Nowadays, with the pandemic and the labor crisis we are experiencing, we ask ourselves over and over again: is it worth traveling, is it really a good decision to spend the money I have on travel, and will I need this money in the future?
I share with you my experience and my vision on this subject because I consider that the happiness of traveling does not compare to a good house, a successful bank account or a late-model car.
I also don’t think travel is an impossibility in these covid-19 times, as do most of my family and friends; and if you have been planning a trip for a long time and you may have saved money for part or all of it, my advice is to not invest it in your trip and take out a Travel Loan.
It is always good to have money for unexpected expenses or emergencies that may arise. By using a travel loan, we can keep savings intact and pay for travel costs in fixed monthly payments over time.
If something goes wrong in the future, we will have money saved to help pay for it, and we will gain in two ways: keeping our savings intact and strengthening our credit history by paying off the loan. The next time we choose to borrow, we have more options with better terms.
What is a travel loan?
A travel loan is usually a personal loan, a fixed-term, unsecured loan. “Unsecured” means that we are not putting up the home or other valuable property as collateral for the loan, and we are not in danger of losing that home or other property if for some reason we fall behind.
Lack of collateral may mean slightly higher interest rates, although exactly how high will depend on current market conditions and our personal credit score. “Fixed rate” means that whatever interest rate is agreed upon when the loan ends is the rate it will be for the life of the loan, regardless of what happens to interest rates nationally. “Term” means the number of payments required to repay the loan, as well as the due date and exact amount of each, is established at the inception of the loan and will not change until the loan is paid in full, at least not without some type of refinancing approved by both us and the lender.
Some travel finance loans can be set up as “lines of credit,” where interest rates and a credit limit are established up front, but the money is not distributed until we apply for it. The advantage of a line of credit is that you only draw what you need, when you need it, up to the maximum amount. Under this system, we only pay interest on the money we actually use; future needs can be handled, well … in the future.
Many lines of credit also allow us to “re-borrow” money that has been repaid. If we withdraw most of its maximum amount, for example, then, over time, repay about half of it, we would now have that percentage of the maximum amount available to borrow and use again. That means paying interest again on the repayment, of course, making a line of credit similar in many ways to a credit card.
Either of the cases we use to finance the trip: Line of Credit or Personal Loan, allow us to keep the savings, face an emergency situation at any time and prove that travel loans have the sense of happiness.