Here you are, planning your budget for your next adventure. But you’re fumbling about your savings still running short to cover your entire trip financially. With your hair-pulling situation, you end up thinking, is it better to postpone my trip instead?
Not so fast! There are available options out there to finally push the trip of your dreams, like taking a personal or travel loan.
Traveling in debt may not be everyone’s style, but it’s actually beneficial than you initially think. Join us as we ponder over the perks of taking a loan to support your #travelplans, the realistic cons of borrowing money through loans or credit cards, and how to manage your debt like a pro.
Loans vs. Credit Cards: Which is Better?
Those who find themselves a little short on travel savings rely on two financial options to cover the remaining expenses of their trip – use a credit card for payments, or take travel or personal loan.
Why people choose credit cards
Credit cards are the best option for people who are always worried about their security while traveling. Because of its cashless payment feature, credit card users won’t need to carry cash with them all the time, and this reduces security risks like theft.
Credit card users also enjoy travel perks like airline rebates, purchase protection, travel insurance, and even travel assistance services like restaurant reservations, depending on your credit card provider.
Credit cards also offer better foreign exchange rates than exchanging money to the local currency of your destination on airports and foreign exchange centers.
But, in exchange for these benefits, credit cards charge you with higher interests. Be prepared to pay the high rate along with the amount of your debt when you get back home.
Your spending is also limited to how much your credit limit is. Once you reach your limit, your card becomes useless. And even if your credit limit is high, you’ll be tempted to make unplanned impulsive expenses.
Why choose to take loans
If you’re the type who wants to stick to your travel budget but find yourself short on on-hand money, take a loan instead.
People prefer loans because of their fixed lower interest rate compared to credit cards.
There’s also no limit to what you can borrow when taking a loan. You can try applying for any amount at banks or lenders like Cash Mart, and if you get approved, you can rest easy knowing that your travel funds are all set.
Taking a small loan early on can help you build your credit score. Once you’ve established a good credit score, you can apply for bigger loans for your bigger travel plans!
On the not-so-bright side, the interest rates start running the day you receive the money. Keep that in mind when considering how you’ll repay your loans.
Unlike with credit cards where you can use them immediately, approval for a loan takes longer. This is why it’s recommended to apply for a travel or personal loan days or a week(s) before your trip.
Lastly, if you have a bad credit score, and you’re applying for a loan, you might be charged with a higher interest, sometimes even higher than credit card rates. You may want to seek other ways to borrow money for your funds if this is the case.
How to manage your debt like a pro traveler
If you plan your loan options carefully, managing your debt would be a piece of cake. Here are some ways you can manage your loans and your post-travel debt:
- Borrow only what you can afford to repay. If you aren’t 100% sure you can repay a large amount with the interest, consider loaning a smaller amount.
- Analyze your financial capabilities. Evaluate your forecasted earnings for the coming months (or years). Would it be enough to cover your debt and still handle your personal and household expenses?
- Borrow only when your savings can’t cover your whole trip. Prioritize using your savings first to cover the expenses. Only take a loan when you really can’t find other resources to finance your trip.
- Let your family know you’re taking a loan. Keep your family informed of your plans to borrow money so they can expect the additional expense at home. Plus, if you run into trouble with repaying, you can ask them for help.
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