5 No-Brainer Reasons You Should Never Get a Vacation Loan

The cost of travel is one of the most common reasons people don't do it as much as they'd like. Over one-quarter (28%) of travelers said that a lack of money was the reason they couldn't travel as much as they wanted last year, according to a report by Going.

Enter the vacation loan. As the name suggests, it's a loan you use to take a vacation. People typically get personal loans for this, because they can be used for almost anything.

I understand the desire to avoid missing out on travel opportunities. But a vacation loan isn't the solution, for several reasons.

1. Financial stress could weigh on your vacation

Some people think they'll be able to put financial worries out of sight, out of mind while on vacation. Maybe you can, but it's more likely that those issues will continue being a source of stress.

You could find yourself constantly wondering: Can I afford this activity, a meal at this restaurant, that souvenir? What am I going to do when I get home? It's hard to fully enjoy your vacation when you know you can't afford it.

2. There are probably alternatives that don't involve going into debt

If you're looking at it like you either get a vacation loan or don't travel, it's easy to make the case for a loan. But you almost certainly have more options than that.

What about taking a cheaper vacation this time around? You could pick a place closer to home, maybe even take a road trip instead of flying. Or, you could see where the best deals are with an "everywhere" flight search, a helpful trick that 1 in 2 travelers use to find cheap destinations.

Another option is to postpone your vacation and spend some time saving so you can pay for it in full. Set up a high-yield savings account as your travel fund and deposit money there every month. If you save $300 per month, then after five months, you'll have $1,500.

3. The loan will last a lot longer than the vacation

Before you get a loan, it's always worth considering the future implications. You'll be committing to a monthly payment for as long as your loan lasts. The shortest personal loans are typically six months, and depending on how much you borrow, you may need to go with a 12-month loan.

Those loan payments could slow down other money goals, such as building your savings or contributing to your retirement accounts. And a vacation loan isn't like an auto loan or a mortgage, where you're making payments on something with long-term benefits. Vacations generally last from several days to a week or two. You may not be nearly as happy that you have a vacation loan four months later when that trip is no longer at the forefront of your mind.

4. It's a want, not a need

This is a cliche, but it's true. A vacation every now and then is important, but it's not a necessity. It's a luxury.

When you start borrowing money for things you want, it can quickly become a habit, and habits are hard to break. You're probably not going to want just one vacation. You'll enjoy it, pay off your vacation loan over the next six to 12 months, and be in the same position as before. You'll want to travel again, but you won't have the money for it, because it was tied up making loan payments.

5. Interest rates are high right now

Vacation loans are much more expensive than they used to be. The average rate on a 24-month loan is 12.49%, according to the Federal Reserve. That's the highest it has been since 2007.

Now, it wouldn't be a great idea to get a vacation loan even if rates were low. The argument that a vacation is a want, and not a need would still apply. But the current rates mean you'll pay more overall, and they'll make it especially costly if you borrow a large loan.

A better way to pay for a vacation

Even though it can be easy to borrow money, it's not a decision to take lightly. With vacation loans, the cons far outweigh the pros. Here's what you can do instead:

• Make vacations one of your savings goals. Set up a travel savings fund and transfer money to it every month.
• Estimate how much a vacation will cost before you go so you can ensure you have enough. Make sure to factor in all your expected expenses, including things like meals and activities.
• Consider opening a travel card. There are lots of travel credit cards that earn rewards you can redeem to cover your travel costs.

It takes a little longer than applying for a vacation loan. But travel is much more enjoyable when you can do it without going into debt.