Financing a Vacation: Credit Cards or Personal Loans

In deciding whether to finance a vacation using credit cards or personal loans, look at all the choices available. Usually, people who choose to use credit cards or personal loans to finance their vacations know that they have the financial stability and ability to pay back the full or partial amount in the months to come. Personal credit cards are good to use during a vacation because you don't need to carry about wads of cash and because your credit card statement can serve to document your spending. Knowing the total or anticipated cost of the vacation will help in deciding which option may be best for you.

Using a Credit Card

If your vacation expense is small, you may consider using a credit card. Credit cards offer great introductory rates for new applicants. These introductory rates will reduce the interest owed to little or none. However, in order to take advantage of the introductory incentives, you must adhere to the payment schedule and avoid making additional charges to the card.  If you carry a balance beyond the introductory period, the balance will be subjected to the new interest rate and may take longer to pay off. Be sure to check any associated fees on new credit cards, such as annual fees. They can possibly affect how much you want to spend.

Credit Card Savings

If you currently have a credit card, check to make sure you have enough available credit to avoid overextending your credit line. Also check into any offers from your credit card company that may apply if you make travel plans using their site or partners. An offer could provide additional savings and reduce the actual amount of credit you would need to use on your card.

Using a Personal Loan

If your vacation expense is more than what a credit card limit could provide, you may look into obtaining a personal loan. A personal loan is an unsecured loan, with fixed repayment terms, interest rates and monthly payments. Because it is an unsecured loan, in order to qualify, you must have good credit. Personal loans also can provide better interests rates than credit cards and have greater flexibility for the repayment terms. This is beneficial because there will be no fluctuating in the amounts owed and you can follow the progress in paying it off. If opting to use a personal loan, shop around for good interest rates and any associated fees. Some lenders may charge an application fee for processing the paperwork. You may also check with your current financial institution. If you are a long-time member, there may be incentives that they can provide you for lending through them.

Making a Decision

When making financial decisions, it is always important to consider these factors:

  • What are you trying do?
  • How much will it cost?
  • How much can you pay towards the activity?
  • What are the available options?
  • What are the incentives?
  • What are the repayment options?
  • What will the long-term financial impact be?

These questions will help you determine which option would better suit your needs and not create a financial strain on your budget.  Besides, what good is a vacation if it is going to cause you stress? Enjoy!

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