Reasons for and against a vacation loan
The honeymoon is supposed to be something very special, even in years the couple would like to remember the most beautiful days in life. No matter where you want to go, whether to Spain, Italy, Turkey or an exotic holiday destination, only a few newly married couples will be satisfied with a camping holiday at the quarry pond. But the wedding has already cost a lot of money, so there is hardly any room for honeymoon.
A similarly important turning point in life is the final entry into professional life – be it after training or after studying. Now would be time for a longer trip, once across America or Australia. The imagination knows no limits. But probably the wallet.
In this situation, there are two options: waiving the expensive trip or a vacation loan. A loan for a trip has to be repaid over a certain period of time, but the memory of a long and beautiful vacation is irreplaceable for people who love to travel. With a little thought and planning, there is nothing to be said against a vacation on credit, so that a big dream can come true.
Vacation credit – a consumer credit
The installment loan for a vacation does not differ in any way from a normal consumer loan, for example for the purchase of home furnishings. For the bank, every consumer loan means a higher risk compared to a mortgage for a property or a car loan. In these two cases, the house or car serve as collateral in the event that the loan cannot be repaid or cannot be repaid in full. The financing bank has access to the equivalent value of the house or car via an entry in the land register or by depositing the vehicle registration document if the debt cannot be paid. In the case of financing, the principle applies that the interest rate increases with the risk for the lender. This is why a consumer loan that is used as a travel loan is more expensive than a home or car loan – after the trip, the money is spent.
Pay vacation on installments – what should you pay attention to?
In the case of a loan, the focus should always be on whether the amount of the monthly charge for the repayment is within a reasonable range. Every borrower should answer this question honestly with a cool head. It does not matter whether the focus is on travel planning or whether the financial framework is defined first. Ultimately, the decisive factor is the moment in which the loan agreement is signed. At the latest, holidaymakers should be sure that they will be able to repay their holiday loan in the future without any problems.
Finance your vacation: loan amount and term
Three sizes determine the amount of the monthly installment for a travel loan: the amount of the loan, the interest rate and the term. The higher the loan should be, the higher the monthly repayment will have to be – unless the term is extended significantly. It is obvious that a loan of 5,000 USD over a two-year term with the same interest rate results in a significantly higher monthly rate than a loan of 2,000 USD. The situation is different with a term of four years: the amount to be repaid is spread over 48 instead of just 24 months, so that the monthly installment for the loan of 5,000 USD drops significantly.
Nevertheless, the loan with a longer term is always more expensive than that with a shorter one, because with each month that the loan is paid off longer, the interest charge ultimately paid increases. In addition, if the repayment is low, the repaid part of the loan melts more slowly than if the repayment is high. Interest accrues only for the part of the loan that has not yet been repaid, which makes the long-term loan even more expensive than the loan with a shorter term. If there is sufficient discipline, a call credit can also be useful, which can be repaid with just one payment, for example from Christmas or holiday bonuses.
Who is a travel loan suitable for?
The desire for a complex and quite expensive trip can be fulfilled for many travel enthusiasts today. Some save for such a trip and already experience great anticipation when saving, others prefer to start today rather than tomorrow. Those who do not want to or cannot wait should take out the cheapest possible loan for the vacation and enjoy their vacation without regrets.
Vacation credit or vacation on installments with the tour operator?
Many tour operators offer travel loans themselves, but they are relatively expensive. The interest on such loans is often in the double-digit percentage range and thus significantly higher than with other providers. Tour operators speculate with the convenience of travelers: everything from a single source may save time, but often costs a lot of money.
It is no problem today to obtain several consumer loan offers online. The tour operator only makes one offer, whereas on the free market many providers compete for the favor of the customer.