3 Alternatives to Vacation Loans

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If you're planning to hit the road post-pandemic, consider these alternatives to borrowing.

After a year of being locked down, many people are eager to travel once the COVID-19 pandemic begins to come to an end and life returns to normal.

If you're planning a post-pandemic adventure, however, you may not want to rush into pulling out the credit cards or taking a personal loan to pay for it.

While vacation loans and credit cards are common ways to fund trips, both options can make your vacation more expensive since you'll end up paying interest. You'll also be committing to a monthly payment that can affect your financial flexibility going forward.

To avoid that, consider these three alternatives to taking out vacation loans.

1. Save up for a vacation all year

Vacations are often too expensive to pay for with just one paycheck. But trips are usually planned in advance -- and you'll know before you travel about how much you expect to spend. That means you can save up for your trip over time.

If you're anticipating that your next vacation will be in seven months and will cost you $2,000, start saving up for it now and put aside around $290 per month. (That's your $2,000 travel cost divided by seven months.) This smaller amount is easier to come up with by making reasonable sacrifices each month. And you'll have the money waiting in your vacation savings account when it comes time to hit the road.

2. Use credit card points to cover your costs

There are many travel rewards credit cards out there that offer rewards like airline miles or free nights in a hotel.

If you use these cards for your everyday spending during the year, you may be able to amass enough rewards points to cover a good portion of the cost of your vacation -- or even the entire expense.

You can maximize your rewards by choosing a card that's a good fit to your spending. Look for one that offers extra bonus miles or points for the types of purchasing you do the most. And you can research your options for how to spend the points on travel so you get the most bang for your buck.

3. Take a staycation

If you can't pull together enough credit card points or save enough money to fund your ideal trip, consider scaling down your expectations and taking a staycation instead.

Most people live near at least some fun places to visit, which they may take for granted simply because the destinations are close by. Instead of blowing your budget and having to pay for your vacation for months or even years after your trip is over, schedule a staycation and enjoy the places near your home instead.

You can still make plenty of fun memories without having to board a plane, as long as you get creative in your planning and spend the time with people you love. And while this may not be quite as exciting as jet-setting off to an exotic destination, you'll appreciate not going into debt when you have more money in your budget the rest of the year.

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