Vacation Loans: How to Finance Your Dream Vacation


Are you aching to fly to your dream destination and explore the sights you’ve always wanted to see? Going on a vacation can help you recharge and make memories with your loved ones but the costs can add up quickly. 

According to a survey conducted by savings and investment company Twine, “The average spend on a weekend trip is $564 and $1,928 for a week-long vacation.

If you’re planning to go on a trip but have limited funds, you might consider taking out a vacation loan to cover a costly getaway. 

Understanding how vacation loans work is important to make sure you know what you’re getting into. You don’t want to be left paying for your travel experience long after it’s over. 

Here’s everything you need to know about vacation loans to help you plan, save, and borrow responsibly for your much-needed vacation.


What Is a Vacation Loan and How Does It Work?

Vacation loans, or travel loans, are unsecured personal loans. This kind of loan involves borrowing money without needing to put up any collateral, like a house or car. 

Vacation loans can help you finance your vacation and cover any travel-related expenses. When you’re a bit short on cash, these loans provide you with the luxury of travel without having to dig into or empty your savings account. 

Your eligibility and interest rate will depend on several factors, including your monthly income, debt levels, creditworthiness, and financial history. 

You can choose a vacation loan of a specific amount with a fixed interest rate. You’ll repay this loan through regularly scheduled payments for a specified term length. 

The benefits of fixed payments are twofold: 

  1. Interest rates are not fluctuating. Your interest rate is the same throughout the entire term of your vacation loan. 
  2. It is easier to budget for your payments. Your monthly payments will also be the same, which provides stability in your financial planning. 

Since vacation loans are essentially a type of personal loan, there are few limits on how you can spend them. Here are some ways you can use the funds for traveling:

  • Buying plane tickets
  • Getting travel insurance
  • Booking a hotel room or suite upgrade
  • Hiring a private tour guide
  • Experiencing an all-inclusive cruise
  • Dining at top-rated local restaurants
  • Relaxing at a beach resort


Should You Get a Vacation Loan?

If you’re looking to finance a vacation, taking out a personal loan is a far better option than incurring a high-interest credit card debt. 

Borrowing for any unnecessary purchase makes it more expensive because of interest. Your future budget is also affected when you commit to repayment over a specific period.

Before taking out a vacation loan to pay for your travel expenses, think about your monthly budget first. Make sure that your budget can handle the monthly payments, so you can commit to paying off the loan on time.


You should aim to borrow no more than what you can comfortably afford to repay within three to six months. This will keep your vacation loan from interfering with your other financial goals.


Below are the pros and cons of vacation loans to help you decide if they are right for you.



  • Fast funding: Vacation loans can give you quick access to travel funds. There’s no need to wait to save up for your dream vacation. 
  • Lower annual percentage rate (APR): Personal loans usually have lower APRs than credit cards. If you’re a well-qualified borrower with a strong income and credit score above FICO 690, you may be eligible for a lower loan rate. 
  • Flexible borrowing option: Vacation loans provide you with a variety of loan amounts and repayment terms. You’ll likely find a monthly payment that best fits your budget. 
  • No collateral needed: If you default on the loan, there’s no risk of losing your property or asset like your home or car. 
  • Lump-sum: When you qualify for a vacation loan, you’ll receive a lump sum of cash all at once instead of over time. Having a fixed amount can help you plan and spend your vacation budget accordingly. 
  • Predictable payments: Vacation loans allow you to plan for repayments in your budget because they have fixed monthly payments over a specified term. Knowing when you’ll pay off your loan also helps you stay focused on your monthly payments. 



  • High-interest rates: You may qualify for a lower interest rate with vacation loans than a credit card. But, if you’re a borrower with bad credit, interest rates could still be high, and you may not be eligible for the best loan terms. 
  • Upfront fees: Vacation loans may come with upfront fees, like origination fees, that you wouldn’t find with a credit card.  
  • Additional interest: Interest charges will add to the costs of your trip, which makes it more expensive than you intended.
  • Long-term monthly payments: Your vacation may only take a week or two, but the terms on personal loans can stretch to several months (or even years!). You’ll find yourself paying off your vacation even after you’ve returned home. 
  • Risky debt: Vacation loans can add financial stress, especially if you struggle to repay your existing debts. You’ll incur late fees and your credit score will be affected when you miss even one payment. 
  • No credit card rewards: Unlike many credit cards, vacation loans don’t let you earn rewards for spending. These rewards may be used on different travel expenses, such as flights, hotels, and restaurants. 


How to Apply For a Vacation Loan

Once you’ve decided that a vacation loan is the right option for you, you can begin the application process with these six steps. 


Step 1: Review Your Credit Report

Before applying for a vacation loan, or any kind of loan, it’s always best to check your credit report first. This will give you an idea of which loan terms you may qualify for. 

Having a good credit score provides you with a wide range of options when it comes to lenders, loan offers, and other borrowing terms (interest rates and fees). 

Make sure to review your credit report thoroughly and address any errors before proceeding with the application.


Step 2: Decide How Much You’ll Borrow

For personal loans, the minimum and maximum amounts you can borrow vary depending on the lender. Some lenders offer small loans (from $1,000 to $10,000), while others offer larger loans (up to $100,000).

When you decide how much you want to borrow, you can narrow down which lenders will best suit your needs. It also gives a budget that you can work within.


Step 3: Shop for Lenders

Shop and compare different lenders to determine what they offer and decide which loan features are important for you.


While the interest is equally vital, the right lender should offer more than just the cheapest interest rate. The annual percentage rate or APR is what you should keep your eye on.


APR provides a real picture of how much you’ll pay for a vacation loan. It reflects the interest rates, points, and fees charged by your lender. 

A great loan offer usually comes with the lowest competitive rates and repayment terms that work best for your budget. 

If you have an excellent credit score, you can negotiate the loan fees. Don’t immediately accept and pay all fees charged by the lender.


Step 4: Submit Your Application

The application process for a personal loan is fairly simple. You need to provide your basic information, such as your name, social security number, income, and place of employment. 

Most lenders run a soft credit check after you’ve submitted your application. A soft credit check has no impact on your credit score. 

The lender will either approve or deny your loan application based on your credit history. Your creditworthiness will let you know how much your personal APR, interest rate, and fees will be. 


Step 5: Proceed With Your Chosen Lender

After selecting a lender that best fits your needs and budget, let them know that you’re ready to proceed with the loan. 

The lender of your choice will run a hard credit check, which can affect your credit score. However, making a regular monthly payment should result in a quick rebound in your score. 

The lender may ask for additional documents when verifying your financial information. The faster you can provide the required documentation, the faster you can receive your funds. 


Step 6: Wait For Your Funds

Once the loan application is approved, expect the lender to deposit the funds into your bank account within one to seven business days.


Get Your Vacation Loan From a Credit Union

Vacation or personal loans are a great way to finance a trip without putting yourself in a financial bind. These loans are likely to have lower rates than credit card debts. 

However, interest rates for vacation loans largely depend on your financial background. There’s a higher chance of securing a more attractive rate when you have a solid financial background. 

Another smart way to finance your dream vacation is by borrowing from a credit union. Credit unions are not-for-profit financial organizations that can offer lower interest rates and fees. 

At 121 Financial Credit Union, we can help you make your dream vacation come true. With our vacation loans, you can borrow up to $25,000 with a fixed APR as low as 8.50%. 

No need to deal with high-interest credit card debts or fluctuating interest rates! Our low minimum payments also let you know your payments in advance so you can easily budget. 

Ready to book your next trip? Complete our online loan application or visit a 121 Financial Credit Union branch near you to find out if you qualify for a vacation loan.

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