THE 6 BEST VACATION LOANS TO FUND YOUR NEXT TRIP

In desperate need of a summer getaway but a little short on savings? Is there a new niece or nephew you want to visit or a last-minute wedding to attend?

If you don't want a lack of cash to stop you from boarding that plane or hitting the road, you may have to turn to a vacation loan – which is essentially a personal loan that's used to cover the cost of a trip.

Though a personal loan for vacation is not ideal, be sure you get the best deal possible – and have a reliable plan for paying it back. Learn more about how vacation loans work, how to compare offers, alternative options for funding a trip and our top picks.

Are Vacation Loans a Good Idea?

The term vacation loan is a marketing phrase, says JP Dowds, CFP and wealth advisor at Marshall Financial. "It's really just a personal loan you're using to fund a vacation," and in general, something you should try to avoid, he says.

Of course, there may be a compelling reason to borrow money for a particular trip. "Financially, it doesn't make the most sense," Dowds says, "but the nonfinancial part is what type of enjoyment and pleasure are you going to get and will it outweigh the cost?"

How to Choose a Vacation Loan

If you're looking into personal loans for vacations, you might start with a personal bank or credit union or research lenders online. Here are some factors to consider:

• Look over the major loan terms. The length of the loan and the interest rate are the two biggest points of comparison. While most personal loans are fixed rate and have the same monthly payment for the life of the loan, be sure to confirm that's the case.
• Watch out for the little details. "Be sure there's no upfront fees, no back-end fees, and understand what your interest rate is throughout the whole loan," says Dawn-Marie Joseph, president of Estate Planning & Preservation in Williamston, Michigan. For instance, some loans may increase your rate if you make a late payment.
• Make sure it's a reputable company. You'll want to dig beyond the first couple of lenders that pop up as sponsored links, says Dowds. Check customer review sites, the Better Business Bureau and other resources to see if any red flags stand out. And if it sounds too good to be true, it is, says Joseph.

Lender Rate Table : Vacation Loans - Rates table

6 Personal Loans for Vacation

Best for Speed: SoFi 

If you're hoping to snag a promotional offer, then SoFi's same-day funding may be a good choice. Interest rates start at 8.99% APR when various discounts factor in, and there are no origination fees required or late fees.

Minimum loan amount: $5,000.

Term: 36 to 84 months.

Potential drawback: If your trip isn't that expensive, the loan minimum may be too high for you.

Best for Lowest Starting Rate: Discover

Of all the personal loans on our list, Discover has the lowest starting APR of 6.99% – but you'll need top-notch credit to qualify for that rate. There are also no origination fees, and if things go smoothly, you can get cash in hand by the next day.

Minimum loan amount: $2,500.

Term: 36 to 84 months.

Potential drawback: Discover charges a late fee if you miss a payment.

Best for Smaller Loan Amount: LendingClub

It's always best to only borrow what you need, and LendingClub loans start at as little as $1,000. The lower end of the APR range is a bit higher than some other lenders at 9.57%.

Minimum loan amount: $1,000.

Term: 36 to 60 months.

Potential drawback: LendingClub charges a 3% to 8% origination fee.

Best for Shorter Term Payoff: First Tech Federal Credit Union

If your preference is to get your vacation loan paid back quickly, First Tech Federal offers a two-year term, which is shorter than most lenders. Rates start at 7.99%.

Minimum loan amount: $500.

Term: 24 to 84 months.

Potential drawback: You have to become a member of First Tech Federal, though there are a number of ways to qualify.

Best for No Hard Credit Pull: American Express Personal Loans

Though some lenders prequalify borrowers without a hard credit pull, with American Express you can get full approval without a ding on your score.

Minimum loan amount: $3,500.

Term: Undisclosed.

Potential drawback: You must be an American Express card member and funding can take up to five business days after you've signed the agreement.

Best for Those Without Strong Credit: LendingPoint

According to its website, LendingPoint looks beyond just a credit score when evaluating creditworthiness. Of course, you may pay more than the starting rate of 7.99% if your credit is less than perfect, but it might be the best option if other lenders turn you away.

Minimum loan amount: $2,000.

Term: 24 to 72 months.

Potential drawback: LendingPoint does not offer joint or co-signed loans.

Raw HTML : Personal Loans Rate Enhancement

Vacation Loan Alternatives

Taking a personal loan for vacation isn't the only way to fund a trip. Here are some other options to consider:

• Save up. Not going into debt is undoubtedly the best option if you have time on your side. "A lot of research shows delayed gratification leads to a more enjoyable trip," says Dowds. You can save the old-fashioned way, putting cash in a jar or envelope. But with the competitive rates being offered on high-yield savings accounts, you might consider automating your savings so your balance can grow all year long.
• Pay with a credit card. If you need the money upfront but know you'll have enough income to pay it off in a few months, using a credit card can be easier than going through a personal loan application process, says Dowds. Your goal should be to pay it down as soon as you can, however, since the high interest rate will keep inflating the cost of your trip the longer it takes.
• Leverage credit card rewards and travel programs. If you have credit card points that can be transferred to an airline or hotel loyalty program, it's a good way to offset the cost of your trip. Other cards may allow you to redeem points as a statement credit for travel after you book it. Every bit of savings helps.
• Open a 0% interest introductory offer credit card. If you have the discipline to pay off your vacation bill before the 0% period ends, this can be a great option to fund a trip, says Joseph. The easiest way to pay the balance is to divide the total by the number of months in the offer. So if you spend $3,000 and have 12 months of 0%, plan to pay at least $250 per month.

Don't Make Vacation Loans a Habit

For a special trip, you might turn to a vacation loan, pay it off and be glad you did it – but don't let that become a substitute for smart financial planning going forward. "Saving for a trip is an accomplishment, something you feel good about," says Joseph. And not worrying about the looming debt can make the vacation all the more enjoyable.

Popular Lenders : Popular Lenders: Personal Loan Lenders

Copyright 2024 U.S. News & World Report

2023-07-11T13:54:56Z dg43tfdfdgfd