A vacation or holiday is often the ideal way to get away from the stress of daily life. Sometimes, a break is all you need to get some relaxation. If you want to go on vacation but can’t quite afford it right now, you may be considering borrowing to fund your trip.
However, financial experts frown upon taking out a personal loan for a vacation. It’s not always financially viable, and you may regret it long after you have returned from your trip.
If you need to borrow money for the trip, then it is may be best not to go. The trip might cost more because you could incur interest on the loan, and you may not end up paying for it until years after you return.
Just like any other financial decisions, there are many advantages and disadvantages to consider when it comes to taking vacation loans; most experts agree that you should not do it and that you should postpone your travel plans if you don’t have enough money to cover the costs.
Using services such as nation 21 cash loans to pay for your travel can lead to bad financial habits that include spending more money than what you actually have. In an ideal world, you should pay for your trip with your savings. If you don’t have enough money in your funds, you should save for a vacation first.
Stuck with monthly payments for several years
Another reason you shouldn’t borrow money to fund a vacation is that monthly payments could trap you for several years after you return. Most people don’t want to have additional expenses in their monthly budgets.
Unlike mortgages and other acceptable types of debt, a vacation is a luxury. No matter how much you want to travel, you should avoid financing it by getting a loan.
How to pay for a vacation
There are lots of ways to raise funds for your vacation, besides taking out a loan. Here are some ways you can save up for your getaway:
1. Reduce overhead costs
The first thing you need to do is to see how you spend your money. On average, people spend between $50 and $200 each month on unnecessary stuff that could easily be put aside for a vacation fund.
For example, eating out daily for lunch probably costs you around $50 a week at least. That’s $200 a month. If you start bringing a lunch, you can easily save half of that amount. That’s $100 for your trip. Aside from your food expenses, look at your cable TV subscription, gym membership, phone package, and other expenses.
2. Automate your savings
Once you are able to find areas where you can realise savings, the next thing you need to do is to set up a separate savings account for your vacation fund. Make sure you enable automatic transfers into the account.
If you can save $100 a month, take out that amount from your paycheck and automatically deposit it into your travel account. That way, you will not even notice that the amount is missing.
3. Create a travel financial plan
When planning a trip, you should also take your expenditures into account; that includes the accommodation and travel costs. A vacation also involves other expenses like dining out, exploring, and souvenirs. A vacation is incomplete without trying the various activities the destination has to offer.
You should include the costs of entrance fees and other expenses that you’ll have when visiting museums, landmarks, and other tourist destinations. You should also include the cost of tours, as well as extra money for emergencies.
Just like doing your household budget, make sure you try to reduce the total expenditures. For transportation, you should consider inexpensive modes of transport. If you are vacationing in Europe, riding the train will definitely be more affordable than renting a car. No gas expenses, no tolls, no parking charges, no insurance, etc.
For accommodations, try looking in Airbnb; book a room in a smaller hotel instead of a chain. You can also save money by preparing your own food instead of eating out all the time.
4. Use your airline miles and credit card rewards points
Most people forget that they have credit card rewards or airline miles. You can redeem points for hotels, flights, and other rewards. If you have many points, they might be able to pay for some of your expenses. You can redeem the points through your credit card provider or transfer the points to partner businesses such as hotels or airlines.
If you have existing miles with a hotel or airline company, you should consider using them to augment your vacation funds. You can usually obtain free domestic flights for a minimum of 15,000 points. International flights start at 25,000 points.
Some credit card companies allow you to transfer your reward points to an airline’s miles program. There are also hotels that allow you to combine credit card points and their loyalty program points. Saving on expenses this way is painless and rewarding.
6. Personal loan instead of using credit card
If you’re unable or unwilling to postpone your vacation and don’t have enough money for it, then perhaps you could consider getting a personal loan as a last resort. Avoid using your credit card to accumulate more debt, though. A personal loan has a fixed amount for monthly payments; you can easily incorporate the instalments into your budget.
On the other hand, a credit card has no spending limit aside from your credit limit. You can easily overspend during your trip. While getting a loan is still not recommended, make sure that if you do, you plan ahead to ensure you can repay it as soon as possible.
What are your favourite ways to save money for a holiday or vacation? Share your number one tip in the comment box below.