3 Vacation Loan Terms to Look Out For

Whenever you are shopping for a vacation loan, you will want to make sure that you look at all of the individual terms of the loan. If you blindly agree to a vacation loan, you could find yourself in some serious financial trouble. Here are a few vacation loan terms to look out for.

1. Interest Rate

One of the first things that you will want to look at with a vacation loan is the interest rate. Vacation loans tend to have high interest rates attached to them. Because of this, you will want to make sure that you know exactly how much interest you are going to be paying and what type of interest rate you are dealing with. Find out if it is a fixed interest rate or if it is variable. If you are dealing with a variable interest rate, this could be potentially dangerous for you. If the interest rate increases, you could be forced to make a payment that you cannot afford. The purpose of getting a vacation loan is so that you can afford to go on vacation. If your payments get too high because of the interest rate, you have defeated the purpose.

2. Length of Term

When looking at vacation loans, you are also going to want to pay special attention to the length of the term. The length of the term is going to have a drastic impact on how much you pay for the vacation and how much your monthly payment is. You want to find a happy medium when selecting a loan term. You do not want to take out a loan that is going to take you many years to pay off. You do not want to still be paying on a vacation from two years ago when you are ready to go again. At the same time, you do not want to have to come up with $5,000 in the next 2 months. Depending on how large the loan is, you will want to evaluate how long it should take you to pay off. When you are dealing with longer loan terms, you are also going to be paying more money in interest charges. In order to keep the price of your vacation any reasonable level, you need to avoid using long loan terms.

3. Prepayment Penalties

You will also want to find out if the vacation loan that you are considering has any prepayment penalties associated with it. Some loans will charge you a certain dollar amount if you pay them off before maturation. When dealing with vacation loans, ideally, you would like to be able to pay them off whenever you want. If you get a lump sum of money, it would be helpful to be able to retire the loan early. You need to specifically ask your vacation lender if there are any prepayment penalties with your loan before signing up.

 


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