8 Vacation Loans: Finance Your Travel in 2023

» MORE: Compare unsecured loans

What is a vacation loan?

A vacation loan is an unsecured personal loan you can use to pay for travel expenses, including flights, hotels, rental cars, meals or anything else trip-related.

These loans don’t require collateral, and you repay them in fixed monthly installments, meaning your monthly payment won’t change over the course of the loan. Online lenders, banks and credit unions all offer vacation loans.

Most financial experts advise against incurring debt for discretionary vacation spending. For urgent travel, and when a loan is your cheapest option, borrowing may make sense. But make sure the monthly payments fit into your budget, and commit to paying off the loan on time.

Pros and cons of vacation loans

Weigh the pros and cons of vacation loans to see if it’s the right choice for financing your trip.

Pros of vacation loans

• Low rates for some: For well-qualified borrowers — those with strong income and credit scores above 690 — personal loans can have lower annual percentage rates than credit cards.

• Receive the money in a lump sum: You receive funds from a personal loan all at once, rather than over time as you spend money. Having a fixed amount can help you plan and stick to your vacation budget.

• Predictable monthly payments: Personal loans have fixed monthly payments over a set term, which means you can plan for repayments in your budget. Knowing when you’ll pay off the debt also helps you stay focused on your payments.

» MORE: NerdWallet's guide to smarter travel

Cons of vacation loans

• Potentially risky debt: If you struggle to repay other debts, a vacation loan could add financial stress. Even one missed payment could cause a hit to your credit score, plus you’ll incur late fees while still accruing interest, making your trip more expensive than you intended.

• Years of payments: Terms on personal loans range from two to seven years — long after you’ve returned home. Carefully consider how long it makes sense to be paying for your travel.

Vacation loan rates

Annual percentage rates on personal loans range from about 6% to 36%, and some lenders may use the reason you get a loan to decide your rate and loan amount.

The rate you ultimately get depends primarily on your credit score and the percent of your income that goes to other debts each month, also called your debt-to-income ratio. The higher your credit score and the lower your DTI, the more likely you are to get a low rate on a vacation loan. A lower rate means a less expensive loan.

For example, a two-year loan of $3,000 with an APR of 11.2% would cost about $140 in monthly payments and $3,362 overall. That same loan with a 25.3% APR would require monthly payments of $161 and cost $3,854.

Use our personal loan calculator to estimate your monthly payments based on your credit score.

How to get a vacation loan

If you’re interested in a vacation loan, you can get one in four simple steps:

1. Check your credit report to see whether you’re putting your best foot forward. Address any delinquent accounts or errors before you apply.

2. Compare lenders so you can see what each offers and decide which loan features are important to you (for example, fast funding, a mobile app to manage your loan or the ability to change your payment due date).

3. Pre-qualify with multiple lenders to see which can offer you the lowest rates and repayment terms that fit your budget. Pre-qualifying doesn’t affect your credit score.

4. Gather your documents — including proof of identity, W-2s or pay stubs, your Social Security number and bank account numbers — and submit your application.

» GET STARTED: Pre-qualify on NerdWallet to compare loan offers

Alternatives to vacation loans

Before you take a loan, consider these alternatives to finance your trip.

Savings: If you have time, start saving. Create a dedicated travel savings account and put away some money each month. Find out how much your trip will cost by comparing prices of flights, hotel rooms and car rentals on travel websites.

» MORE: How to travel on a budget

Travel credit cards: If you travel frequently and have good or excellent credit (690 or higher credit score), you may qualify for a travel credit card that offers a sign-up bonus and other perks that could help lower the cost of your trips in the long run.

0% credit card: If you have good credit, you may also qualify for a low-interest or 0% intro APR card that allows you to carry a balance interest-free, typically for 15 to 21 months. That means if you can pay off your trip in that time, you can skip the interest altogether.