Everyone’s looking for a getaway, but the pandemic has left many strapped for cash, and a vacation may be out of reach. Or is it?
Travel loans are becoming increasingly popular, and a lot of resorts and airlines are offering them as an option at checkout.
Similar to point-of-sale loans offered at checkout at various retailers, travel loans work the same way. They allow you to break down a purchase into a series of smaller payments and charge interest which can average 15% and go as high as 30%, depending on your credit score.
“And so one of the things that’s great is if you have really good credit, you’ll see a very, very low rate, and we do charge all the way down to 0%,” said Brian Barth, CEO of UpLift. “And if you don’t have good credit, we still really pride ourselves in finding a way to make it possible for almost everybody to travel.”
Since traveling right now can be uncertain, you do need to be aware of how refunds work if your trip is canceled.
“So even if you get 100% of the cost of the trip refunded, you’re still on the hook for those interest charges that may have accrued,” said Chuck Bell, travel editor with Consumer Reports.
Here’s what to know before applying for a travel loan.
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Most companies will do a soft inquiry to review your credit report. While this won’t impact your credit score, you will need to lift your credit freeze if you have one.
Some travel loans don’t come with protections that are built into credit cards. Credit card companies are required to investigate and respond to complaints about disputed charges under the Fair Credit Billing Act.
Ask about origination fees which could be as much as 2% of the total borrowed.
Beware of the temptation of overspend.
“So that would be one risk of these programs as you might take out loans that are a bit more than you can afford on your own, said Bell. “So, we just urge people to be cautious, and that’s why it’s a good reason to have savings and to save up in advance for trips that you may be taking.
One other thing to note: Companies like UpLift are working with certain resorts and cruise lines that are offering 0% interest on these loans, so if your credit is less than perfect, this may a good chance to get a better price.