The Pros and Cons of Paying for Your Dream Trip with Credit

If you are familiar with the loans and their conditions, you should be able to enjoy yourself on your dream trips without any issues.

The Pros and Cons of Paying for Your Dream Trip with Credit

Travelling has always been seen as a measure of success and luxury. It's no wonder because going on vacation is one of the most relaxing activities you can provide yourself with. When you're far away from your problems, you feel like a brand new person. However, affording this luxury is often difficult without some extra funds. People increasingly find themselves in tough financial situations which prevent them from going on vacation, even though they desperately need one. Luckily, some unorthodox financing options can help people enjoy their luxury vacation without issue.

1. Vacation loans

It may come as a shock to many that you can even pay for a vacation with credit. After all, these types of financial decisions are usually reserved for different kinds of investments. People normally use credit to pay for things like real estate and transportation vehicles. They're even used for starting businesses if the investor doesn’t have enough capital right off the bat.

However, who uses credit to go on their dream trip? A surprising number of people, actually. It’s a pretty popular way to finance your ideal vacation, and there are lots of benefits and drawbacks to it.

2. Lenders understand needs

As much as it’s a surprise to take out a loan for a vacation, it might be more surprising that lenders are willing to give out these types of loans. Normally, people are only granted loans for specific types of financial decisions. However, there are some good reasons for this change of heart among lenders.

Nowadays, it's understood that families don't always have the cash-on-hand to simply go on vacation. This doesn't mean that these same families don't want to go on vacation, though. Taking a break and heading to the beach or hitting the snow slopes is something that people need. Even when finances don't allow it, it's necessary that people get the break that they deserve. It helps them catch their breath and relax a little bit.

This is something that lenders understand, which is why they are willing to give out loans for a comfy vacation. They even offer low-interest loans for this specific purpose. These families often have good finances, but they simply lack the funds to suddenly go on vacation.

3. Destress and relax

People say that travelling is one of the most important activities you can partake in. Seeing the world is something people can’t go without. People require a bit of travel to unwind and relax after a tough and tumultuous year. However, travelling provides more than just a rebreather from stress, it also helps you get back on track when it comes to work and school.

Resting is an integral part of being productive. Nobody can work non-stop for 24 hours a day, seven days a week. People need to rest every once in a while. This resting allows them to collect their thoughts and get rid of all the built-up stress that has accumulated in the back of their mind. Travelling is the ideal way to go about this.

Not only are you getting away from the stress of work and school, but you're also getting away from the place that reminds you of these things. A change of environment tells your mind that you are no longer in a location that should be reminding you of stress. It goes very well with the change of pace that comes with vacationing and resting. Plus, it doesn't hurt that you actually get to have some physical rest.

4. Thinking about finances

At first, taking out credit to go on vacation seems like an ideal solution. You simply delay your payments and get to enjoy the same benefit of a wonderful vacation. The only difference is that you don’t have to worry about spending your entire backup fund on something that might feel frivolous. However, it’s never that simple in reality.

Even while you’re relaxing far away on some beach, you might be thinking about your finances. After all, if you just took out a loan to go on vacation, you’re going to be thinking of ways to pay it back. Because of this, there will always be a nagging feeling in the back of your mind telling you that you can’t completely unwind. Instead, you’ll be doing math and finances in your head, trying to come up with the best schedule for returning the money.

This kind of thinking can really put a dent in your enjoyment of the vacation. If you’re the type of person to stress about finances all the time, this might even ruin part of the trip. As long as there’s something to stress about, it might have a very bad influence on your state of mind while you’re vacationing. Whether or not you can handle this kind of stress depends on you, but the trip might actually help relieve those feelings

5. No collateral is necessary

Vacation loans are normally just personal loans that are given out for this specific purpose. Personal loans are great because they can be approved for just about anything. As long as the lender feels that it’s a solid idea and they believe the individual will pay them back, it’s a done deal. The financing implications of a personal loan are pretty mild as well.

You don’t actually need any collateral to take out one of these loans. You won’t have to put up any of your assets or take risks to get the necessary funds for your vacation. If you don’t have anything of significant value to borrow against, you don’t have to worry. The lender will give out the loan all the same. This makes it very convenient for those spur of the moment decisions that weren’t planned. You probably didn’t plan on investing anything significant before your trip, which is understandable.

6. The payments are fixed

There are some key differences between regular loans and personal loans. Borrowing money with a credit card has different financial implications. Your loan can be paid back any time you want and for as long as you need. The interest does accrue, but you don’t have to worry about missing a payment and breaking the loan contract. This can lead to consequences like losing collateral or worse.

Personal loans have fixed payments that need to be paid according to a schedule. They need to be paid on time and missing out on them will cost you a pretty penny. Lenders might not be as forgiving as credit card loans. If you don’t meet the specified payments, you lose any collateral that you might have put the loan up against. Since there is often no collateral, this means that the lender can sue you for not paying up. This can be extremely detrimental to your finances and you could end up in some very bad financial trouble. Because of this, it’s crucial that you enter into the loan with certainty that you can make payments on time. These kinds of fixed payments shouldn’t be underestimated.

7. Different rates are offered

As with any other loan, interest rates are a crucial part of the profit for the lender. Different rates are offered for different loans. When you compare it to borrowing with a credit card, it doesn’t have to be all that different. Some loans might even end up being more favourable than credit card loans, but this isn’t the general rule of thumb.

The interest rates mostly depend on your credit score. If your score is pretty high, you shouldn't have to worry about getting a very high-interest loan. In fact, it's more likely that you’ll get a very favourable loan that won’t cause you any issues.

People with low credit scores should be careful with personal loans. They can incur some very high-interest fees and this might not end up well for your finances. Since the rates are fixed, these interest fees are pretty much guaranteed. It's going to cost you a lot more than someone that has a better credit score, that's for certain.

8. There’s plenty of time

One of the great things about these types of loans is that they give you a lot of time to breathe. You don’t have to overexert yourself to pay them off within a short amount of time. The lender gives you a solid timeframe with which you can pay off the loan without worry.

The amount of time you need to pay back the loan can vary from lender to lender, but it’s usually in the ballpark of a year or more. It’s something that can be negotiated, but you shouldn’t try to stretch it too far. Waiting longer just means getting more interest and that’s something you want to avoid. Compared to other financing options, this is a perfectly fine amount of time. You won’t put yourself in a situation like people who take out payday loans might. Instead, you get to leisurely create a strategy for paying back the loan on time.

9. You pick the borrowing amount

When it comes to using a personal loan, you don’t have to worry about being short on cash. There is no fixed loan amount that you’re limited by. As long as you don’t aim for some extraordinarily high price, you’re usually going to be able to finance your trip just fine. Personal loan amounts usually go from as low as a thousand dollars, all the way up to a hundred grand. Obviously, your vacation is going to be somewhere in between these numbers.

This can be very beneficial for some larger vacations. You can borrow a lot more than a credit card would allow you and this can be of significant help on your trip. IF you’re the type of person that enjoys a proper vacation with a bit of luxury, you will be glad to know that a personal loan will allow you to create one for you and your family.

When you’re negotiation your loan amount with lenders like OurMoneyMarket, you need to consider the implications of a larger loan. If you take out a larger loan, you should be prepared to get some big terms to go along with it. Since you have to pay it back in fixed rates within a year or so, you have to be absolutely sure that you’re able to sustain such payments regularly. Bigger amounts are going to be harder to handle, which is why it doesn’t hurt to be cautious.

10. Prepayment fees and penalties

Sometimes your finances bounce back sooner than you might have expected. This positive turn of events is always welcome in every household, and it’s especially helpful if you intend to pay back your loan on time. However, it might not actually help you much when it comes to settling your debts. Personal loans have certain clauses that influence how and when you can pay your loan back.

If you want to rid yourself of the debt as soon as possible, you're out of luck. Unless you're willing to fork over a large sum of additional money up front, you're stuck with paying the regular rate over the course of a year. Personal loans include prepayment fees for those who want to pay ahead of schedule. These fees might be a bit too high to be worth prepaying your loaned money. Interest can be pretty bad, but prepayment fees add a sudden and unexpected expense to an already taxing loan. You have to decide whether you want to tough it out with the interest or pay up some additional funds for the expense of a prepayment penalty.


As it turns out, taking out credit to pay off a vacation isn’t all that bad. There are some downsides to it, but they are generally outweighed by the benefits. This is why people take out personal vacation loans all the time. They get to have a good time abroad and enjoy themselves without having to worry about paying for the trip any time soon. As long as you’re familiar with the loans and their conditions, you should be able to enjoy yourself without issues.

personal finance
Lucas H. Parker
Lucas H. Parker
Lucas H. Parker

Lucas is a business consultant and editor in chief at Besides that, he has a passion for writing. Doing his research, exploring and writing are his favourite things to do.

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