Dry season is here of which you have been aching for months. You must be feeling like being shackled by workload and the incessant burden of your responsibilities. It has been so wearying that you would be looking for a moment when you could get out of the deadly monotony. A few days break is a must to unwind your body and mind. A few days vacation is necessary to revitalise your creativity and spirit.
Not everyone is fond of travelling but everyone needs it as a therapeutic treatment to heal your mind affected by jadedness. More often than not, you fail to plan your vacation at your favourite destination because of lack of funds, but the doors of direct lenders are open to finance your travelling needs. Personal Loans seem to be sensible to fund your holiday as these are unsecured loans. You can borrow money even if your credit history is not stellar.
Majority of aspiring traveller finance their vacations with either a personal loan or credit card, but it brings forth a question that whether you should travel with debt or not. Continue reading to get the answer.
Ideally, some people do not prefer taking out a vacation loan, but some people fail to overcome the resistance of slaking their wanderlust without giving a second thought on its impact on their finances.
The rule of thumb says you should research to find out the best loan options.
Is there any problem with borrowing money for travel?
Travel loans are like personal loans that you can get without arranging a security and guarantor. These loans allow you to avail flexible repayment periods unlike other short-term loans. Yet, you may end up with paying high interest rates if your credit score is poor. Further, a personal loan does not provide additional benefits of a credit card such as warranties, reward pints, travel benefits, and the like. However, the interest rate is lower than that of credit cards and you may borrow more than the credit card.
You should generally borrow money only when you have come across an unexpected expenditure. Travelling is fine as long as you have enough savings. Otherwise, it is worse than depreciating assets. Neither it is tangible nor does it appreciate the value of something, as happened when you take out a loan to buy a house. Over the years, the equity of your home builds up, but it does not happen in case of travelling. You collect memories and soon they disappear into thin air as you find difficulty paying off your debt that continues to add up due to late payment charges.
The right way to borrow money for travel
Before you take out a loan, you should calculate the total cost of your loan. Will you be left with enough money to pay off the debt timely? Here are some tips you should follow:
- Borrow only when you need money
Personal loans are appealing because they are readily available. In fact, you do not need to have a good credit score. However, it does not make a sense to apply for the loan when you do not need it. First off, you should create a budget on an excel sheet to get a clear and detailed picture of your finances from incoming to outgoings.
Calculate the estimated cost of your travel and find out if you have enough savings to meet the expense. If you are able to meet travelling expenses out of your savings, do not apply for personal loans. This is because you will pay the interest on the top of what you owe.
Dipping into savings will help you save money in the long run.
- Find the best loan option
Do not grab the first offer. Instead, wait, research and choose the deal that fits your budget. Whether you approach bank or a direct lender, you have to judiciously decide on the best loan offer. Contact different lenders to compare their deals with each other. Each lender follows a different policy; the tenure and interest rate may vary from lender to lender.
Do not forget to take into account the processing charges, application fees, prepayment fees and late payment fees. You should also consult your friends and family who went on the trip after borrowing money. They may counsel you in a better way.
- Do not borrow more than your affordability
There is no problem in taking out a loan to finance your vacation as long as you are on top of your finances. Personal loans are short-term loans and hence, they prove to be expensive than long-term loans. Further, the lenders charge high interest rates because of the high default risk. Travel is important but it should not get in the way of your other important expenses like your children's education, food, drink, medical treatment and utility expenses.
You should check how much money you have got after paying out all of your regular expenses, debt instalments and all. Make sure that you are able to meet all of your expenses out of your monthly income.
Do not forget to separate at least 10% of your income for emergency funds so that you do not need to take out a further loan if any unexpected expenditure rears its head in the meantime.
- Understand all terms and conditions
Before you get funds transferred to your account, you will sign the loan agreement. Of course, it will have all terms and conditions that you have been told already; it is still your responsibility to peruse all terms and conditions. Make sure you have read and comprehended all terms and conditions to avoid facing hidden surprises. If you have any doubt and query, do not hesitate to ask your lender.
Final words
Travelling with debt may not sound appealing to a large amount of people, but it is not a bad idea if you are able to repay the debt on the scheduled date. You are recommended that you should create a budget to know your incomings as well as outgoings. This will help you get a clear picture of whether you should take out a personal loan or not.
