Should you take out a loan to travel?

Should you take out a loan to travel? | aircraft-505126_960_720 | News And Opinions

That’s not an easy question to answer, and it largely depends on who you ask. Travelling with debt can be a good thing if it’s good debt, or even if it’s bad debt, as long as you have an ongoing income stream to help pay it off. One option for travelling when you don’t have the money to hand is to take out a personal loan, but this option isn’t for everyone.

Proponents of taking out a travel loan typically have a “seize the day” attitude. For them, the time to do things is now, and the time to pay the piper is tomorrow. But what if you can’t pay the piper? Your trip could be tainted by the debt load with which you’ve saddled yourself. However, if you know yourself and know that you can be responsible enough to pay off your debt quickly, it may not be such a bad idea to seize the opportunity to travel (when you’re young, for example, before you have the responsibilities of a marriage and kids).

If you are going to take out a personal loan such as those offered by Buddy Loans for travel purposes, there are a few guidelines you should stick to. If you don’t think you can, it’s probably best to opt for the route of saving up your money to travel.

The first thing to remember is to not over-borrow. Just because you can borrow x amount of money doesn’t mean you should. Only borrow what you reasonably need for your trip, and cut corners where you can. It doesn’t make sense to go first-class all the way when you could save money and borrow less, leaving you with less debt to manage when you get home.

It’s also smart to leave home knowing how you are going to pay off your debt and how long it it’s going to take you to repay it. Be sure you know how you are going to be able to repay your debt, travel, and still be able to afford to live when you get home. With taking out a personal loan (for which virtually everyone qualifies, even if you have no credit) it’s imperative that you think through everything, including life after the trip, and how you are going to be able to afford it all.

Before you take out your loan, save up a nest egg that will allow you to cover your first few repayments. In this way, you can take your dream trip but still hit the ground running when the first bill comes due. The more you can save up ahead of time, of course, the further ahead you’ll be when it comes time to pay up.

One phenomenal way of taking your vacation and also setting yourself up to repay your loan is to take a working holiday. We’re not talking about drinking pina coladas out of pineapple while sitting at your desk. What we mean here by a working holiday is the chance to, for example, earn money teaching while exploring Thailand, or working as an au pair in the UK. If you can combine earning money with taking your vacation (especially if you are earning money in a currency that exchanges in your favour back home!) you are doing yourself a big favour when it comes to setting yourself up financially when you return home with a camera full of photos and a travel debt to pay off.

In short, if you don’t have a guaranteed income stream and a way of repaying the loan when you return from your trip, and you don’t think you are disciplined enough to make the payments regularly, don’t take out a personal loan to travel.

If, on the other hand, you are strategic, disciplined and have a solid plan to repay your loan when you return, a personal loan can be a viable strategy for finding a way to see the world right now, without having to save for a rainy day.

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