may range from a few months to a few years. Rates will vary by lender, but your credit worthiness and the product (s) you are purchasing have the greatest impact on the rate you will be offered. With some point-of-sale loans, you’ll also be responsible for any payment of fees in addition to repaying interest and principal. However, loans from Affirm carry no fees, and while some from Uplift may have a 2 % origination fee rolled into the loan, Uplift does not charge prepayment penalties or late fees.
Although financial experts generally advise against taking on debt for discretionary expenses, there are certain situations when it may make sense to take out a loan to travel. For instance, you may have come up against a rare last-minute opportunity, need to travel for pressing reasons that are not entirely leisure-related, or feel the need to support a friend or family member by attending a destination wedding or birthday bash at a distant location. If you have an excellent credit profile and can qualify for a 0% APR loan, you may even be able to borrow the entire amount of the loan for free to take advantage of limited-time offers. Considering using a point-of-sale loan for your next trip? Get more details on their pros and cons at “Point of Sale Loans: Are They Worth It?” from Money Under Thirty.
Travel Rewards from Your Credit Card
If you’ve been amassing points from your credit card rewards program, summer 2021 may an ideal time to put them to good use. Forbes reminds us that rewards programs can lower the cost of a vacation, and in some cases, you may even be able to cover all of your transportation and accommodations using rewards points. When you assess what you’ll need to budget and/or finance for your trip, make sure your first step is to take stock of your outstanding rewards balance. Quick reminder—before you take off on a trip, make sure you check in with your financial institution and set up a travel notification. This will greatly reduce the chance that your credit card purchase in a new location could get flagged as potential fraud and blocked. You can set a notification with The Police Credit Union by logging into Online Banking and navigating to Account Services > Travel Notifications.
Funds from a Home Equity Line of Credit (HELOC)
Money Crashers points out that secured credit lines such as a home equity lines of credit have lower interest rates than unsecured loans. So, if sweat equity has increased the value of your home and you can tap into a HELOC, you can spend less on financing costs than you generally would for a vacation loan. It’s critical to understand the higher risks associated with borrowing from your home’s equity, since it is your home that secures the loan.
A Personal Loan
Although financial institutions like your credit union or bank may not specify that they offer “vacation loans,” their personal loan can be used to pay for travel expenses. Personal loans provide a lump-sum distribution that may range anywhere from $1,000 to $100,000, and are paid back in fixed monthly payments. Terms and interest rates vary according to the lender, as well as your credit history, income and other criteria.
One of the great advantages of financing travel with something like a personal loan is that it gives you the funds you will need to take advantage of promotional pricing, flash sales and amazing deals on all-inclusive packages. This can enable you to save hundreds of dollars on international airfare alone, as Money Crashers points out. However, both they and Forbes also caution consumers to be aware that in order to come out ahead from a financial perspective, the discounts you receive on lower prices would have to be greater than what you would pay in interest and fees on your loan. On the other hand, irrespective of your savings, a personal loan can be a practical solution for those seeking funds for a last-minute trip, non-discretionary travel and even a once-in-a-lifetime opportunity.
As NerdWallet points out, well-qualified buyers (those with a FICO of above 690 and strong income) can often obtain loans with a lower annual percentage rate (APR) than they would have to pay on a credit card. Money Crashers also asserts that qualified buyers with both secured and unsecured personal loans usually carry a lower APR than premium cash-back or travel rewards credit cards. In general, the best interest rates are only available to those borrowers with a FICO score of 720 or higher. In addition to higher interest rates, buyers who are less qualified can expect their personal loan to come with shorter repayment terms and higher fees. Find an excellent overview of “How Does a Personal Loan Affect Your Credit Score” at The Balance.
Excited to start your search for summer travel deals but need access to funds so that you can book with self-assurance and peace of mind? The Police Credit Union can help with a personal loan offering competitive fixed rates as low as 5.85% APR* and terms up to 60 months (balances beyond $15,000 may be extended to 72 months). Qualified borrowers can borrow up to $50,000 for any purpose. No collateral security is required and Payment Protection is available. Find details on our Personal Loans here.
Apply for a personal loan at The Police Credit Union Personal Choice Loan through our online loan application or by calling The Police Credit Union at 800.222.1391. You also can visit one of our convenient branches.
*APR = Annual Percentage Rate. Example rate of 5.85% with 36 monthly payments = $30.36 per $1,000 borrowed, assumes discount for enrollment in automatic payments (fully indexed rate of 6.10%). Rates quoted above assume excellent borrower history and may include a discount of .25%. To qualify for this discount you must have a The Police Credit Union deposit account from which your monthly loan payment is deducted. Your actual APR may vary and will be determined when a credit decision is made, and may be higher than the lowest rate available. Lower credit quality, longer terms, different loan types, and non-qualification for discounts may result in higher rates. There are no pre-payment penalties on early payoff of loans. Rates, terms, and conditions are subject to change without notice. For current rates or other information, call us at 800.222.1391.
**$50,000 loan maximum assumes excellent borrower history. Not all members will qualify.. ++Maximum aggregate signature loan balances cannot exceed $50,000.00 per member. For more information, please contact our Loan Department at 800.222.1391