How to Pay for Your Summer Vacation

Whether summer is weeks or months away, you can never be too prepared. What’s in store for your summer plans? Perhaps, you’re envisioning an action-packed family adventure. Or maybe it’s a tranquil retreat where you can relax and unwind. Before you get lost daydreaming about the perfect vacation, you need to consider how you’ll pay for this excursion.

Everyone wants to go on vacation, but sometimes money is tight, or prices are too high. Not to worry - below are five ways to make your dream vacation a reality without breaking the bank.

Create a Savings Plan

If your vacation date is still a way out, then you’re in good shape. Use the time leading up to your trip to sock away as much money as possible. Paying with cash is much cheaper than relying on credit cards or other financing methods – so saving should be your top priority.

Start by determining how much your vacation will cost. Then, break that amount up into weekly goals. Even if you can’t save the full cost, every bit helps. Work to trim expenses to free up extra funds. For example, if you’re considering dining out tonight, forego it. Save that money so you can dine out one evening on your trip instead. If discipline is your issue, consider a Vacation Club account. It’s a savings account specifically designed to help you save for your next big adventure.

Share the Cost

For most people, vacation is more fun when you’re with family and friends. So, why not share the costs as well as the fun? Instead of everyone paying for their own individual rooms in a hotel, consider a vacation rental where everyone can share costs.

This goes for transportation, too. Carpool to your destination so everyone can contribute gas money. You might miss out on some privacy, but you’ll make up for it in savings and memories.

Pay By Credit Card – Sparingly

The convenience of credit cards makes them one of the most popular forms of payment today. It’s very easy to jet off today and finance your whole trip with your card, or cards. However, the higher interest rates of credit cards also make them one of the most expensive options. And without set repayment terms, your vacation could easily become long-term debt.

Instead, try to limit credit card usage by paying for your trip partly with cash. Or, if you do need help with financing your vacation, opt for a personal loan.

Consider a Personal Loan 

Personal loans, commonly called signature loans, are one of the most overlooked financing options. These unsecured loans are typically shorter-term, ranging between 12 to 36 months, and are much more affordable than most credit cards. In fact, personal loans offer three distinct benefits that make them ideal when financing a vacation:

• Pay Less Interest: Personal loans usually have lower interest rates than traditional credit cards – freeing up more money for summer fun.
• Fixed Interest Rates: Most credit cards today have variable rates, meaning the interest rate can increase because of the economy. Personal loans generally have fixed rates – preventing you from paying higher rates down the road.
• Set Payments: With a credit card, you’re only required to make a minimum monthly payment. That can cause you to drag out your vacation expenses over a long period and pay significantly more interest. A personal loan has set monthly payments to help you eliminate the debt quickly.

Plus, most personal loans can be funded within a couple of days – sometimes the same day!

Tap Into Your Home’s Equity

If you’re a homeowner, you could use your home’s equity to finance your summer vacation. Typically, this strategy works best if you already have a home equity line of credit (HELOC) established. Otherwise, you could be required to pay closing costs, and approvals can take some time.

Using your existing HELOC is wise because home equity loans are secured loans, meaning they use your home as collateral. That makes the interest rate significantly lower than most other financing options.

Options to Avoid

While there are many ways to pay for your summer vacation, there are options you want to avoid.

• Emergency Fund: While a mental break from the daily grind can feel like an emergency, it’s best to leave these funds alone. It can be tempting to spend this money, but you want to keep it intact in case you do experience a financial emergency, such as a sudden job loss or unexpected expenses.
• Retirement Accounts: Most retirement accounts are tax-advantaged, meaning they provide specific tax benefits and have requirements. If you tap into a retirement account, you could be required to pay taxes on those funds, along with a penalty. An even greater factor is lost time. The key to retirement savings is letting money grow long-term and compound. An early withdrawal could rob your future self of valuable retirement revenue.

We’re Here to Help!

Everyone deserves the opportunity to get away and unwind. Whether you want to travel to exotic lands, cross-country, or spend your vacation close to home, we’re here to help make it a reality. If you want to learn more about using a personal loan to finance your summer excursion, please stop by and see us. You can visit any of our convenient branch locations or call 800.336.6309 to speak with a team member today.

Each individual’s financial situation is unique, and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed.