You heard it here: Canadians have returned to the skies to take a holiday. Of course, you should never take a vacation if you don’t have the savings to do so ahead of time. Ideally, it’s better to save in advance. But you might apply for vacation loans in Canada in a handful of scenarios.
Keep reading to learn more about vacation loans in Canada.
What Is a Vacation Loan?
A vacation loan is a way to bridge a financial gap. For example, you might use a vacation loan for seasonal travel, a family holiday, or travel for a special commitment.
With a vacation loan, you can avoid running up a balance on your credit card. It might also help you alleviate the pressure of making sure your family can make the most of a holiday. Also, a vacation loan can ensure you have some extra money in case of an emergency while you’re travelling.
Vacation loans in Canada are typically a short-term financial product. For example, a lender might provide a vacation loan ranging from $1,000 to $35,000 or more.
If you’re having trouble arranging funds for your holiday, you’re not alone. Look at the following graph to see the percentage of Canadians who say they can’t afford to go on vacation.
Vacation Loans in Canada
There are many ways you could make use of a vacation loan. For example, travel is one of the most significant expenses of a vacation. You’ll most likely pay the most for a flight or rail ticket.
You may take a holiday abroad or at home. In either case, responsibly funding your vacation is the key to a stress-free experience. This point applies both during your experience and after you return.
A Word of Caution About Vacation Loans
As with many other financial matters, you must take steps to better manage your money, especially after the fallout of the pandemic. In most instances, a financial advisor would warn against borrowing for a holiday—especially with a credit card.
A holiday is a luxury. So it’s unwise to go into debt for something nonessential.
After your vacation, you must repay the loan. Also, you could end up paying hundreds to thousands of dollars in interest, depending on the loan amount and interest rate. Ultimately, you’re better off saving for your vacation in advance.
Reasons You Might Apply for Vacation Loans
There are some instances, however, where a vacation loan makes sense. For example, you may need funding for last-minute travel expenses.
Alternatively, you might need funding to cover hidden fees. You could even need a vacation loan for an emergency trip.
Otherwise, you may want to visit distant family members during a holiday. Yet still, you may need to visit a sick family member. You could also need to attend a last-minute wedding or funeral.
In these instances, a vacation loan in Canada can help you manage an emergency or last-minute travel with more affordable payments.
How to Get Vacation Loans in Canada
If you’re considering a vacation loan, you may wonder, “How can I find vacation loans near me?”
One way to arrange funds for your holiday is to use credit card points. The points you earn with your credit card could cover part of your trip.
Before taking a holiday, you must create a holiday budget. By doing so, you can ensure you choose accommodation and transportation arrangements you can afford.
As you create your budget, it’s vital to remember miscellaneous items. These items might include:
If you must take out a loan for your holiday, make sure you understand how it works. With this in mind, let’s look at a few of the most common types of vacation loans.
Again, it would be best never to put your whole holiday on your credit card. Still, you may find it helpful in booking flights and lodging. You could also use your credit card to pay for special dinners and souvenirs during your holiday.
If you plan, you could invest in a travel rewards credit card. The card may give you access to airport lounges, complimentary travel insurance, and travel rewards points.
Remember, however, a credit card’s interest rate will prove higher than using a personal loan for vacation. You must also consider that a credit card could have an annual fee. Furthermore, you could also have to pay foreign transaction fees if you use your credit card in a foreign country.
Home Equity Loan
You’ve probably heard someone call a home equity loan a second mortgage. With this type of loan, you’d use your equity as collateral.
A home equity loan, or home equity line of credit (HELOC), is usually easy to obtain. In addition, since you’d use your home as collateral, a vacation home loan is less risky for lenders.
As a result, you could receive a more competitive rate with a home equity loan compared to an unsecured personal loan. Of course, however, you risk losing your home if you cannot afford to repay the loan.
Line of Credit
With a line of credit, you’ll most often receive a lower interest rate than a credit card. However, you won’t receive a lump sum of cash in your bank account.
Instead, you can withdraw funds up to the limit of your line of credit at any time. You’ll only pay interest on the balance you use.
A line of credit provides you with flexibility. You can use it as needed while on vacation. At the same time, it frees you from concerns about running out of funds while on holiday.
A payday loan is a short-term, high-interest loan. You should never take out a payday loan for vacation or travel.
The terms of a payday loan are unforgiving. If you miss a payment or make a late payment, the fines and penalties could prove severe.
In most instances, you must repay a payday loan with your next paycheck. However, you can extend the terms of a payday loan by paying additional fees. In this way, however, many payday borrowers find themselves going from paycheck to paycheck to one advance after another.
This circumstance is a vicious cycle. It’s not a situation you want yourself or your family to experience.
Unsecured Personal Loan
You can use unsecured personal loans for about anything—including a holiday. For many people, an unsecured loan is their go-to choice for vacation financing.
You can acquire an unsecured loan relatively quickly if you have good or excellent credit. A bank, credit union, or online lender will gladly approve you. With good credit, you could get an unsecured loan for anywhere from $1,000 to $50,000.
The interest rate for an unsecured loan is much lower than that of a credit card. Another benefit of an unsecured loan is it doesn’t require collateral.
Vacation Loans for Bad Credit
Lenders consider any credit score below 650 as “bad.” They consider a score below 560 as “very bad.” Lenders consider you a high-risk borrower if you have bad or very bad credit.
Some lenders will take the risk of lending to high-risk borrowers. However, they’ll charge higher fees and interest. So if you have bad credit, you must consider whether this loan is worth the expense.
Vacations Can Get Expensive
A recent survey reveals that 12% of Canadians overspend on holiday by $500 or more. Another 25% of respondents say they overspend, but they’re not sure how much. Look at the chart below to see how many Canadians said they overshot their budget while vacationing.
It’s important not to succumb to the seduction of the holiday season. Marketers use this time of year to help companies make more money.
Flights and hotels cost more for the most desirable destinations. Also, cruises are more expensive.
With this in mind, keeping an eye on vacation expenses throughout the year and during the holiday season is essential. You can save money by taking your holiday during the off-season.
Count Your Pennies: Making Your Holiday More Affordable
You may find a few vacation tips helpful. They might make your next trip more affordable.
Remember, the smart way to manage money is to save in advance for your holiday. With this in mind, let’s consider a few things you can do to save on your next vacation.
Look For Promotions
Travel agents and websites have vacation sales all year long. So it’s a good idea to sign up for their newsletters and email alerts. By doing so, you can get a notification when a holiday you’re interested in is available at a discount.
Open a High-Interest Savings Account
A high-interest savings account is an effortless way to save money for your holiday. For example, you could deposit as little as $5 daily in your account. As a result, you’ll have $1,825 plus interest at the end of the year.
If you like, you can set up automatic deposits. The deposits will come directly from your weekly paycheque, ensuring you don’t forget to contribute to your vacation fund.
Of course, this balance will likely not pay for your entire holiday. However, it will help cover the cost of your vacation.
Your savings account could also serve as an emergency fund. For instance, you may need to take an unexpected trip. In that case, you’ll already have the funds available.
Apply for a Travel Rewards Credit Card
Again, several companies offer credit cards with travel rewards. In addition, you can use a credit card to pay for your daily expenses.
By paying your credit card bill early, you can avoid interest charges. Simultaneously, you can earn points to put toward your holiday.
You can apply for a grant if you enroll in an overseas education program. This tactic is a fantastic way to travel while learning about a foreign country intimately. Studying abroad is an excellent option if you cannot afford a holiday.
You could also try setting up a crowdfunding campaign during the holiday season, your birthday, or any special event. If so, you can ask for donations for your vacation instead of gifts.
Take a Cruise
You may have an advantage if you prefer to take a cruise instead of a flight. Some cruise companies have layaway plans.
With a layaway plan, you’d pay the deposit months in advance. Then you’ll pay in increments leading up to your vacation.
Work With a Travel Agent
Working with a travel agent can also make your holiday finances more manageable. For example, some travel agencies offer “cruise now, pay later” programs.
With this program, you can take your vacation without worrying about money. However, you must pay for it after you complete your holiday.
Still, it’s a form of financing. Remember to read the fine print, so you don’t get an unfortunate surprise when you see how much you owe for the trip.
Get Smart About Money
As travel providers increase operations, many Canadians are thinking about how they’ll finance their next holiday. As a result, vacation loans in Canada may become more common—for suitable candidates.
It can prove challenging to manage your finances in these uncertain times. Learning about your finances is more important than ever before. We can help.
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Take a look at the chart below. 12% of Canadians ended up overshooting their budget by $500 or more in the holiday shopping season while a whopping 25% said they were unsure of how much they overspent (which is arguably worse!).
Though we all enjoy the holiday season, the marketing techniques used during these times of year are a trap. Air tickets and hotel prices will always be high for desirable locations. Cruises will be more expensive. Being dragged into a store by a “deal” will likely result in overspending on other unnecessary items. Even food, wine, and alcohol is more expensive.
Take the time to analyze pricing of the necessary or wanted items throughout the year and the holidays, and maybe buy in the “off season.” If you set alerts on certain online stores such as Amazon, you will see that if you just wait a bit, prices will drop regardless of a holiday or special sale.
Yes, this takes patience, and this is the hardest human trait to learn. We’re certainly not born with it. But, financial discipline requires patience, and you must learn it sooner than later so you don’t become or remain an impulse buyer. This doesn’t extend just to you. This should be learned by your entire family, and they must understand that there are limits to household spending. Manage your individual and collective expectations accordingly.