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In an ideal world, everyone would have enough money to travel. But in reality that’s not the case. And for many people, their best option for travel is taking out a personal loan.

And in many situations there’s nothing wrong with that. Personal loans are a great way to reach a short term goal, and with better interest rates than credit cards, are a much safer way to fund your holiday. However you do need to approach this sensibly. Banks see the yawning gap between reality and aspirations as a tremendous opportunity, and you need to be smart enough to borrow responsibly.

So if you’re considering taking out a personal loan for travel, make sure you’ve understood the following.

Should You Take Out a Personal Loan to Travel?

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Credit Cards vs Personal Loans

A travel loan is the same as any other personal loan. You borrow a sum of money to fund an upcoming expense, in this case your holiday. When you take out the loan you agree to the terms and conditions, including paying interest and any associated fees, as well as a repayment schedule.

A personal loan doesn’t have the additional benefits of a credit card such as warranties and purchase protection, rewards points, travel benefits etc. However, the interest rate charged is usually a lot lower than that of a credit card, and you can borrow a lot more. There’s a certainty about the amount of time it will take to become debt free, and a repayment schedule means you can easily factor repayments into your budget.

You can use personal loan calculators before committing to a loan to calculate how much your repayments will be, how long it will take to pay back the loan and options for making extra repayments.

Credit Cards AND a Personal Loan

If you’re more inclined towards a credit card for the benefits like insurance and rewards points, though want the lower interest rate and certainty of repayments of a personal loan, one approach to consider is using a credit card while you’re away, and then consolidating your debt into a personal loan once you’re home.

That said, you should organize your personal loan before you start traveling so you’re not caught out if you don’t get approved. You don’t want to run up a $30k credit card bill to come home and find out you can only get approval for a $15k personal loan. Approval for a loan will usually last up to 60 days, as long as your circumstances haven’t changed.

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Don’t Borrow if You Don’t Need the Money

Personal loans are tempting because they’re readily available and offer cash up front. But it doesn’t make sense to borrow if you don’t need the money.

Before taking out a personal loan, sit down and review your finances to decide if you really need to borrow in the first place. You may not want to use funds you have tucked away in the bank, but if you do have savings, this may save you more money in the long run since you won’t be paying interest on top of it.

Find a Loan That’s Right For You

Banks are falling over each other to attract business, but don’t take a loan just because it is available. You need to undertake proper research, compare the market, and find the personal loan which is right for you.

Most people know to compare the interest rates which vary from bank to bank. However you should also take into account the processing charges, documentation charges and pre-closure charges. Consider not only competitive interest rates, but also whether there is fast pre-approval, and any associated monthly fees.

For Australians heading overseas, People’s Choice Credit Union is a great place to start your comparisons, and a reputable indicator of what a competitive personal loan should be.

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Don’t Borrow More Than You Can Repay

The most important thing to consider when taking out a loan for travel is if you can actually afford to do so. You need to have confidence in your cash flow, and only take out a loan that you can easily repay.

Never take the risk of living beyond your means. Your monthly loan repayment shouldn’t exceed 50% of your monthly income. Once this happens, other critical financial goals, like saving for retirement or your kids’ education gets sacrificed. Travel is important. But it shouldn’t come before food, education, or mean you end up on the street.

And make sure that you don’t miss a repayment. Delaying a payment can negatively impact all three credit scores, and hinder your chances of taking a loan for other needs later in life.

Understand the Fine Print

Sure, loan documents don’t exactly make for light reading. But it’s essential that you read the terms and conditions carefully to avoid any unpleasant surprises.

Before you sign on for a personal loan, make sure you’ve read the document properly, and that you understand it. Make sure that the terms and conditions are filled in completely and match with those that you agreed upon when taking out the loan.

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Let Your Family Know

If you’re living with a spouse and/or dependents, discuss it with your family before you take a loan. This is important because the repayments will impact the finances of your entire household. So you should make sure that it’s something everyone is on board with, and something that both you and your spouse agree to do.

If you’re traveling solo, often you can take out a loan with a family member as a guarantor. If there’s no way you would ever let your family down, this could be a way to ensure you borrow responsibly and don’t get sloppy with repayments.

Use the Money Productively

You can take out a massive personal loan if you choose to, and plan for an incredible holiday. However it’s important to limit the amount you borrow to only covering the essential costs, because you do need to repay it, and it does come with an interest rate.

You don’t want to spend years paying back a two week holiday. So take out a personal loan, but travel within your means, and pay it back as soon as possible.

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Megan is an Australian Journalist and award-winning travel writer who has been blogging since 2007. Her husband Mike is the American naturalist and wildlife photographer behind Waking Up Wild; a website dedicated to opening your eyes to the wild & natural world.

Committed to bringing you the best in adventure travel from all around the globe, there is no mountain too high, and no fete too extreme! They haven’t been everywhere, but it’s on their list.

Follow their journey on Facebook, TwitterYouTube, Pinterest and Instagram.

Disclosure: Post completed in collaboration with People’s Choice Credit Union. All advice and opinions expressed are our own. Congratulations on reading the fine print! Now go and do the same for your personal loan!

    62 Comments

  1. Great post! This is something that we know all too well. My girlfriend traveled to Europe and India last year. She saved a good chunk but not all that she needed and we’re still paying it off. Good financial travel sense is definitely something to consider.

    • Thanks Jim! Yes, personal loans can be great, but it’s definitely something to be sensible about when taking one out. Hope that you guys pay yours off soon :)

  2. I had also taken personal loan for doing volunteering in India and I learn lots of things from here. As per my experience if you have learned lots of things from travel then a personal loan is not a big deal.

    • So glad to hear you had an incredible experience in India Carol! Yes, I agree, the life experiences which come from travel are well worth considering a personal loan if you need to :)

      Happy travels!

  3. Pondering this in NYC, where taking a loan out for travel is like taking out 3 mortgages LOL! Fab advice here. We did credit cards during leaner days years ago but a loan is a viable route too. Just enjoy the ride and put that chedda to good use. Well done Meg :)

    Ryan

    • Feel free to reach out if you have any questions while still pondering :) Personal loans can be great, definitely a viable route if you’re able to stay on top of the responsibility :)

  4. I wouldnt take a loan out to travel, but these are excellent tips for people who want to travel and cannot afford it. It s important to not overdo it and stay within the budget, when people have to pay the money back with interest.

    • Thanks Barb :) Definitely important not to overdo a loan, and to practice financial responsibility – it can be a great way to open the door to travel if you’ve thought it through :)

  5. I am a firm believer in NOT taking out a loan for travel. Unless you are due to receive a bonus in April or whenever that is already authorized by your employer and you want to travel NOW. Too many people end up having debt they can’t handle if they follow this (non)yellow-brick road.
    Except, I could see paying for the travel using PayPal credit or something similar that gives you 6 months to pay without a credit charge. Then, you can pay off the excursion in 1,3,6,or 12 payments over that time period, leaving your cash reserves for emergencies.

    • Definitely agree that there are too many people out there with crippling debt which they don’t know how to pay off. But I’ve always been of the opinion that if you’re able to approach lending responsibly and strategically, it can be a great resource.

      Trying to stress the importance of financial responsibility, so hopefully people can assess whether they’re in the position to take a personal loan, or weather they would be better to save and wait :)

      Thanks for your comment Roy!

  6. You know, I never even considered taking a personal loan to fund a trip. For responsible people who set up a repayment plan and stick with it, it wouldn’t be a bad idea. It would allow you to see the world and actually take a vacation. And definitely better than the interest rates paid on a CC.

    • Absolutely – I’ve found that the interest rates on credit cards can be crippling :S But personal loans are a great way to fund a trip if you have an opportunity present itself but don’t have the cash right now. As you mentioned, just need to approach it responsibly :)

  7. This is not a sexy topic but must be discussed.Thanks for the thorough tips. I prefer a credit card especially if you know you can repay on a short window. You can accumulate miles and get insurance through them while traveling.

    • Thanks Jessica, yes, credit cards can be great for accumulating miles and rewards points, and the insurance which comes with a trip. And if you end up not being able to repay quickly you can always then go for the personal loan to refinance and grab a better interest rate :)

  8. Great tips for people who want to take a loan to travel, I wouldn’t take a loan out to travel. I think I would rather wait and save up the money for the trip.

    • Thanks Priya :) If your method is to wait and save up for a trip, that’s awesome! Avoid paying interest on credit cards or loans that way :)

  9. Interesting. I’ve never thought about using a personal loan for travel before – there’s some definite benefits compared to using a credit card. Of course as you say, the key is to do some homework beforehand, but now I’ve got another option to consider! Thanks for the tips!

    • Glad we could help to broaden your options Marion :) There are some definite benefits to a personal loan, but yes, just make sure you do your homework before jumping in.

  10. This is an awesome post, really well addressed and something which is really important i think! I highly agree with everything. Loans can be good but only if they are used in the right way.

    • Thanks Janey – responsible borrowing is key :)

  11. Strictly speaking, I like the Dave Ramsey philosophy of zero consumer debt and “acting your wage”. That being said, I do have consumer debt and still continue to travel. This is really no different than taking debt out in the first place to travel.

    The primary reason I would want to borrow money for travelling is that travel windows don’t always remain open. For me, it was travelling with my kids. They are rapidly approaching the age where travelling with the folks isn’t going to cut it.

    Another example of a closing travel windows is with the fresh out of school (any school) crowd. They are in a catch 22 situation where you need money to travel but as soon as you start working your travel window could close. I am encouraging my kids to travel before starting a cooperate life even if they have outstanding school loans.

    Nobody can sustain 16.99+ interest rates so carrying balances on full rate cards should be a non-starter. We carry the bulk of our debt on a 401k loan and the remainder on zero interest promotional cards that are going to be paid off with lump sum income next year.

    The 401k loan shares the benefits of a person loan in that you have a fixed time it will be paid off (3 years for us). A lot of travelers and new graduates don’t have a 401k so a personal loan might be their best option.

    • Absolutely Jenn, these days there are very few people who are completely debt free, with consumer debt being the most widespread. And this obviously doesn’t stop people from traveling, so I agree with your analogy that this is no different than taking debt out in the first place to travel.

      And yes, a personal loan is a great way to seize upon those short window opportunities, whether it be a student exchange or traveling with you’re kids when they’re young as in your case. And the interest rates are far more affordable than those of a credit card which can really stack up if you’re paying back over a prolonged period of time.

      I genuinely believe this is a legitimate option for those who can handle the financial obligation responsibly :)

  12. I’m definitely in the camp of only spending within your means. If I don’t have the money, I don’t go, it’s that simple. I’ve never considered taking out a loan to travel, but that said, there are some reasons to consider using one instead of a credit card.

    • Definitely a responsible approach Adelina :) And that’s the same advice I give to those who are considering a personal loan too, to make sure you’re spending within your means. Because borrowing can be a great resource though you do need to be in a position to pay it back :)

  13. I had actually never considered taking out a personal loan for traveling but its such a clever idea. Traveling can be a life changing experience, you can learn a new skill or even change your perception of life. I do agree that its extremely important to share your decision with your family.

    • I agree, I think travel is one of those experiences which can really shape your perception on life, and be completely invaluable. Even though many believe it’s a luxury and those who can’t afford to pay for it upright shouldn’t travel, I think a personal loan is a great way to make it accessible to a lot more people, so long as you know you can pay it back in the future and borrow responsibly within your means.

  14. I believe one should save and budget to buy anything, including a travel experience. So loans are definitely not something I would consider or suggest to anyone. Of course, the decision depends on the repayment plan/capacity of the traveler in question.

    • Definitely the most responsible approach Punita :) But yes, I believe that loans can be a great way to access a travel experience, so long as you know what you’re getting into and are very clear that the repayment plan is within your means :)

  15. It’s a tough one. Taking out a personal loan to travel is one way of funding your travels, but I’m not sure if I could do it. I have a credit card which I pay for all my flights with, and while I owe a bit on it, the minimum payments are easy to handle. Thanks for the post, the comments make for interesting reading, it’s always good to know how other travellers handle their finances.

    • Honestly personal loans are much like a credit card though usually with a lower interest rate, allow you to borrow more, and don’t come with the rewards. I find that most people are comfortable putting expenses on a credit card, though don’t think about a personal loan, when the concept is the same :)

      Glad you found the post insightful :)

  16. This is amazing advice! I think it’s so important to consider that with a loan you are given a certain amount of money, whether you need it or not and may end up paying interest on the full amount down the road. It’s so important to consider how much you really need and how it can impact your future. But it can also be a really great option if seeing the world is something you really want to do.

    • Thanks Heather :) Yes, there are a lot of different things people need to consider re taking out a personal loan. But if you’ve done the research and the repayments are within your means, I think it’s a great option if travel wasn’t accessible otherwise.

  17. Wow – Meg – nothing like the topic of finances to get me going in the morning! When I initially read your post I was thinking, no, nope, there is never a good reason to take out a loan to travel. (side note, I’ve never applied for such a loan, but have a hard time thinking of many banks here in the States who would be willing to lend to a person who is traveling instead of using the money for a business or something.)

    But as I was reading through other comments, I found an interesting exception – there was one person who used a personal loan to volunteer, an experience that would likely be transformative but still has a price tag. I could also envision a loan taken out to pick up an adopted child abroad (which usually has a waiting period) or to help out a relative abroad, or something of that nature.

    All that said, I think that being a traveler is a mentality and doesn’t need to be far flung to be valuable. Learning to see your home with a traveler’s outlook is a valuable skill, as are local trips and local exploration. This world is a big and beautiful place, no matter where you are. It also isn’t inherently expensive…and developing the skills to see your home through a fresh lens (and on a budget!) will serve you well!

    • I’m glad that the discussion in the comments section has been food for thought :) I’ve personally traveled on these loans for similar short term opportunities, like volunteering abroad and student exchange, and they were incredible experiences I’m so glad I had the chance to take. I wouldn’t have been able to travel so early on in life if I didn’t have access to a personal loan.

      But I agree that travel doesn’t have to be far flung to be valuable – we’ve spent the past year exploring our home country of Australia, and there are incredible experiences at your front door. Local travel is definitely an avenue to consider if you’re not comfortable taking a loan for an international trip :)

  18. I guess people really do struggle with this decision. Great details and content but for the life of me I cannot imagine getting a loan to pay for travel. Probably my gen x age though.

    • It’s an important decision to make, and definitely something people should think carefully about. I’ve personally used these loans to travel and it was a fantastic way to access opportunities I wouldn’t have otherwise had the chance to take, though I’m the next generation from you so maybe there is something to the mindset there!

  19. I would rather save and then travel than take a personal loan to finance my travel. It helps me to keep my expenditure in check when I have saved money to travel. When you are saving, it feels and is difficult but when you finally book that trip, it is all worth it. I would advise anyone to save and then travel, this way you will not burn a hole in your pocket.

    • Definitely the most responsible way of approaching financials for travel. Thanks for sharing your perspective :)

  20. Great article as usual Meg. On a personal level, I can’t say I would ever consider taking out a personal loan for a travel, the pressure of a mortgage is definately enough. And because I love travel so much that means I am always trying to put away every bit of coin I have for my next trip, which is as often as possible.
    Cheers for the read.

    • Thanks Anthony :) Happy travels & best with your savings :)

  21. Excellent tips – money talk can be so stressful, and it’s important to have as many facts as possible. I prefer to save and then travel, but I know it is different for everyone.

    • Thanks Jessie – yes, it’s always difficult tackling topics to do with money, because it’s very sensitive for many people and I’m always conscious of trying to give the best possible information to help people head forth and decide. As you said, it’s always different for everyone :)

  22. Never thought about taking out a loan to travel, but I can definitely see where it could be a good option! As long as you are financially responsible and know what you are getting yourself into with the right terms, it would be a great way to travel. Thanks for sharing all the tips and things to think about, too!

    • You’re welcome Jenna, and absolutely, as long as you’re able to borrow within your means and approach it with a responsible mindset, this can be a great option for financing a trip away.

  23. This is a great thing to take into account! You provided some food for thought!

  24. There are good points in your article. Personally , I would probably never take a personal to travel. What with home mortgage and all. But I know all people are different and situations are different too. By the way personal loans are a lot more expensive in India than home loans but definitely better than unpaid credit card interest rates.

    • Definitely if you have other loans already it may not make financial sense, and would be better to save. But as you said, all people are different as are individual circumstances, and this could be an option for someone else :)

      Interesting to hear that personal loans are a lot more expensive in India – I guess rates will always vary depending on where you borrow.

  25. Excellent post, Meg. Taking out a personal loan should cost a lot less than charging travel to a credit card and paying it off incrementally. I consider travel an investment and would not have a problem borrowing money to see the world.

    • Thanks Nancy – personal loans definitely come out costing a lot less than a credit card can. I see travel as an investment also :)

  26. My husband and I are blessed enough to not resort to taking out a loan whenever we travel. I understand though that some people would do this to see the world. I personally won’t do it just because I dont want to end up in debt and be stressed about money when I get home after a 2 week vacation. I want to work hard enough and save money before traveling.

    • Awesome Janna! Definitely a great position to be in if you can finance everything up front without a loan :)

  27. This is awesome, I never thought about taking a loan out to fund my travels, I wish I knew about this sooner! Definitely will consider this for when I travel to the USA in a few months :)
    Thanks for sharing!

    • Glad we could introduce you to a new option for funding – just remember to always read the fine print, and make sure your repayments are within your means :) Happy travels!

  28. Useful information. Love the personal loan calculator! Good to go into this with eyes wide open.

    • Thanks Lillie – glad you found helpful information from the post :) Happy travels!

  29. Personal loan for travel is a great thing. Last time my husband went to Singapore by opting instant personal loan for travel really it is worth.

    • Glad to hear you’ve had good experiences with personal loans too Amritha :) Happy travels!

  30. The article makes a very good point about not borrowing more than you can repay. After all, you don’t want to end up in serious debt just because you wanted to take a vacation. You need to have a clear understanding of your personal budget before you decide whether or not to get a loan.

    • Thanks Callum, absolutely, financial responsibility should always be first and foremost. Personal loans can be great if you can manage them to your advantage, but it’s essential that you don’t put yourself in a position where you’re worse off afterwards. Glad you enjoyed the post!

  31. Getting a personal for your travel purpose is not a bad thing I believe, But going for these loans with the bad credit is the place we need to make decisions wisely. Getting these loans from short term credits is the best thing as these loans came up with low interest rates.

    • Hi David, if you have bad credit, I would advise really thinking hard about whether adding a personal loan to your responsibilities is a wise move. You should only take out a personal loan, short term or not, if you are in the financial position to.

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