Should You Finance Your Trip with a Personal Loan? What to Know First

Itching to travel, relax, and spend time with friends or family? Prepare your wallet because travel costs are getting more expensive, thanks to the effects of inflation. 

According to travel site Hopper’s Q3 2023 Consumer Travel Index, the average domestic roundtrip fare costs US$257, while airfare for European trips costs US$813.^[1] You don’t need to convert that to Philippine peso to know that that’s a significant amount. 

Unfortunately, even if you create a travel fund, it may not be enough to cover everything. So can you get a loan to travel? 

You do have this option to fund emergency or once-in-a-lifetime trips. Here's what you should know before you apply for a personal loan to fund your travel. 

How Much Money Do You Need to Travel?

There are no fast and hard rules for financing a vacation. Vacation costs depend on the destination, trip duration, and number of people on the trip. 

Let’s say you’re planning to bring your family of five to Singapore. The cost of your plane tickets will depend on the distance, the time of year (peak season means higher demand and therefore more expensive airfares), and your chosen airline (budget or full-service). If you’re going during Holy Week (a peak period) on a budget airline, prepare to shell out around ₱15,000 as base fare per passenger for a round-trip ticket.

Your accommodation cost will vary depending on whether you stay at a hotel, Airbnb, or a hostel. The fancier the hotel, the bigger the room, and the longer your stay, the more expensive it will be. 

For instance, five-star hotels like Marina Bay Sands cost around ₱32,000 per night, while popular four-star options like Carlton Hotel Singapore cost around ₱11,000. More affordable alternatives such as Airbnb rentals range from ₱1,700 to ₱10,000 per night.

Going on a food adventure? You can order room service for a luxurious experience or dine at local restaurants for a cheaper one. 

And what’s a vacation without shopping and sightseeing? The cost of shopping, transportation, and admission tickets to entertainment and local experiences will also depend on which activities you prefer.    

Can You Get a Loan to Travel? Pros and Cons to Consider

Yes, you can get a travel loan to pay for all your travel-related expenses. Travel loans are usually unsecured, so you don’t have to worry about pledging collateral. 

Get a loan if you are pressed for time and strapped for cash but need to go on that trip. Providers typically approve applications in a few days—some in minutes, even. You get the loan proceeds as a lump sum, so you can immediately pay for transportation, accommodations, and other miscellaneous travel expenses. 

Plus, if you have a good credit score, you can enjoy lower interest rates. With fixed monthly payments, you can also easily plan your budget.

But note that getting a loan to finance a vacation means you have to pay fees and interest, making your vacation more expensive. Plus, you’ll be paying off the loan long after the vacation is over. 

When Should You Get a Loan to Travel?

Not sure whether you should avail of a personal loan to fund that trip? Consider these instances: 

• You have a low credit card limit or don’t have a credit card at all
• You don’t have other urgent, outstanding loan balances to pay off
• You have the income and discipline to make monthly payments after the trip
• You need to go on that trip ASAP
• Your trip offers a return on investment—such as opportunities for networking, securing new clients for your business, learning new skills, and more

Read more: List of Loan Purposes: 13 Best Reasons to Get a Personal Loan

What to Consider Before Getting a Personal Loan for Travel 

Before you apply for a personal loan, here are important things to consider: 

• Travel budget - Meticulously plan your travel costs, including transportation, lodging, food, sightseeing, and unexpected expenses. This will help you determine how much money you need so you don’t end up borrowing more than necessary. 
• Credit score - This will affect your chances of approval and the loan terms you receive. A good credit score can make the cost of borrowing more affordable. 
• Repayment capacity - Evaluate your income and expenses to know how much you can comfortably put aside for loan repayments. This way, you can select repayment terms that fit your monthly budget, ensuring timely payments.  
• Loan terms and conditions - Know what you’re signing up for, especially regarding late payment, pre-payment fees, and other charges that affect your loan’s overall costs. 
• Loan options - Research loan providers to find the best option that meets your needs and budget. Focus on their interest rates and repayment terms. The best personal loan should align with and complement your finances, not push you toward financial instability.  

Related: To Borrow or Not: Is Getting a Personal Loan Worth It?

How to Finance a Trip with a Personal Loan

The steps are straightforward, especially if your finances are in order and you meet the loan provider’s requirements. Here’s how to fund your travel through a personal loan:

Step 1: Review Your Credit

Lenders evaluate personal loan applications based on credit scores and histories, so review yours before applying. Some lenders still provide loans for those with bad credit, though they typically impose higher interest rates in such cases. 

Step 2: Compare Personal Loan Offers  

Shop around for personal loan offers so you can review lenders' rates, terms, requirements, and approval processes. You can then choose the best loan for your travel needs. 

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Step 3: Submit Your Loan Application

Fill out the personal loan application form, which you can usually find online. You can also secure it from your chosen bank’s branch or office. 

Lenders typically require proof of identity, address, and income for verification and credit review. Ensure the requirements are correct and updated for quicker loan approval.  

Step 4: Receive Your Funds 

If you get approved for the loan, the next step is to wait for the loan proceeds to be released through your preferred disbursement method. Depending on the loan provider, this can take within three to seven working days. 

Related: Top 7 Personal Loan Rejection Reasons and How to Avoid Them

Step 5: Make Your Loan Repayments 

Once your loan proceeds are disbursed, you can pay for everything you need for your travel. Make sure to pay your loan before the due date and ensure on-time payments until the end of the loan term. 

How to Stay Financially Responsible While Traveling 

Now that you know how to get money for travel, you need to learn how to budget it meticulously. Here’s how to economize and stay financially responsible during your trip without sacrificing fun and spontaneity:

• Reduce your personal loan’s overall cost by booking a flight on a budget airline and traveling in economy. Pack light so you don’t have to check your baggage in.  
• Carry both cash and credit cards. Cash will come in handy if an establishment doesn't accept card payments. But always bring a travel-friendly credit card. Some cards, such as the ones below, offer points, rebates, and even travel discounts: 
  

  Credit Card	Travel Benefits
  UnionBank Rewards Card	3x non-expiring rewards points when you shop and dine here and abroad Worldwide acceptance Rewards at participating restaurants, shopping outlets, and leisure establishments nationwide
  Metrobank Platinum Mastercard®	1 rewards point for every ₱20 spend Points redeemable for air miles
  Metrobank World Mastercard®	2x rewards points for international purchases Exclusive access to airport deals
  HSBC Platinum Visa Rebate	5% rebate on travel and shopping transactions Free travel accident and travel inconvenience coverage Exclusive deals at shopping, travel, dining, and health and beauty merchants worldwide
  Security Bank Platinum Mastercard	Dual currency billing 2 complimentary lounge access annually in more than 1,300 lounges in 500 airports worldwide Unlimited access to A Lounge, Marhaba Lounge,  and PAGSS Lounge Up to US$200 coverage with Mastercard E-Commerce Purchase Protection  Free travel insurance
  Security Bank World Mastercard	6 complimentary lounge access annually in more than 1,300 lounges in 500 airports worldwide Free travel medical insurance worth up to US$100,000 with COVID-19 coverage Exclusive automatic cashback offers from participating stores overseas
  BPI Platinum Rewards Card	2 BPI Points for every spend on foreign transactions abroad or online worth ₱20 Low forex conversion rate of just 1.85% Up to ₱10 million in travel insurance coverage 0% interest on airline installment all year round Up to 4 free lounge access annually to more than 1,300 airport lounges worldwide
  BPI Signature Card	2 BPI Points for every ₱20 spend Complimentary lounge access to PAGGS at NAIA 1 and NAIA 3 Preferential exchange rates on foreign currencies 24/7 worldwide concierge by Visa

• Use a handy budget app. It’s easier to avoid overspending if you lay out all the numbers. Make sure to diligently type in your travel expenses so you stay on track.
• Cook meals to save money on food. If you book a rental with a kitchen or kitchenette, buy ingredients at the local grocery store and cook your meal instead of dining at restaurants in tourist hotspots where food is expensive. 
• Eat like a local. If you decide to try the local cuisine, dine where the locals do for a more affordable and authentic dining experience.
• Skip the overpriced tours. Explore on your own for free. Many cities offer free guided tours. Most museums and natural attractions don’t charge admission fees. Just research online to discover your options. 
• Skip the souvenirs. You don’t have to buy standard souvenirs that will only collect dust on your shelves when you get home. 
• Get travel insurance coverage. Just because you’re on vacation doesn’t mean accidents and emergency trips to the hospital can’t happen. To enjoy financial protection in case of travel-related mishaps, make sure to purchase a travel insurance policy. Compare your options via Moneymax by clicking the banner below:

Final Thoughts 

Everyone wants a proper vacation. But the issue of how to finance travel often gets in the way. 

If your budget is stretched thin at the moment and you need the funds fast, yes, you can get a loan to travel—although you’ll have to deal with the added cost of interest and other loan fees. Use the loan to pay for your trip outright, then pay off the loan in manageable monthly payments afterward. 

If you’re confident you can pay it back, get a loan to travel—but not before doing your research and comparing your funding options. At the end of the day, it’s still best to travel without taking on debt.

Source: ^[1] Q3 2023 Consumer Travel Index (Hopper, 2023)