Travel Now, Pay Later: How Personal Loans Can Help You Explore the World

Alevin K Chan

Alevin K Chan

Last updated 03 April, 2025

Dreaming of a vacation but short on savings? A personal loan can help you finance your travels without waiting years to save up. Here’s how you can do so responsibly.

It’s not your imagination. With increases in air fares, hotel prices and even tourist taxes in some areas, travel has become more expensive. This unfortunate development stems from revenge travel, with travellers no longer willing to put off their dream holidays after being frustrated by COVID-19 lockdowns.

So if you’ve been finding it difficult to save up for your dream trip, it’s worth considering another approach – funding your travels with a personal loan. In this article, you’ll learn how a travel loan makes sense, how to minimize interest costs, and alternative ways to fund your trip.

Table of contents:

Travel loans – how do they work?

A travel loan is simply a personal loan that you use to pay for the cost of your trip. This may include air fare, hotel and accommodation costs, attraction tickets, transit passes, and of course, money for food and shopping. Oh, and be sure not to forget travel insurance – we’ll discuss why later.

Once your loan has been granted, the cash is yours to do with as you please. This means you can use part of your travel loan for other expenses if necessary. 

You will repay your loan via monthly installments. Be sure to pay each installment before they become due, lest you incur late payment charges. Each repayment includes the interest charged on your loan, so once you complete paying all your installments, you would have paid up your travel loan in full.

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Using a travel loan to fund your travels - Pros and cons

Pros of using a travel loan

You can pay for your overseas trip immediately 

Let’s face it: The biggest advantage of using a travel loan is instant gratification. You don’t have to make yourself wait till you save up enough money before going on your trip. 

You can enjoy your travels without buyer’s remorse

You know that weird feeling that sometimes creeps after you spend money? That’s a well-known phenomenon known as buyer’s remorse. If not managed, it can stop you from fully enjoying your holiday – and what a waste that would be. 

Buyer’s remorse might stem from anxieties over seeing your bank account balance fall back down after working so hard to save up. This can be conflated with feelings that you’re not making any meaningful progress in your financial goals.

However, because a personal loan pays for your trip upfront, and only requires an installment payment each month, using a travel loan lets you preserve your savings, allowing you to sidestep buyer’s remorse. 

You can pay back your loan at your own pace

Personal loans are offered with varying loan tenures, typically from 1 to 5 years (and even up to 7 years with some providers). You can choose how long you want to take to repay your travel loan.

Shorter loan tenures require larger monthly payments, while longer loan tenures will lower your monthly instalment amount. It’s a good idea to choose a loan tenure that lets you pay off your travel loan as quickly as possible, without taking up too much of your monthly budget. 

You can save your credit card limit for other needs 

You might be thinking of charging the cost of your trip to your credit card, and then converting your balance to an installment payment plan (IPP) at 0% interest. 

While this can be an alternative way to pay for your holiday, the amount you can spend is capped by your credit limit. You’ll need to apply for a credit limit increase if the total cost of your holiday exceeds your current limit. 

Furthermore, when you use an IPP on your credit card, the entire amount of your trip is paid up from your available credit limit. This is only restored as you make each installment payment, which means you won’t be able to use your credit card as much as you usually do, at least for a couple of months. 

And perhaps most importantly of all, transactions converted to IPP do not qualify for credit regards such as cashback, reward points, or air miles. So charging several thousands to your credit card’s IPP means foregoing a significant chunk of credit card rewards. 

You can avoid all that by applying for a travel loan instead. This way, you’ll have the means to pay for your holiday, while using your credit card for shopping or dining overseas to earn those sweet, sweet rewards. 

Cons of using a travel loan

You’re taking on unsecured debt

A travel loan is a form of unsecured debt, which carries certain important implications.

For one, you’ll be taking on unsecured debt, which – depending on your usage patterns of other forms of unsecured debt – may affect your credit score. This need not necessarily be a problem, unless you’re also thinking of applying for other crest facilities at the same time. In this scenario, it’s better to prioritize the loans that matter (such as a mortgage). 

For another, your travel loan amount will count towards your unsecured borrowing limits, which is capped at 12x your monthly income. Just be aware that this could affect how much you can borrow for other needs.

Still, taking on unsecured debt in a travel loan isn’t a problem by itself, as long as you’re borrowing within your limits, and you’re able to make your monthly repayments. 

Your cashflow will be reduced for the time being

You’ll have to make space in your budget for your travel loan repayments. This means that you will have to cut down on discretionary spending for the time being – a task that requires discipline to accomplish.

Ideally, paying your travel loan installments should not come at the cost of other financial activities, such as investing or building up your emergency fund. If you find that you have to temporarily stop your goals just to make room for your travel loan, you might want to think about increasing your income instead. 

You may have to hold off on career moves or other significant changes 

It’s important to realise that your travel loan repayments don’t stop until they end. You will need to meet each monthly payment, which means you’ll need to ensure steady cashflow for the duration of your travel loan.

What this means is that you’ll need to play it safe, which might mean holding off on career changes (what if your new job turns out to be a grindhouse?), or moving out and getting your own place. 

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Tips on getting the most out of your travel loan 

Tip 1: Choose the right lender 

Travel loans are easily available in Singapore, but it’s important to know that they aren’t all the same. You’ll want to choose a loan that gives you the best interest rate and a suitable loan tenure – you’ll find that banks offer the best travel loans in such terms. 

In comparison, while licensed money lenders advertise easy loan approval, do be aware that they charge significantly higher interest rates, and generally do not offer long loan tenures. 

Tip 2: Borrow only what you need

Taking a travel loan still counts as discretionary spending, so you’ll want to borrow just enough to cover your trip, and perhaps a little more as a buffer. 

As such, check how much you’ll need to put on your travel loan, after you’ve reduced your travel budget as much as possible. No, we don’t mean slumming it at some dinghy backpacker’s motel. Instead, now is the time to cash in any perks you may have. 

For example, use your air miles to offset the cost of your plane ticket, or to pay for flight upgrades. Or use your hotel loyalty points for free nights. Remember, the less cash you have to pay, the less you have to borrow in your travel loan. 

And the smaller your travel loan, the easier it’ll be to pay back. 

Tip 3: Make sure to get a travel insurance plan

While it’s rare, travel mishaps do happen. Your flights may be canceled, your luggage or personal stuff could go missing, or you may be forced to give up your entire holiday, leaving booked hotels and pre-paid tickets unrefunded. 

Should that happen, it’ll mean you’ve basically wasted your travel loan, but you’ll still need to make those monthly repayments!

You can avoid this with travel insurance. If your trip is covered by an appropriate travel policy, you can receive financial compensation for unused flights, hotel bookings and other prepaid items. This way, you can receive back (at least a portion) of your travel expenses, which you can then use to pay off your travel loan. 

Used responsibly, travel loans are a great way to see the world

So if you’ve been wondering how you can travel the world without spending months or years saving up beforehand, well you’ve got your answer. 

Travel loans offer a convenient and affordable solution for cash-strapped travellers to sate their wanderlust. But in return, you’ll need to go about it the right way.

Choose the right lender, get the lowest interest rate you can, and borrow only what you need. Oh, also remember to get a travel insurance plan for backup. And most importantly, be clear about the financial obligation you will be taking on, and have a plan for ensuring you can meet it no matter what. 

Start your hunt for the best travel loan at our personal loans comparison page.

Alevin loves helping people make good money decisions. He briefly flirted with being a Financial Advisor, but quickly realised writing about personal finance is the better way to go.

FINANCIAL TIP:

Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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