Here’s Why You Shouldn’t Borrow Vacation Loans — And What to Do Instead

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

vacation loans

Whether your city is in the throes of winter or your stressful job won’t let up, an indulgent vacation can sometimes feel like a necessity.

If you have the urge to travel but don’t have the money to afford it, you might consider using vacation loans to book the trip of your dreams.

Unfortunately, this temptation should be resisted in almost all cases. Taking out a personal loan to go on vacation isn’t a financially savvy move, and it’s a decision you could regret long after you’ve returned home.

“If you need to take out a loan to take a vacation, you can’t afford to go,” warned Matthew LaMont, a financial advisor, certified credit counselor, and president of LaMont Advisors. “The vacation will cost more than necessary due to interest paid, and you’ll be paying for the vacation possibly years afterwards.”

Here’s why vacation loans are a bad idea

With some financial decisions, there are significant pros and cons to weigh. But when it comes to taking out a personal loan to go on vacation, most experts agree there’s only one right decision: Don’t do it.

“It’s not a good idea to take out a personal loan to pay for a vacation,” advised Chad Rixse, a financial planner and co-founder of Millennial Wealth. “As much as we need our downtime to recharge our batteries, vacations are a luxury, not a necessity.”

Rixse could think of no advantages to taking out a personal loan for vacation, but he listed lots of disadvantages. “You increase your debt load,” he said. “You have to make monthly payments that might be a struggle for your budget. You’ll pay more than you borrowed by owing interest. And interest rates on unsecured personal loans can still be very high, even with good credit.”

The bottom line: Having a good time for a week or two isn’t worth the long-term price.

However, LaMont provided one exception. If the trip is for a once-in-a-lifetime event, such as a wedding for a close family member, taking out a vacation loan might be worth it if you don’t have time to save up.

But even in this situation, you shouldn’t take out a loan if you can’t afford the payments. Your loved one wouldn’t want you to ruin your credit to attend their wedding.

What should you do instead?

When it comes to paying for vacations, the best option is to plan in advance and save up enough money to afford the trip you want. “You’re better off making a vacation a goal,” LaMont said. “Work towards saving and paying cash, [and] then reward yourself with the trip.”

To make sure you don’t need to take out vacation loans, consider these tips:

  • Start a dedicated travel fund and regularly transfer money into it. If you don’t have a lot of extra money, make a budget and see where you can cut costs to afford to save for a trip. You also could consider one-time financial moves that could result in big savings, such as refinancing your student loans. If you can lower your monthly debt payments, you’ll have more money to save for an awesome vacation.
  • Use a credit card that rewards you with miles. If you can earn free plane tickets by putting your regular purchases on your credit card, it’ll make trips more affordable. Just make sure to pay off the balance in full every month. Otherwise, interest fees will negate the value of the rewards you earn.
  • Look for affordable vacation options. Taking a trip doesn’t mean you have to spend a lot of money. Research low-cost vacation options and see if there’s a trip you can afford to take right now. If you can’t find a cheap trip, consider a staycation to explore fun locations in your area.

What if you decide to borrow a vacation loan anyway?

If there’s a once-in-a-lifetime event worth borrowing for, there are a few key things you can do to minimize the financial damage from taking out a vacation loan. You should:

  • Shop around for a loan with the most favorable terms. Start with our personal loan marketplace to compare lenders and consider interest rates, origination fees, and repayment terms. Some lenders have minimum amounts you have to borrow to be eligible for a loan, which might be more than you need. You can find one that doesn’t with our guide to safely getting personal loans of $3,000 or less.
  • Repay your loan as quickly as possible. You’ll pay less in interest and won’t be paying for your vacation for years to come.
  • Borrow as little as possible. While you might need the money for plane tickets and hotels to avoid missing a big getaway, you don’t have to spend a fortune eating out or buying souvenirs.

While these steps limit the long-term damage to your finances, remember that a vacation loan should be a last resort for special occasions.

You also should remember that you don’t have to forego vacations forever, even if you can’t afford a trip right now. Check out our guide on how to save up for short-term goals quickly to get tips on building a travel fund.

When the next opportunity to travel comes along, you’ll have money in the bank and can go on vacation guilt-free because the trip won’t hurt your finances.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 5.950% APR to 14.740% APR (with AutoPay). Variable rates from 5.825% APR to 14.365% APR (with AutoPay). SoFi rate ranges are current as of May 18, 2018, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.825% APR assumes current 1-month LIBOR rate of 1.90% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank


Upgrade Bank Disclosures


  • Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.
  • Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% - 29.99%$1,000 - $50,000
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5.83% - 14.74%1$5,000 - $100,000
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5.96% - 35.97%*$1,000 - $50,000Visit Upgrade
8.00% - 25.00%$5,000 - $35,000
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4.99% - 29.99%$10,000 - $35,000Visit FreedomPlus
4.99% - 16.24%2$5,000 - $50,000Visit Citizens
15.49% - 34.49%$2,000 - $25,000Visit LendingPoint
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.49% - 18.24%$5,000 - $75,000Visit Earnest
9.95% - 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.