Funding Your Vacation: Loan Options for Your Next Camping Trip

Everyone needs to have a vacation once in a while. That may be a good thing in itself, but saving up for it is a problem for some. While there are various loan options for vacations, some can harm your credit score, not to mention will rack you up more debt in the process. 

Vacation loans have similarities to personal loans. They are done by taking out an unsecured loan that can be paid monthly with interest. You will get the money from a bank through a check or online. However, vacation loans are geared towards flight, hotel, and gear expenses. 

Although vacation loans are marketed as an excellent way to finance your next vacation trip, it is an expensive commitment. This is especially true for borrowers who have poor credit. But, if you are in dire need of money for unexpected travel expenses, they are an excellent choice to have. But first, let’s dive more into what vacation loans are and how they work.

What are vacation loans?

As mentioned earlier, vacation loans or camper loans, much like personal loans, are unsecured loans geared towards traveling expenses, such as gears for camping, RV rentals, flights, or hotels. These loans require no assets and properties as collateral, and they can be paid over some time with added interest. Your eligibility, repayment terms, and borrowing limit depend on your creditworthiness and the risk you have to banks or lenders.

There are some advantages that vacation loans have over other loan options. Unlike other available loans for traveling, vacation loans can be paid with monthly installments. They are fixed, which means that the loan term is set on the get-go, and the amount of money you’ll pay each installment will be the same. Moreover, interest rates for vacation loans are much lower than that of credit cards. 

However, vacation loans are not without its cons. Vacation loans, just like any other loans, increase your credit utilization rate, especially if you don’t pay the loan on time and with the right amount. Defaulting it makes it worse, so be careful. 

If not necessary, it is not advisable to take on another debt. That said, saving money beforehand for a trip is still the best option in financing your vacation. If you do end up taking a vacation loan, you will still cash out money since there are fees you have to pay, inflating the money you would shell out for the loan. 

That said, here are your options for vacation loans.

Lines of credit

An open home equity line of credit, more commonly known as HELOC, is a viable option for you to finance your vacation. This is mostly because the interest rate for a HELOC is lower than that of personal loans or credit cards. However, it takes your home as collateral, so you might want to think more about getting one. 

Another type of line of credit you can use is a personal line of credit. A personal line of credit is either secured or unsecured. The best thing about this financing option is that it is a revolving credit, offering more flexibility while still having a low-interest rate. Any line of credit allows you to only borrow money for the things you need. That said, you can continue borrowing more money once you pay off the previous one.

However, if you are using a line of credit, you always have to check if you are overspending. An increasing balance could mean that you are overextending your available credit. Remember that your home secures HELOC. Defaulting on it will make you lose your home. Only apply for a HELOC if you’re sure you can pay it yourself.

Credit Card

They are the more expensive option, but credit cards can be used to finance your vacation. Credit cards are expensive and can rack you up tons of debt, but you can meet the money you need for a vacation using them. Moreover, if the money you’ve saved up for a vacation is still not enough, using a credit card can be the best option. If you’re sure enough you can pay the money you’ll borrow from the credit card, then all the better. 

However, there is one strategy you can use if you want to utilize credit cards. Find a credit line you can apply for that offers 0% APR and has an introductory period that lasts between 12 to 21 months. An introductory period is where your purchases will not accrue interest, which is an excellent way to pay immediate expenses like flights and hotels. 

If you have a travel rewards card, you might want to see if you have racked up enough points for travel. If you do have enough, you can use the points you accumulated over the years for travel expenses. These points can be used or cashed in to pay for your travel expenses like flights, hotels, or other expenses. 

However, credit cards are not without their disadvantages. Credit card interest rates are steep. This is especially true if the credit card you’re using has a particularly high-interest rate. It’s essential to know that some of the credit lines with a high interest rate offer introductory periods. They may have a zero interest rate for the first 21 months, but they make up for it by having very high interest rates.

Cash Advance

Cash advance utilizes the available balance you have from your credit card to give you easy-access cash. Just like a regular debit card, you can withdraw money from an affiliate ATM anywhere and get the money on hand. Repaying it will involve paying off your balance within the credit card’s terms.

However, there are extra fees you will have to pay, including cash advance fees. Also, the interest rate is typically 5-8% higher than credit card interest rates. 

Takeaway

The loan options mentioned above are good financing options if you are a responsible and creditworthy borrower. Racking up more debt is usually a bad idea to finance your vacation, but not if you can pay up. Nothing beats saving up money for your next vacation trip.

Author Bio: 

Lauren Cordell is adept at writing articles about financing and traveling. In her free time, she likes to play board games and browse through her social media.