As a college student, you might get the opportunity to travel the world, maybe on a study abroad program or vacation trip. But if you’re on a tight budget, you should consider travel loans for students.
Here’s what you need to know about how to finance your adventures:
Travel loans for students
|Lender||Loan amounts||APR rates||Loan terms|
|Best Egg||$2,000-$35,000||5.99% – 35.99%||36 or 60|
|SoFi||$5,000-$100,000||4.99% – 19.63%||24 to 84|
|Upgrade||$1,000-$50,000||5.94% – 35.97%||36 or 60|
Travel loans for students are essentially personal loans that students may use toward traveling expenses, such as transportation, food and lodging. With a travel loan, you’ll receive a lump sum in the amount that you qualify for based on factors like your credit score, credit history and income.
Depending on the lender, you may be able to apply for a loan with a cosigner (perhaps a parent or guardian) if you don’t have much experience with credit. This may increase your chances of being approved.
Important terms to know for travel loans
- APR: The APR on a loan is the amount of interest and fees you have to pay a lender in order to borrow money. APRs are also tacked onto other financial products, like credit cards and mortgages. The higher your credit score, the lower your APR rate can be, and the lower your APR rate, the less you’ll owe over the course of a loan.
- Loan term: A loan term is the set period time in which you have to pay off your loan. Many personal loan terms run anywhere from 12 to 60 months; however, some lenders offer long-term loans that can go for as many as 144 months. Typically, the shorter your loan term, the higher your payments will be.
- Credit score: Your credit score is a numeric value — generally ranging from 300 to 850 — that determines your creditworthiness, or how likely you are to pay back a loan on time. Your credit score is based on whether you make payments on time, your credit utilization rate, the types of accounts you have and how old your accounts are. You can check your credit score for free from all three credit bureaus by visiting annualcreditreport.com.
- Soft-credit inquiry versus hard-credit inquiry: Before applying to see what kind of rates and terms you may be eligible for, be sure to check whether you can prequalify for a loan. This is known as a soft-credit inquiry which allows you to check what kinds of rates and terms you qualify for without hurting your credit. If you decide to proceed with the loan, the lender will eventually have to do a hard-credit check that may temporarily ding your credit. Be sure to compare those offerings with other lenders to get the best possible terms.
- Cosigner: If you’re unable to get a travel loan based on your own creditworthiness, you may consider getting a cosigner (this can be a parent, guardian or friend that has good credit). Getting a cosigner can help you obtain a travel loan; however, if you’re unable to repay the loan, the responsibility will fall to your cosigner.
When applying for a travel loan, lenders typically require the following information:
- Contact information
- Social Security number
- Bank account numbers
If you have a cosigner, they’ll need to provide that information as well.
Since many lending companies base their approval process heavily on credit scores, you’ll need to check your credit to get an idea of where you might land. If you don’t have a lot of experience with credit, consider asking a parent or guardian (someone with good credit) to be a cosigner on the loan. To gain more credit experience consider applying for a student credit card to build up your credit and demonstrate your financial responsibility to lenders.
Before signing on the dotted line for a travel loan, however, make sure that you budget in order to pay back the loan. You don’t want to default on a loan, as it can have a severe impact on your credit score and stay on your record for up to seven years.
While a personal loan might be a good option for some students wanting to travel, it may not be for everyone. Here’s several alternatives to taking out a travel loan.
- Student loans: You may be surprised to hear that you can use student loans toward traveling. However, this is generally not recommended — it’s unlikely to be related to your formal education, unless you’re studying abroad. By putting your student loans toward your travel plans, you may find yourself short when it comes time to pay for more essential expenses like classes, textbooks and room and board.
- Student credit card: A student credit card is a type of credit card specifically made for students. They can be easier for students to qualify for as many of them don’t require you to jump through as many hoops as a regular credit card might. For example, credit score requirements might not be as high for student credit cards; however, this may mean you’ll have to pay higher APR rates.
- Grants and scholarships: If you’re planning to study abroad, you may be eligible for various grants and scholarship programs to cover some of your travel expenses. Be sure to read the requirements of any grants or scholarships before applying — some may have specific requirements (traveling to certain countries, for example) or are only for students who are enrolled in specific majors.
|Can help you build credit as you make on-time payments||May be difficult for you to qualify if you don’t have a strong credit background|
|Allows you to travel without paying a lot of money upfront||If you’re unable to pay the loan back on time, that can severely impact your credit|
|Can help you to diversify your credit portfolio, which may help you secure other types of credit down the road||Saving for a trip instead of taking out a travel loan helps you avoid spending extra money on fees and interest|
|May teach you how to budget as you set aside money to repay the travel loan||May be charged higher APR rates if you don’t have a good or excellent credit score|
Like with any large expense, you’ll need to carefully budget your money to afford your travels. You’ll not only need to budget before you catch your plane, but you should also keep an eye on your money while you’re away to make sure you don’t overspend. To do this, you’ll need to:
- Figure out your income so you know how much you can afford to spend. Your income will set the framework for what expenses you can and can’t afford. (As we’ll explain later, be sure to give yourself some flexibility and leave room for unexpected costs.)
- Determine how much you plan to spend while you’re out traveling. It may be tempting to spend money on expensive food, beverages, souvenirs and hotels, but splurges such as these can quickly eat up your budget. Prioritize what you want to spend your time and money on during your travels and research ways to save on items like lodging and transportation.
- Set aside some money in case of an emergency. While this may feel like you’re taking away from your spending limit, having an emergency fund handy can be a wise decision. There can be a lot of unknowns when it comes to traveling, and having the money to address any bumps in the road can help you. Some examples may include getting sick or injured, losing your luggage, experiencing a crime or having to switch hotels or plane tickets.
Can you use student loans to travel?
While you may use your student loans to travel, it’s generally not considered wise to do so. Student loans are provided to help you cover your education expenses, and, eventually, you’ll have to pay them back. If you spend your student loans toward nonessential expenses, you may not have enough money to pay for expensive costs such as tuition.
Can you get travel loans?
While it may be difficult for you to be approved by a lender if you don’t have much experience with credit or your score is low, it is possible for students to get travel loans. If you do qualify, you may be subject to higher APR rates if your credit score needs improving. Be sure to carefully research the requirements, as each lender is different and, if you prequalify for any loans, compare each offer to decide which may be the best for you.
Can I take out a loan for study abroad?
Yes, you can take out a loan in order to study abroad; however, you may want to research grants or scholarships that may help you avoid taking out any loans. Many schools and study abroad programs may offer financial assistance for students, and these provisions may not only be easier to qualify for, but may also be less pricey in the long run.
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