Taking up a loan to fund your lifestyle can end up putting you in a very uncomfortable situation financially if you don’t do the math correctly. These days it’s easy to secure installment loans online other than go through the long process at the bank.
Type of loan
Borrowing unsecured or personal loans can be advisable as they do not require any form of collateral. One can consider these two forms;
- Travel Loan- if you already know the amount of money that you are going to spend on a vacation, this type of loan should be considered as it will enable you to pay in advance for the hotel and everything else especially if you’re on the all-inclusive package.
- Line of credit- this type of loan is considered when you have no idea how much money you will spend on your vacation. You pay for your expenses when they occur and it allows you to monitor how you spend your money. It can also save you on the interest paid compared to a travel loan where you settle your finance charges beforehand.
What to consider when borrowing funds to travel
- How to pay back: Where will the money to repay the loan come from? The idea is to not repay the loan using money that was being saved for something else like down payment for a house or a car that you were meant to buy the following year.
- The need for the money: when taking up a travel loan, first do your calculations and know for sure that you really need the money. If you have your savings tucked away you may consider using it instead of borrowing money that will be paid using interest.
- Where to borrow: you definitely don’t want to borrow money from a bank or an agency that will charge you high interest rates. Do your research first and compare the different interest charges and documentation charges that are there then decide where you will borrow money from. You can also consider instalment loans online or choose to have your parents or family member as guarantors which will discipline you when it comes to repaying the loan as you don’t want to disappoint them.
Also taking up a loan from a friend or a family member can save you the high interest charges that you will pay with an agency.
- Borrow what you can pay: people tend to live beyond their means which is strictly advised no to. Limit yourself by borrowing the amount that you only need. First you need to know whether you can afford to pay the loan, if not then you’ll just have to punish yourself for not saving before and forgo the vacation.
- Terms and conditions: You need to understand the terms of the agency from which you are taking up a loan. Read carefully and understand it as you don’t want any surprises once you come back from your vacation.
Taking up a travel loan is a good idea if you plan and manage your finances well. You will get to see the world and visit your dream places then come back home knowing how you are going to pay back the money without risking your other plans. Question to ask yourself is, why plan a vacation and not save enough money to go?