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Vacation Loans: Good to use or more money to lose?
Let's fact it, everyone needs a break.
Whether it is simply time away from your office during the day, taking an extra day to make it a three-day weekend or leaving town, we all need one.
If you are considering the latter but can't afford it right now, you may want to consider a vacation loan.
A vacation loan is basically an amount of money borrowed from a financial institution where the funds are allocated towards vacation expenses, i.e. airfare, lodging, meals, transportation and a variety of other miscellaneous travel expenses.
Some financial institutions offer what they call an "Unsecured Vacation Loan," with varying amount restrictions. A quick internet search revealed one offering $500 to $8,500, sans restrictions on how to use the money (i.e. it could be used to pay off other bills or credit cards), as well all as another for a loan between $10,000 and $25,000. Numerous credit unions also offer unsecured vacation loans to their members.
"Secured Holiday Loans" are based upon a borrower's credit rating and require some sort of collateral for the loan, such as your home, vehicle(s) or other property. This essentially makes them about the same as conventional loans.
Both types—unsecured and secured--have similar variable annual percentage rates, repayment terms between 24 to 84 months and are reflected on your credit report.
The benefit of a vacation loan is obvious: money to use to take that much needed vacation. However, there are numerous drawbacks as well.
For one - a loan, is a loan, is a loan, and eventually it must be paid back. So, if you already have credit card account balances, and/or are trying to pay off other debts, borrowing more money for a "non-mandatory" expense (enjoying the good things in life aside) may not be a great idea.
If the loan is secured---again, meaning that it is bound with some sort of collateral such as your home, vehicle(s) or other property--then you risk losing that item if something happens and you can't repay the loan.
You might find that a better option to taking out a vacation loan is to use a low interest credit card for your vacation expenses (preferably one you already have to avoid another entry on your credit report). Or, better yet, determine the kind of vacation you want to take and the expenses associated with it, and save up enough to pay for it in cash.
Everyone needs a break, but it is important to carefully weigh the risks and rewards of taking out a vacation loan first.
Lysa Allman-Baldwin possesses over 12 years of experience as a Freelance Writer. Her feature articles covering a wide variety of topics appear regularly in several print and on-line publications.
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