1 in 10 Americans Plan to Borrow for Travel — Here's How to Do It Smarter This Summer

Summer is heating up, and so are travel costs. About 1 in 10 Americans plan to borrow for travel this year, expecting to take on an average of $2,525 in debt to make a trip happen. If you're one of them, the financing tool you choose matters.

Whether you're comparing the best personal loans or weighing up a travel credit card, the right option could save you money, and a few smart moves can also help you stretch your budget on vacation.

In a new BestMoney survey on vacation costs and trends, 53% of Americans said planning a trip this summer feels financially stressful, and 81% say travel feels more expensive than it did a few years ago. Even so, a majority plan to take the vacation anyway. Plus, over two-thirds (77%) are using some form of financing to do it, whether that's a credit card, personal loan, or Buy Now, Pay Later plan.

So the real question isn't whether borrowing happens, but whether it makes financial sense. When done deliberately, borrowing for a vacation isn't necessarily a bad idea, but you should be able to pay it back without interest. If you can't, that trip of a lifetime could turn into a cycle of debt.

"Going into consumer debt should be used sparingly," said Matt Schaller, CFA and CPA, an advisor at Moneta. "The only time I can see borrowing for a vacation [to be] potentially okay is if you use a credit card to gain additional perks or frequent flyer miles. Even then, the balance should be paid off for that month."

A few signs you may want to reconsider borrowing:

• Your credit cards are already close to their limits.
• Your debt-to-income ratio shows you owe more than you can comfortably repay.
• You won't realistically be able to pay the balance off after you return.

If none of those apply, the next step is deciding which financing tool to use and how quickly you can pay it back.

The cheapest way to finance a trip is to use your savings and avoid taking on new debt. But if you do need to borrow, the common options have very different costs.

Personal Loans

You can apply for personal loans from your bank, credit union, or an online lender. They have lower APRs than credit cards and a fixed payoff schedule, with funds often available within 24 hours.

Downsides: Origination fees, an extra monthly bill, and lenders may want to see credit scores of around 740-799 (considered a "very good" rating by FICO) for the best loan offers.

Credit Cards

If you use a 0% intro APR card and can pay it off during the intro period, it can act as an interest-free loan. The average APR on cards is 19.19%, so paying off the balance before the promo ends is critical.

Downsides: A high APR kicks in if you don't clear the balance before the promo period ends, and minimum payments can trap you in revolving debt for months or years.

Buy Now, Pay Later

These short-term "Pay in 4" loans let you split a purchase across four interest-free installments, usually over four to six weeks.

Downsides: Stacking multiple BNPL loans is easy to do without realizing it, which can leave you owing more than you can absorb. Missed payments can also now show up on your credit report.

When you finance a vacation, you have to look beyond the sticker price. Here's what borrowing $2,525 actually costs depending on the tool you use:

• Credit card at 24% APR, paid over 12 months: $238/month, roughly $340 in interest, total cost around $2,865. Stretch the payoff to two years and that interest nearly doubles.
• Personal loan at 12.27% APR, paid over 12 months: $224/month, roughly $171 in interest, total cost around $2,696. That's about $169 less than the credit card scenario above.

The difference comes down to your interest rate and how long it takes you to repay. The longer the balance lingers, the more an affordable vacation becomes an expensive one.

The figures above show the cost difference, but cost isn't the only factor when planning a vacation. Here's how personal loans versus credit cards stack up beyond the numbers:

Choose a credit card if:

• You can pay off the balance quickly: Ideally within a 0% intro APR period.
• You want travel protections: Like trip cancellation and interruption coverage.
• You'd benefit from rewards points: Redeemed for hotels, flights, and other trip costs. For example, the cost of a last-minute replacement ticket could easily exceed what you'd save on interest with a personal loan.

Explore airline and hotel credit cards if you travel regularly, as some cards are specifically designed to maximize travel benefits.

Choose a personal loan if:

• You have good to excellent credit: You don't need the benefits a travel credit card provides.
• You prefer a fixed payoff schedule: No risk of sliding into a years-long repayment cycle.
• You want a structured plan: Forces full repayment rather than minimum payments.

The bottom line: if you can pay it off fast, a credit card often has the edge. If you need more time and want predictable payments, a personal loan is the more disciplined option.

"Many travelers expect vacation debt to disappear quickly, but in practice it often lingers much longer than intended, especially when unexpected expenses arise after the trip," said Brian Rooney, travel advisor and founder of GetCruiseInfo.com.

"Carrying travel debt can reduce flexibility for emergencies, increase utilization ratios on credit cards, and create a cycle where future discretionary spending also gets financed," he added.

• A credit score hit: Charging $2,500 on a card with a $5,000 limit immediately uses 50% of your available credit, which can ding your credit score even if you pay on time.
• Your next emergency goes on credit, too: Cash flow committed to vacation payments isn't available when something else goes wrong, so the next surprise expense may also end up on the card.
• The "low monthly payment" trap: A small monthly number can make a trip feel affordable even when the total repayment burden isn't. Focusing on the monthly payment rather than the total cost over time, including interest, is important to keep in mind.

It's usually best to borrow only what you need and pay off any older vacation-related debts before additional interest and purchases are added to your account, which can drive your balance higher.

Some ways to save money and pay down travel debt faster:

• Start a vacation fund: After you come home from one holiday, start saving for the next. Saving around $250 a month for 12 months would cover a $2,525 trip and some extras.
• Pay more than the minimum due on your credit cards.
• Make an extra payment toward the principal on your personal loan.
• Plan to travel during the off-season: Try the shoulder seasons when flights could drop significantly, anywhere from 15% to 32% just outside peak travel times.
• Check your cards for unclaimed rewards: Points, miles, and travel credits sitting unused in accounts could make your next holiday cheaper.
• Consider cutting trip costs: A less expensive destination, a home-sharing platform instead of a hotel, driving instead of flying, or building the trip around free attractions can all make a meaningful difference.

"The biggest mistake is continuing to finance new travel while still paying off the last vacation," Rooney warned. If last summer's beach week is still on your statement, this summer's may need to wait.

It's common to finance a vacation, but figuring out the most affordable option is important for life after you come home, whether that's a fixed-rate personal loan, an interest-free intro APR window or simply putting off your trip while you save up.

Should I take out money to travel?

Sixty-three percent of Americans recently surveyed by Best Money reported that vacations are worth financial sacrifices, but only you can know if your finances can handle the costs.

What is the best type of credit card to use for travel?

A travel rewards card with trip benefits is a good option for frequent travelers. If you can repay your balance within the intro period, usually around 12 to 21 months, a 0% intro APR credit card could help you save while on vacation.

Should I take a trip if I’m still paying off last year’s vacation?

The experts we spoke to said no. If you’re already in debt from last summer, adding to it with another trip, isn’t likely a good idea. Consider paying off your debts before you book a new vacation.