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Dreaming of an epic travel experience? Have your route mapped out and your to-do list set? But have you figured out how you’ll pay for it all? Whether your trip is years, months or weeks from now, these tips can help you cover the costs of your trip and stay on top of your money — while you’re away and when you return.
If you’re planning a big trip well in advance, you may have an opportunity to save most, if not all, of the funds you need for travel. A great way to approach your travel savings goal is to create a travel budget to determine how much you should save. Then, work backward: How much time do you have to save that amount? When you’ve got that figured out, consider setting up automatic transfers to a separate account regularly until you reach your goal.
If you don’t have enough money to spare each month to meet your savings objective, look at your current spending and see where you might trim. Are there take-out meals, streaming subscriptions, transportation expenses or personal luxuries you can cut back on? Taking a closer look at your money coming in and money going out — and making the necessary adjustments — can help you reach your travel savings goal.
2. Personal loans
If you can’t quite fund your entire travel with your savings, a personal loan might be a good option. With a loan, you borrow a fixed amount of money and pay it back in regular installments over a set period (the longer your loan period, the lower the payments). This option works well if you know your travel budget and are confident about it. As you consider a travel loan, be sure to factor in your repayment costs — if you’re taking an extended trip, you may need to make loan payments while you’re away.
3. Personal line of credit
An unsecured line of credit can be an appealing way to finance your travel as you only borrow what you need and only pay interest on what you borrow. It’s a good option if you’re not sure how much money you’ll need to cover the full costs of your trip. The caution with a line of credit, however, is that if you have easy access to a larger source of cash, it can be tempting to overspend on travel and splurge on luxuries while away. Keep that travel budget top-of-mind and stick to it as closely as possible.
4. Home Equity Line of Credit
A Home Equity Line of Credit (HELOC) works similarly to a personal line of credit, as you can access the funds you need and pay interest on only what you use. A HELOC, however, is secured against your home and, therefore, comes with a lower interest rate than an unsecured line of credit. The same benefits and considerations apply — and since HELOCs generally come with fairly high credit limits, a hefty level of spending restraint should be exercised when out on your adventure.
5. Credit cards
Credit cards have become an exceptionally easy way to pay for travel worldwide. Even some of the smallest gelato shops and market stalls are equipped with credit card readers, enabling you to pay for items large and small across the globe. While convenient, credit cards may have a high interest rate if you don’t pay off your balance in full by the due date. So, if you’re using them to help finance your travel, be sure to have a short-term repayment plan in place so you’re not significantly increasing the cost of your trip through interest charges.
6. Rewards points
Your biggest travel costs will likely be your flights, accommodation, and perhaps your rental car at your destination. If you have a credit card with a travel rewards program, check to see if you have enough points accumulated to cover some of these larger expenses. You may be surprised at how much your points can bring down the overall cost of your trip!
However you finance your next trip, remember to start with a budget — you can learn how to create one here — and research ways to save money while travelling. These eight money-saving tips can help you stretch your dollar further. Then, choose a financing option that works best for you — one that lets you create an unforgettable experience while keeping your financial life on track once you return.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.