Vacation Loans: How They Work and When to Use One

There’s nothing as exciting as packing up your suitcases and heading off for a vacation with friends, loved ones, or a good book. But, let’s face it: vacations can be expensive. 

Rather than worrying about expenses, you may consider getting a vacation loan to schedule your flight, book your reservations, and make the most of your trip without emptying your bank account or racking up high-interest credit card debt.

What is a vocation loan?

A vacation loan is a typically unsecured personal loan used to finance a trip, sometimes called a holiday loan. Personal loans are typically unsecured, meaning they’re not backed by collateral like your home or car.

Taking out a loan for a vacation can be a simple, manageable way to afford your trip, especially if you’re tight on funds. Rather than paying for your vacation all at once, you can use the loan to book the trip and then repay your lender in fixed installments. 

That said, vacation loans may be more expensive than other options because they’re not backed by any collateral. Compare your options before committing to a loan.

How do personal loans for vacation work?

Unlike some types of loans–like a student loan or mortgage–vacation loans are flexible. Each lender has different guidelines, but you can usually use a vacation loan for any kind of travel expense. You could purchase airline tickets, book a hotel, rent a house, or plan a cruise up front, then repay your lender in monthly installments after your trip. 

Through a lending marketplace like Upstart, participating lenders may offer loan amounts from $1,000 to $75,000⁵, repayment terms of 3 or 5 years, and funds deposited directly to your bank account. Rates and eligibility depend on your credit profile and state.

As a quick example: borrowing $3,000 at 12% APR over 36 months results in monthly payments of approximately $100.

Is it a good idea to take out a loan for vacation?

A vacation loan can be worth it if you need funds now, can qualify for a lower APR than your credit card, and can comfortably manage the monthly payment. It’s less ideal if you’re already carrying high-interest debt or can save within 3–6 months.

When a vacation loan makes sense

Consider a vacation loan if you need funds now for a time-sensitive or once-in-a-lifetime trip, you may qualify for a lower APR than your current credit card rate, or you prefer predictable fixed payments over revolving credit card debt.

You may want to skip the loan if you’re already carrying high-interest debt, you can save the amount within 3–6 months, or you qualify for a 0% intro APR credit card.

Vocation loans come with several benefits, like spreading out the cost of a trip over several months or years. To help you make the best decision for your needs, let’s take a look at some of the pros and cons of vacation loans.

Pros and cons of vacation loans

Pros	Cons
Fast funding: funds may be initiated in as little as 1 business day	Increases your debt-to-income ratio
Typically no collateral required	May include origination, processing, or prepayment fees
Fixed monthly payments, predictable repayment schedule	Repayment can last years after your trip ends
Clear spending limit helps with budgeting	Hard credit inquiry and new account may lower your credit score
May cost less than high-interest revolving credit card debt	Rate depends on your financial profile; lower scores often mean higher APRs

Pros of vacation loans

• Vacation loans have fast, flexible funding. Your funding timeline will vary based on which loan provider you choose, but you may be able to get your vacation loan in as little as 1 business day. That way, you can plan even the most spur-of-the-moment trip without worrying about how you’ll pay for it. 

• There’s usually no collateral required. Unlike a secured loan, you don’t have to put down collateral on an unsecured vacation loan. Your interest rates may be slightly higher, but you won’t have to worry about losing your property if your circumstances change and you’re unable to repay your loan on time. 

• A vocation loan may be less expensive than other vacation financing options. Taking out a vacation loan may cost you less than some other trip financing options, like high-interest credit cards or a personal line of credit.That said, it’s important to remember that your rate will depend on details like your credit score and repayment history, so make sure you compare your options before choosing a funding source.

• You’ll have a predictable repayment plan. Like many personal loans, vacation loans come with fixed repayment terms and set monthly installments. That means you can build your monthly vacation payments into your budget—and have a definite end date in sight. 

• You’ll have a clear vacation budget. We know how easy it is to lose sight of your budget while you’re traveling, especially when you’re on vacation with friends or family. Luckily, a vocation loan can help you stick to your budget, because you’ll know exactly how much money you have to spend. 

Cons of vacation loans

• A vocation loan will increase your debt-to-income ratio. When you borrow money to finance a vacation, you take on more debt and increase your debt-to-income ratio, or the percentage of your monthly income that you use to pay off debt.Typically, potential lenders look for a debt-to-income ratio of 43% or lower. Anything higher indicates you could be at a higher risk of defaulting on your loan. So, accepting a vacation loan might prevent you from getting approved for another line of credit, like a home mortgage, in the near future.

• Your vacation loan may come with costly fees. We mentioned your interest rate will be influenced by factors like your credit score and repayment history. As a result, you could end up with higher rates on your vacation loan if your credit score is less than stellar.However, your vocation loan may also come with other expensive fees, like origination fees, processing fees, late fees, or prepayment penalties, that can add up over time.

• You could have a long-term repayment plan. Depending on your financial circumstances, the amount of money you plan to borrow, and the lender you choose, you could end up making payments on your vacation loan for 5 years or more–long after you return from your trip. 

• Vacation loans can reduce your credit score. Finally, taking out a vacation loan can impact your credit score in several ways. First, you’ll likely undergo a hard credit inquiry after choosing a loan. This will appear on your credit report and lower your score by a few points.Second, taking on a new loan will shorten your average credit history length. Credit bureaus take your credit history length into consideration when measuring your credit score.Pro tip: You can typically improve your score by making timely payments on your vocation loan and managing your credit utilization rate. Your credit utilization rate is the amount of available credit you’re using. One easy way to do so is by using cash or debit cards to make purchases while you repay your loan instead of credit cards.

Vacation loan vs. other financing options

Choosing how to finance your trip depends on your credit profile, timeline, and how quickly you can repay.

Option	Typical APR	Better for	Key drawback
Personal (vacation) loan	7%–36%+, varies by credit profile	Larger trips, predictable payoff timeline	Interest cost adds to total trip spend
0% intro APR credit card	0% for 6–21 months, then variable	Borrowers who can repay before intro period ends	Interest begins accruing after intro period
Travel rewards credit card	20%–30%+ variable	Borrowers who pay monthly and want rewards	Expensive if you carry a balance
Buy Now, Pay Later (BNPL)	0% short-term; up to 36%+ if extended	Booking via partner platforms (Affirm, Klarna)	Limited to specific merchants; variable rates after intro period
Savings	0%	Anyone with time to plan ahead	Requires advance planning; may delay your trip

Note: Examples are for illustration only. Actual rate, term, and savings will vary based on your credit profile and lender.

How can you get a personal loan for a vacation?

Ready to apply for a vacation loan? The process varies by lender, but these steps apply broadly:

Step 1: Shop around. 

Compare rates from multiple lenders before committing. Even a small rate difference can save meaningfully over a 3–5 year repayment term.

Step 2: Find a lender that fits your needs. 

Consider loan amounts, repayment terms, fees, and whether the lender works with your credit profile.

Step 3: Prequalify when possible.

 Prequalifying lets you check personalized rates without a hard credit inquiry. While rates may change slightly after final approval, prequalification gives you a realistic monthly cost estimate. A personal loan calculator can help you model payment scenarios.

Step 4: Complete your application. 

Fill out all documentation completely to reduce delays. Have income verification and identification documents ready.

Step 5: Review your terms before accepting. 

Check the APR, origination fees, repayment term, and any prepayment penalties. If your rate is significantly higher than current market averages, consider other options.

Can you take out a loan for a trip with bad credit?

You may be able to qualify for a vacation loan even with a lower credit score. While many lenders favor good-to-excellent credit, options exist for borrowers with fair or limited credit history.

Some lenders specialize in loans for borrowers with lower scores. Lending platforms like Upstart consider factors beyond credit score, including education² and work history, when evaluating applications through their marketplace.

How to finance a vacation: Alternative travel financing options

Not sure if a loan for a vacation is right for you? We’ve got you covered. You may consider these alternative vacation financing options instead: 

Savings accounts

There’s no denying that saving money for a vacation is the cheapest option. You may have to cut back on spending for a while, but you’ll save time, energy, and money by avoiding a loan. 

If you’re stretched too thin financially to save? A debt consolidation loan may be able to help by combining multiple debts into a single monthly payment with a potentially lower interest rate. 

Credit cards

Depending on your credit score, you may be able to qualify for a low-interest travel credit card. Offers vary from card to card, but some issuers advertise perks like a sign-on bonus, points for qualifying purchases, and other benefits. 

Alternatively, you may be eligible for a 0% introductory annual percentage rate (APR) credit card. These cards allow you to repay your balance without charging interest for a certain period of time, usually ranging from 6 to 21 months. You often need a good credit score to qualify. But, if your credit history is solid, you can skip the loan application process and pay off your trip without any interest fees. 

Be careful, though. If you don’t pay off your trip within the zero-interest period, you’ll have to pay interest on the remaining balance. 

Personal lines of credit

A personal line of credit (PLOC) is similar to a personal loan, but it may offer slightly more flexibility. When you get approved for a personal line of credit, you’ll have access to a certain amount of money you can borrow against for a designated period of time. 

Unlike a travel financing loan, you can borrow as much–or as little–from your PLOC as you want. For instance, if you get approved for a $10,000 PLOC and borrow $6,000 against it, you’ll only repay the money you withdrew (plus interest).

However, PLOCs come with a major catch: in many cases, the interest rates on a personal line of credit are variable instead of fixed. That means you could start out paying less in interest and have a lower monthly payment than you originally thought. But if rates increase, you could end up with higher interest and a more expensive monthly payment. 

Point-of-sale trip financing

Finally, you may consider point-of-sale (POS) financing to spread out your travel expenses. These lenders allow you to pay for a purchase in fixed installments instead of a lump sum. 

Point-of-sale financing can be useful if you have a lower credit score. However, point-of-sale financing is usually limited to a certain amount and may come with hefty late fees if you miss a payment. In addition, some POS financing platforms restrict your spending limit for the first few months. 

Buy Now, Pay Later (BNPL)

BNPL platforms like Affirm and Klarna partner with airlines, hotel booking sites, and travel agencies to offer point-of-sale installment plans. These can be interest-free for short repayment terms. However, BNPL is typically limited to participating merchants, may carry high rates if you extend the repayment period, and often has lower spending limits than a personal loan.

Should you get a personal loan to travel?

The right call depends on your financial situation. A vacation loan makes sense when you need funds now, can qualify for a competitive rate, and the monthly payment fits your budget. If you can save in advance or qualify for a 0% APR credit card, those options will cost you less.

If you decide a vacation loan is right for you, you can check your rate through the Upstart marketplace to see what offers may be available; checking your rate won’t affect your credit score¹.

Frequently asked questions

What credit score do you need for a vacation loan?

There’s no universal minimum. Most traditional lenders prefer scores of 620 or higher, though some lenders work with lower scores. Some lenders consider additional factors, including education2 and work history, beyond credit score alone.

Can you get a vacation loan with bad credit?

Yes, it’s possible, but approval depends on your full financial profile. Some lenders specialize in fair-credit or no-credit applicants. Eligibility and rates will vary; expect higher APRs and potentially lower loan amounts if your credit score is below 620.

How long does it take to get vacation loan funds?

Timelines vary by lender. Through many online lending platforms, funds may be initiated within one business day of approval, depending on verification requirements and your bank’s processing time.

Are vacation loans worth it?

A vacation loan can be worth it if you need funds now, can qualify for a rate lower than your credit card, and can manage the monthly payments. If you have time to save or qualify for a 0% intro APR card, those options typically cost less.

What can a vacation loan be used for?

Most lenders allow vacation loan funds for any travel expense: flights, hotels, cruises, car rentals, activities, or travel insurance.

Should I go into debt for a vacation?

It depends on your financial situation. If the trip is meaningful, time-sensitive, and the monthly payment fits your budget, it can be a reasonable choice. If you’re already carrying high-interest debt, prioritize paying that down first.