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 plenty of lenders across Canada that offer travel loans or other types of financing you can use to pay for a vacation. But be careful — you might be better off saving for your next big adventure rather than taking out a travel 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 travel loan and a credit card to fund your trip. 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.
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 in Canada
From travel loans and credit cards to travel agencies and savings accounts, here are a few different vacation 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 this type of travel loan is unsecured, you won’t need to put up any collateral when you borrow.
You can usually borrow between $500 and $50,000 with interest rates ranging from 6.99% to 46.96%. You could have anywhere from 3 – 60 months to pay back your loan. However, the travel loan terms you qualify for will vary depending on your credit score, income and other factors.
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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 travel loan gives you the flexibility to spend what you need when you’re on a 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.
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 travel 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 – starting near the bank prime rate, which is 5.45%.
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 from your HELOC.
4. Credit cards
Credit cards for travel can be useful for booking flights, hotel rooms or paying for 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 a 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
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 paid for the trip to go – you can typically travel within days of booking your vacation.
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 travel 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.
Travel loan example: The Singh family go on a trip
The Singh family decide they want to escape the cold Canadian winter and take a vacation. With six family members in total, their all-inclusive vacation package to Sayulita, Mexico will total $1,500.00 each – for a total of $9,000.00! With savings of $7,000.00, the family will need to borrow $2,000.00. They know getting a vacation loan isn’t ideal, but the family are expecting to sell their extra car soon, which can pay back the loan. With a good credit rating of 700, the family are approved for a personal loan from an online provider.
Cost of vacation
$9,000.00
Loan type
Personal loan
Loan amount
$2,000.00
Interest rate
7.00%
Loan term
6 months
Additional fees
Origination fee of 3.00% ($60.00)
Monthly payment
$340.17
Total loan cost
$2,101.03
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
6 tips for making your next vacation more affordable
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.
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 build your savings balance without you even thinking about it.
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.
Use a credit card with travel rewards. There are a number of credit cards with travel rewards for you to choose from. Use your card to pay for your everyday expenses, pay your bill early to avoid interest charges and build up travel rewards points that you can put toward your trip.
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 who are unable to build savings or qualify for a loan or credit card.
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.
Cruises are popular all-inclusive getaways, but they can get pricey. Here are some options to help lower the payments on your cruise or make it more affordable.
Cruise layaway plans. Some cruise companies offer layaway plans that allow you to put down a deposit months in advance and then pay in increments.
Credit cards. Possibly the easiest way to pay for a large purchase, a credit card with a low interest rate can get that cruise booked and you can focus on paying back the money with a low rate.
Book in advance. Cruise companies that don’t offer layaway programs will still allow you to book in advance. This will save you money, and you’ll have more time to pay for your cruise.
Go through a travel agency. Some travel agencies will offer a cruise-now-pay-later program that allows you to finance your vacation before you take it and pay for it once you get home.
Vacation loans for bad credit
If your credit history is less than stellar, you can look into personal 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.
Another travel 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.
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 travel loan, don’t take one out in the first place. Missed payments can have a negative effect on your credit score, and that can make it much harder to borrow in the future. Plus, the loan cost will be even higher 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 travel 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 travel loan, it’s much better for your finances if you can save up for your vacation 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 to set your money aside in a high-interest savings account. 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 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 travel loan could be an important step in planning your next big trip. There are multiple ways to make vacation financing in Canada 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 travel loans
If you have all the required information close by, you can usually complete a loan application in less than ten minutes.
If it’s an unsecured personal loan, you can repay your loan any time without penalty. If your loan is secured using your home, you’ll likely pay fees.
Leanne Escobal is a publisher for Finder. She has spent over 11 years working with financial products and services, specializing in content and marketing. Leanne has completed the Canadian securities course (CSC®) as well as the personal lending and mortgages course by the Canadian Securities Institute. She has a Bachelor of Arts (Honours) in English literature and creative writing from Western University. See full bio
Chelsey Hurst is a publisher at Finder, specializing in banking and investments. She loves empowering people to avoid financial pitfalls and make better decisions with their money. Chelsey has a Bachelor of Science from Redeemer University, a Master of Science from McMaster University, and has won multiple awards for research communication. In her spare time, Chelsey enjoys cooking and taking long walks in nature. See full bio
Here are 6 easy loans to get in Canada, but watch out for high interest rates.
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Cruises are popular all-inclusive getaways, but they can get pricey. Here are some options to help lower the payments on your cruise or make it more affordable.