What to know about vacation loans

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Vacation loans are personal loans you can use for anything, including paying for travel costs. (Shutterstock)

A vacation loan is an unsecured personal loan that you can use for any purpose, including to pay for travel. Saving up is the best way to pay for a vacation. But when paying cash isn’t possible and travel is necessary, you do have financing options.

If you’re considering a vacation loan, it’s a good idea to compare personal loan rates from multiple lenders. You can easily see your prequalified rates in minutes with Credible.

What is a vacation loan and how does it work?

A vacation loan is a personal loan you take out from a lender. You can use any loan for vacation financing as long as the lender doesn’t specifically prohibit the use. For example, you typically can’t use a personal or vacation loan for gambling or illegal activities.

And although you can use a personal loan for nearly any purpose, some lenders market specific personal loans for vacation travel or as travel loans. You can use these loans to pay for travel-related costs like your flight, hotel, and tours. 

Personal loans are typically unsecured loans, meaning they’re not backed by collateral the way your home secures your mortgage or your vehicle backs your car loan. Unsecured loans don’t put you at risk of having your property foreclosed or repossessed. 

You’ll need to submit an application to secure a personal loan for travel. Lenders decide whether you qualify for a vacation loan based on factors such as your credit report, credit score, and debt-to-income ratio. 


If you’re granted a loan, you’ll repay the lender with interest, usually in monthly installments. The interest rate you receive for a vacation loan varies based on multiple factors. Lenders determine your interest rate based on factors that include:

  • Your credit score and credit history
  • Debt-to-income ratio, which compares your debt payment obligations with income
  • Loan amount
  • Repayment term (a shorter term typically comes with a lower interest rate)

Quotes from lenders can vary significantly, so it’s usually worth it to shop around for the best loan offers.

At the end of December 2021, the average rate for a 24-month personal loan was just 9.09%, according to Federal Reserve data. That’s significantly less than rates for another popular travel funding option — credit cards. While using a credit card to pay for travel expenses could gain you rewards points, you’ll pay more interest for those benefits. At the end of 2021, the average credit card interest rate was 16.44%. 

Where to get a personal loan for travel

You can typically get a personal loan for travel from online-only lenders, credit unions, and banks. To apply, you’ll need to provide financial information and documents, as well as verify your identity with your date of birth and a driver’s license or other form of identification. Financial institutions will then verify and record information that identifies you. 

Online-only lenders

With online lenders, you can complete your application and submit it online, and once approved, close on your loan digitally. Because they don’t have the expenses associated with a physical branch, online lenders can often offer competitive rates. And online lenders usually fund loans within a few business days of approval — although some offer next-business-day funding. 

Credible makes it easy to research personal loans online and compare rates from multiple lenders.

Banks and credit unions

Not all banks offer personal loans, but many do. You might be able to apply online, or you might need to visit the bank’s branch to get a personal loan. If you have an account at a bank that offers personal loans, your bank might deposit the vacation loan funds directly to your bank account.

Some credit unions offer personal loans, but you need to be a member of the credit union to be eligible. If you’re a member in good standing, your credit union might lend to you even if you have a fair or poor credit score.


Another option is point-of-sale travel financing. This is a “buy now, pay later” type of option. When you buy plane tickets, for example, you might be given the option to pay using a point-of-sale loan. If you choose that option, you’ll be directed to a website of a loan provider. You’ll enter the information required, and you’ll either be approved or denied. 

This process is similar to applying for a personal loan, but point-of-sale is perhaps easier since you go only to the reta
iler’s site, and that retailer redirects you to the loan provider. A downside is the interest rate could be high.

How much does a vacation loan cost?

Vacation loans can come with costs besides the principal and interest. Personal loans can often have fees, such as origination and application fees. 

On your loan agreement, the interest rate will be presented to you as a percentage. You’ll also see your loan’s annual percentage rate (APR), which represents your interest rate plus fees. Because it shows you all the loan’s costs in a single percentage, APR is a much better way to understand how much you’ll pay for a loan.

The total cost of the loan will vary based on factors like your credit score, how much you want to borrow, and the repayment term. A personal loan calculator can help you estimate your payment on a personal loan.

When to use a vacation loan

A vacation loan makes sense in certain instances. If you need to travel but don’t have the cash on hand, a personal loan is likely a lower-cost option than using a credit card. This depends on the interest rate and fees of the personal loan versus the interest rate of your credit card. Note that you probably won’t get the funds immediately with a personal loan. Some lenders can do next-business-day funding, but others may take a few days to get you the money.

It makes sense to use a credit card for expenses while traveling because credit cards have built-in security measures. If you lose your credit card or suspect fraudulent activity, you can notify your card issuer to block the lost card and send you a new one. The most you’ll have to pay is $50, and many credit card issuers waive that fee. You should, however, pay the balance on your credit card in full as soon as possible to avoid accumulating credit card debt, especially if your credit card comes with a high interest rate.


Pros and cons of vacation loans

A vacation loan, like any financial product, has advantages and disadvantages. Here are some points to consider.

Pros of a vacation loan

Cons of a vacation loan

  • Fees — Vacation loans come with costs, like origination or application fees, that make the loans more expensive overall. You can usually roll the fee into the loan or subtract the fee from the loan funds. Some lenders also charge prepayment penalties if you pay the loan off early.
  • Puts you in debt — You’ll need to factor the cost of your vacation into your monthly budget for years. And if you can’t repay the loan as agreed, you risk negative effects on your credit.
  • Higher monthly payments — Compared with the minimum payment on a credit card, your monthly payment with a personal loan could be higher.

Comparison shopping could help you find the lowest personal loan interest rates available to you. With Credible, you can easily see your prequalified personal loan rates without affecting your credit.

Vacation loan alternatives

A vacation loan isn’t the only way to fund travel. Consider these other options: