Compare vacation loan options

Sometimes your finances can be the thing holding you back from that dream vacation where you’re relaxing on an exotic beach or hiking a mountain. Fortunately, there are numerous lenders across Canada that offer specific vacation loans or other types of financing you can use to pay for travel. But be careful — you might be better off saving for your next big adventure rather than taking out a loan and paying extra in the form of fees and interest. Keep reading to find out about vacation financing in Canada.

Can I finance a vacation?

Yes, vacation financing in Canada generally ends up being a combination of your savings, a vacation loan and a credit card to fund your travel. If you don’t have the savings built up and don’t want to put it all on a credit card, then a personal loan will likely be a good option to fund your next trip. Depending on the type of trip you book, you may only have to pay a deposit at first and then pay the rest later.

The type of vacation loans you’ll qualify for will depend on your credit score, your income and the amount you need to borrow.

6 types of vacation financing

From vacation loans and credit cards to travel agencies and savings accounts, here are a few different financing options you can consider:

1. Unsecured personal loans

Personal loans can be used for almost any purpose, including travel financing, and they’re many people’s go-to choice when it comes to vacation loans. If you have good or excellent credit, you can apply for a personal loan through an online lender, bank or credit union. Since these vacation loans are unsecured, you won’t need to put up any collateral when you borrow.

You can usually borrow between $1,000 and $50,000 with interest rates ranging from 6% to 47%. You could have anywhere from 3 months to 5 years to pay back your loan. However, the loan terms you qualify for will vary depending on your credit score, income and other factors.

Compare personal loans for vacations now

2. Personal lines of credit

Lines of credit usually provide you with a lower interest rate than most credit cards, but rather than receive a lump sum in your bank account to finance your vacation, you can withdraw money at any time up to your limit. This means you only pay interest on what you actually borrow.

This type of vacation loan gives you the flexibility to spend what you need when you’re on trip without worrying about running out of funds. Once you pay your borrowed amount back, you can borrow the money again and again until you choose to close your line of credit. Interest rates on personal lines of credit tend to range between 2.5% and 6%, but can go as high as 47%, with a minimum credit limit of $5,000.

3. Home equity loans

A home equity loan is actually a specific type of secured loan where your home equity is used as collateral on the loan. This type of vacation loan is typically easier to qualify for since providing collateral makes you a less risky borrower. Compared to unsecured loans, these loans come with more competitive rates loans – typically ranging from 2.3%+prime up to 24%.

You can usually borrow from 65% to 80% of the value of your home, minus the amount outstanding on your mortgage. Keep in mind that you run the risk of losing your house if you can’t pay your loan back.

A specific type of home equity loan you can use for vacation financing in Canada is a Home Equity Line of Credit, also known as HELOC. Like any line of credit, you only pay interest on the amount you withdraw form your HELOC.

4. Credit cards

Credit cards can be useful for booking flights, hotel rooms or paying for expensive dinners or souvenirs while you’re travelling. If you plan ahead, you can invest in a travel rewards credit card that might give you access to airport lounges, complimentary insurance coverage and travel rewards points.

However, credit cards do come with a few drawbacks. You’ll face higher interest rates – typically around 20% – and many credit cards come with an annual fee. If you plan on visiting a foreign country, you may also have to pay foreign transaction fee, which is typically 2.5%. Credit cards are better suited to those who can pay off the balance in full each month and reap the rewards from the complimentary extras.

5. Travel agencies

Different Canadian travel agencies offer financing programs that allow you to pay for your vacation through a monthly payment plan. You’re usually given 12 or 24 months to pay for your trip. And you don’t have to wait until you’ve payed for the trip to go – you can typically travel within days of booking the trip.

Probably the biggest perk of this vacation financing option is the convenience and potential savings that come with booking your entire trip on one online platform. Interest rates for these payment plans can range anywhere from 0% to as high as 36% so it’s still worth shopping around to make sure this is the most affordable option for you.

Here is a list of popular Canadian travel agencies offering vacation payment plans:

• Redtag.ca
• Escapes.ca
• Tripcentral.ca
• Expedia

6. Your personal savings

Instead of opting for a vacation loan, the safest way to pay for your vacation is with your personal savings. Going into debt for a vacation may be worth it for a honeymoon or a once-in-a-lifetime getaway, but it’s generally not advised. To avoid having to borrow a lot of money when you want to go on a vacation, start a high-interest savings account to put money towards your next adventure from each of your paycheques. You may be surprised by how quickly your savings build up over one year.

Compare vacation loans from online lenders

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Name	Product	Interest Rate	Loan Amount	Loan Term	Requirements
Loans Canada Personal Loan Loans Canada Personal Loan		5.4% - 46.96%	$300 - $50,000	4 - 60 months	Requirements: min. credit score 300	Go to site View details	Compare	loading Fetching your data...
Spring Financial Personal Loan Spring Financial Personal Loan		9.99% - 46.96%	$500 - $35,000	6 - 60 months	Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500	Go to site View details	Compare	loading Fetching your data...
SkyCap Financial Personal Loan SkyCap Financial Personal Loan		19.99% - 39.99%	$500 - $15,000	9 - 60 months	Requirements: min. income $3,333/month, full time employment/pension, min. credit score 600, no bankruptcy	Go to site View details	Compare	loading Fetching your data...
LoanConnect Personal Loan LoanConnect Personal Loan		6.99% - 46.96%	$100 - $50,000	3 - 120 months	Requirements: min. credit score 300	Go to site View details	Compare	loading Fetching your data...
GOOD CREDIT Symple Personal Loan Symple Personal Loan	GOOD CREDIT	6.99% - 32.00%	$5,000 - $50,000	24 - 84 months	Requirements: min. credit score 650, min. income $50,000/year, no history of bankruptcies	Go to site View details	Compare	loading Fetching your data...
GOOD CREDIT goPeer Personal Loan goPeer Personal Loan	GOOD CREDIT	8.00% - 34.00%	$1,000 - $25,000	36 - 60 months	Requirements: recommended income $40,000/year, no payday loan debt, min. credit score 650, min. 5-year credit history. (Avg. approved rate of 15.80%)	Go to site View details	Compare	loading Fetching your data...
Mogo Personal Loan Mogo Personal Loan		9.90% - 46.96%	$200 - $35,000	6 - 60 months	Requirements: min. income $13,000/year, min. credit score 500	Go to site View details	Compare	loading Fetching your data...
Fairstone Secured Personal Loan Fairstone Secured Personal Loan		19.99% - 24.49%	$5,000 - $50,000	36 - 120 months	Requirements: must be a homeowner, min. credit score 560	Go to site View details	Compare	loading Fetching your data...

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6 tips for making your next vacation more affordable

1. Look for online promotions. Throughout the year, travel agents and online travel sites will have vacation sales. Sign up for email alerts and get notified when a trip you’re interested in goes on sale.
2. Put money into a high-interest savings account. Savings accounts are a quick way to save up with minimal effort. If you deposit the equivalent of $5 a day, you’ll have $1,825 after a year — plus interest. It might not fully pay for a yearly vacation, but it can help cover costs and act as an emergency fund if you need to make an unexpected trip. You can also use an automated savings plan to whisk away your savings without you even thinking about it.
3. Have a budget. While you’re busy putting away money into your savings, take the time to create a travel budget. Money for accommodation, food, tours and entrance fees should all be added on top of transportation costs like flights and car rentals. This step can help you know exactly how much you can afford with your savings and how much you may have to cover with a vacation loan.
4. Use a credit card with travel rewards. There are a number of credit cards with travel rewards for you to choose from. Use it to pay for your everyday expenses, pay your bill early to avoid interest charges and build up travel rewards points that you can use toward your trip.
5. Apply for a study abroad grant. Enrolling in a program overseas is a great way to travel and really get to understand a foreign country. This is a great option for students looking to travel, but unable to build savings or qualify for a loan or credit card.
6. Crowdfund your trip. Set up a campaign on a crowdfunding site during the holiday season, around your birthday or any special event and ask for donations instead of gifts.

Vacation loans for bad credit

If your credit history is less than stellar, you can look into vacation loans for bad credit. Of course any time you get a bad credit loan, the interest rates will be much higher since there’s more risk for the lender. Some options you can consider if you’re a bad credit borrower are installment loans and bad credit personal loans.

Another vacation loan option you can consider with bad credit is any type of secured financing including vehicle title loans and home equity loans. Interest rates on secured loans are generally lower than other types of bad credit financing, because the vehicle or house you use as collateral makes the loan less risky for lenders.

Watch out for these vacation loan mistakes

Using any form of financing comes with risks. Be aware of the following for vacation financing:

• Unaffordable monthly payments. If you think you won’t be able to pay back your loan, don’t take one out in the first place. Missed payments can have a negative affect on your credit score, and that can make it much harder to borrow in the future. Plus, the loan cost will be excruciatingly high once you factor in late repayment fees.
• Skimming your loan contract. Never skim over the terms and conditions of a loan contract. Your vacation loan contract will tell you exactly what you’ll be spending and what happens if you default — important information when you’re borrowing a large chunk of money.
• Overspending on your credit card. Credit card debt comes with a high interest rate and rigid fees. If you borrow too much, you could damage your credit utilization ratio and pay a ton of money in fees and interest.

Should you finance a trip?

Most financial advisors are against using a vacation loan of any type — including credit cards — to finance your travel plans. Vacations are a luxury, and going into debt to pay for one may not be a wise decision. You’ll be stuck with monthly payments, and at the end of the day, you’ll pay hundreds or even thousands of dollars more in interest than you would have if you’d saved for your vacation instead.

However, if you must get a vacation loan, opting for a personal loan is likely wiser than using a credit card. Personal loans offer fixed payments, relatively low interest rates and set terms. When you borrow, you’ll know exactly how much that vacation will cost you for years to come.

Tips to help you save for a vacation

While it may be easier to just get a vacation loan, it’s much better for your finances if you can save up for your travel plans and pay for it out of pocket. By using your savings, you’ll avoid paying the hundreds or even thousands of dollars in interest you would otherwise have to pay on a financing plan.

One of the best ways to save for a vacation is set your money aside in a high-interest savings account. These days you can often find savings accounts offering interest rates from 1.2% to 2.5% for either a promotional period or as an ongoing rate. You can check out our guide to the best vacation savings accounts here to compare your options and get started.

Here are a few tips to help you save faster so you can avoid going into debt for your next vacation.

• Automate it. Find a roundup app or keep-the-change program to save even more to make consistent progress toward your goal with your extra money.
• Save in a joint account. Consider opening joint savings account with your partner so you can both contribute to reach your travel goals sooner.
• Save unexpected cash. If you receive a bonus, tax return, pay off a debt or cancel a bill, consider putting that money into your savings account.
• Cut back. During the months leading up to your vacation, you can cut back on dining out or other extra expenses to free up extra cash.
• The $5 bill method. Consider paying for everyday expenses in cash, and stash away your $5 bills each time you get one. You might be surprised by how much you could save this way.

Bottom line

Finding the right vacation loan could be an important step in planning your next big trip. There are multiple ways to make vacation financing more affordable, while keeping your travel plans on budget. Keep in mind that borrowing too much could make it more difficult to afford trips in the future. Always compare different lenders and have a healthy amount of money saved to finance the majority of your vacation.

Frequently asked questions about vacation loans

• How quickly can I apply for a travel loan?

  If you have all the required information close by, you can usually complete a loan application in less than ten minutes.

• Do I have to pay any penalty if a repay my loan ahead of time?

  This depends on the lender you choose. Always check this before you apply and sign the loan contract. If you already have a loan and don’t know if you can make early repayments without facing any fees, contact your lender or read your loan contract thoroughly.