Should you take out a personal loan to cover your vacation expenses?
Many people commit to saving for the holidays in advance, only to find that they aren’t richer at the end of November, and those expenses start to show up. If you are unsure of how you are going to spend your vacation this year, you may be considering taking out a personal loan. With a personal loan, you can borrow money for any reason, and you will usually qualify based on your credit score and your ability to repay your debt (which means you will need a loan). source of income, such as a job, so that a lender can feel comfortable lending you money).
Personal loans are generally preferable to credit cards for several reasons. First, personal loans tend to charge a lot less interest, which makes your debt less expensive. Second, a personal loan will not hurt your credit score if you make your payments on time. A high credit card balance, on the other hand, could hurt your score by increasing your credit utilization rate.
But while a personal loan may seem like a good solution to cover your vacation expenses, it’s always worth thinking twice before taking one.
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The danger of debt
Some people have no choice but to go into debt when urgent expenses arise. If your roof starts to leak and you don’t have the $ 1,200 to pay for a repair crew, a personal loan makes sense because you can’t defer those kinds of expenses. Likewise, if your car breaks down and you need it to get to work, it pays to get a personal loan to cover the repairs if you don’t have the money in savings.
But taking out a personal loan for non-essential expenses is a bad idea. So if you find yourself strapped for cash as the holidays approach, you’d better avoid the loan and change your plans instead. If you go into debt to pay for gifts, travel, decorations, and cards, you will end up paying more for these items in the form of interest, even if that interest is less than what you would pay on a credit card. . Plus, if you take out a personal loan for your vacation expenses, you risk falling behind on your payments, which could seriously hurt your credit score. If this is the case and then you need to borrow money for a genuine emergency, this option may not be considered.
A better approach to holidays
The best way to cover your vacation expenses is to save up front. If you’ve ever missed the mark on this, then your next best bet is to cut your spending significantly.
If you normally spend $ 600 on gifts for friends and family, reduce that to $ 60 by giving out lots of homemade heart treats instead. Or explain to the important people in your life that you can’t give gifts this year because it will put a strain on your finances.
During this time, you can downgrade your decorations or, if you have children, enlist their help in making your home look festive. Outdoor lighting can be pricey and skyrocket your utility bills, but that doesn’t mean you can’t decorate your living room with tinsel and tinsel.
Finally, if you’re used to sending dozens of personalized greeting cards, trade them in for a blast of emails. It’s an easy way to reach anyone you want to share your good wishes with, and it won’t cost you a dime.
While personal loans are an affordable way to borrow money, you shouldn’t take one for just any reason. In an emergency, a personal loan is a reasonable choice, but don’t get one for expenses that you can avoid altogether.