December 11, 2023


Time to travel

Should You Use Vacation Loans To Cover Travel Expenses?

Hotel and air travel prices dropped significantly during the peak of the COVID-19 pandemic, but prices have risen significantly in the face of inflation over the last year.

Hotel prices have risen due to the increased demand for travel as the pandemic eases. The increase in price for car rentals, flights and food costs can be attributed to high fuel costs increasing overall transportation costs.

Generation Average summer vacation budget
Gen Z (10-25) $2,788
Millennials (26-41) $4,141
Generation X (42-57) $5,060
Baby Boomers (58-67) $6,126

Despite having the smallest per-trip average travel budget, Gen Z is leading the charge to return to travel in 2022. Compared to other generations, Gen Z is planning to increase travel spending the most this year, with 72 percent planning to splurge on a big trip in 2022.

A vacation loan is an unsecured personal loan that you can take out to help cover your vacation expenses.

You can get a vacation loan from any lender that offers personal loans. Vacation loans can be used to cover any and all travel expenses, including transportation, lodging, food and entertainment. However, vacation loans should only be used for once-in-a-lifetime trips, special occasion trips like a honeymoon or emergency trips because of the effect they can have on your credit score and finances. Only take out a vacation loan if you are sure you will be able to pay it back on time.

As travel expenses continue to rise in the U.S., vacation loans are likely to become more common. The cost of domestic travel and overall travel spending in the U.S. is projected to continue rising over the next several years.

This year, travel spending in the U.S. is at $932 trillion. By 2025, it is projected to be $1,060 trillion. This rise in spending is due to a variety of things, including post-pandemic restlessness and stark inflation.

While vacation loans can help you take the trip of your dreams sooner rather than later, they should be considered a last resort unless the trip is an unavoidable emergency. Before considering a vacation loan, you should try to save up and budget for a trip so that you can afford it on your own. If you are considering taking out a vacation loan, consider the pros and cons first.


  • Fixed monthly payments. Because payments are fixed, you will pay the same amount each month, making it easy to plan ahead.
  • Potential for lower interest rate. Depending on your credit, personal loans often have lower interest rates than alternatives like credit cards. If you were planning to use a credit card to pay for your trip, a vacation loan could be a lower interest alternative.
  • Help fund emergency travel (or higher cost travel). If you are taking a trip out of necessity rather than pleasure and it is time-sensitive, a vacation loan could be a great option to enable you to travel more quickly.


  • Interest increases the cost of the trip. If you take out a loan, you will have to pay interest on top of the expenses of the trip itself.
  • Fees can increase the cost of borrowing. Many lenders charge a variety of fees. Always look into the fees a lender charges before applying.
  • Monthly payments. If you take out a vacation loan, you will be on the hook for monthly payments until it is paid off. This means that you could be paying off your trip months after the fact. Taking out a loan is a long term investment.,
  • Can negatively impact your credit score if you don’t make the payments. If you are late making payments or end up having to defer them, your credit could take a serious hit.

If you decide to take out a vacation loan, there are several steps you will take.

Check your credit score

First, you should check your credit score. Different lenders have different minimum credit score requirements, but you generally need good to excellent credit to qualify for a lender’s lowest rates. Generally, a score of 670 to 739 is considered good, and a score of 740 to 800+ is considered excellent.

Knowing your credit score is important because it informs what lenders you may qualify with and the terms you might be eligible to receive. If your credit is less than stellar, you may want to consider a lender that works with bad credit borrowers.

Research lenders

Once you have reviewed your credit score and overall financial picture, start researching top lenders. When comparing lenders, consider the interest rates offered, fees charged, minimum and maximum loan amounts, repayment terms and any additional features offered by individual lenders.

Many lenders allow you to pre-qualify without hurting your credit. This lets you see the rates you will be eligible for without officially applying.

Submit your application

Once you have chosen a lender, you will submit a formal application, including identifying documents like your ID, W2s and pay stubs. If you are accepted, the next step is to sign off on the agreement, receive the funds and begin paying back the loan in monthly installments.

Bankrate insights

While many lenders offer fast approval and funding within just a few days, it is best to apply for a travel loan at least a month before your planned vacation to ensure you have enough time. 

While taking out a vacation loan could be the right decision in certain circumstances, you should generally try to save up and budget for expenses that are not necessities rather than taking out a loan.

Because a vacation is a luxury, not a necessity, you should think carefully about taking out a vacation loan. If the trip is an emergency, a vacation loan may be a good idea. Other circumstances that warrant taking out a vacation loan include special occasion trips like a honeymoon or once-in-a-lifetime trips.

Essentially, if there is a sense of urgency and you don’t think you have time to save up, taking out a vacation loan could be the way to go. However, you should budget and save instead of taking on debt if it is at all possible. If you do decide to take out a vacation loan, make sure to search for the best rates and make sure that the loan fits your budget.

Discover: Discover vacation loans are available for as much as $40,000 with rates ranging from 6.99% to 24.99%. Funds can be acquired as quickly as the next business day after approval.

SoFi: SoFi offers as much as $100,000 for vacation loans with rates that start at 8.99% and go up to 23.43%. Loan funds can be dispersed as quickly as the same day of approval. There are no origination fees, prepayment fees or late fees.

Prosper: Prosper loans can be used for practically anything and offer rates as low as 6.99%. Loans are available from $2,000 to as much as $50,000. There are no prepayment penalties and you can get funds in as little as one business day.

Avant: You can borrow from $2,000 to $35,000 from Avant for vacations. APR rates range from 9.95% to 35.99% with loan terms from 12 to 60 months. There are fees with Avant loans to be aware of including late payment fees, administration fees, and dishonored payment fees.

LendingTree: For applicants with the best credit scores, rates on LendingTree vacation loans range from 8.83% to 22.74%. Loans are available for as much as $100,000. Though there may be fees with LendingTree loans including late payment and origination fees, and prepayment penalties.

Before taking out a vacation loan, consider the following alternatives.

  • Budget. If you plan accordingly, there are many ways to save money on a trip. Spend time researching the cheapest travel and lodging options, as well as looking up tips and tricks for cheap travel in a certain area. Creating a budget and finding options that fit into that budget is the best way to save money while traveling.
  • Travel cards and reward cards. Many credit card companies offer perks and reward programs for traveling. Find a credit card that lets you build up travel points as you spend. This could help you cut travel costs, with some cards even awarding airline miles as you spend and pay off the card.
  • Saving. If you know you want to take a trip, it is always a good idea to start saving early. Set aside a predetermined amount from each paycheck to go toward a travel fund. Figuring out a travel budget will make it easier to figure out how much and for how long you will need to save.
  • Traveling with a bigger group and splitting costs. Traveling with a group and sharing accommodations can help with travel costs significantly. 
  • Find discounts. There are often discounts available if you search for them. Do your research to find the cheapest flights, hotel rooms, etc. There are almost always deals to be found online.
  • Choose a less costly vacation. If the vacation you’re planning is turning out to be too expensive, you might want to consider a smaller-scale trip, or changing your destination to a less costly area.
  • Wait until the offseason. Prices are higher in certain areas during certain times. For example, it is more expensive to go to the Bahamas during the summer than it would be to go during the fall or winter. Consider visiting your chosen location during the offseason to take advantage of lower prices and less crowded destinations.

The bottom line

Despite rising costs, Americans are ready to travel after the pandemic. While rising inflation does make travel more difficult, there are still plenty of ways to reduce costs and keep your travel budget on track.

If you can’t wait to save up but are confident you will be able to pay back the loan, a vacation loan could be a great way to finance your upcoming trip. However, you should do your research and compare financing options before making that decision. Saving up and finding deals is always a better option than taking on debt.