Planning a vacation can be an exciting but costly endeavour. This is especially true for travellers who dream of taking one or two trips a year but don’t have the funds to pay for the vacation upfront. Fortunately, most of the most popular holiday providers in the Canadian market offer vacation payment plans.
What are vacation payment plans?
Vacation payment plans allow you to book your trip now and pay later. They let you spread the cost of your getaway over low, monthly payments in the form of a short-term, fixed interest loan.
These plans make travel more accessible whether you want to go to Orlando or Cuba for some sun or on a bucket list trip to London or Paris. But being smart with your money is key to avoiding unnecessary costs. This article will quickly educate you on trip payment plans so you can enjoy your vacation while staying financially savvy.
Why you might decide to use a vacation payment plan
There are several reasons why travellers choose to pay for their getaways using a monthly payment vacation plan. They include:
1. Spreading out costs: Paying for your trip in installments makes the expense more manageable and budget-friendly.
2. Taking advantage of limited-time deals: Vacation now, pay later plans let you secure discounts and promotions without needing the full amount upfront.
3. Affording dream vacations: Paying for your trip monthly can make bucket-list trips achievable sooner rather than later.
4. Avoiding credit card interest: Many travel payment plans offer lower interest rates than credit cards. Some even feature 0% financing options.
5. No immediate financial strain: By financing your vacation, you can book your trip without depleting your savings or emergency funds.
6. Enhancing special occasions: Milestone celebrations, such as honeymoons or anniversaries, can be planned more easily with flexible payment options.
7. Maximizing travel during prime seasons: Payment plans make it more affordable to book trips during peak seasons, such as March Break, when costs are higher.
8. Simplifying group bookings: Utilizing a vacation payment plan makes sense if you’re responsible for a group booking. This allows you to secure the trip without having to cover the entire cost upfront yourself.
Things to consider when deciding whether to use a trip payment plan
When evaluating a vacation payment plan, consider these four factors to ensure it aligns with your financial priorities:
1. Interest rates: Interest rates for monthly payment plans can vary from 0% to 36%. If the interest rate for the trip payment plan is higher than what your credit card or line of credit charges, it may not make sense to finance your vacation this way.
2. Repayment terms: Understand the duration and frequency of payments. Ensure the installments fit comfortably within your budget to avoid financial strain.
3. Not collecting rewards points: Do you have a credit card that earns you rewards points? If you pay for your holiday using a vacation payment plan, you will miss out on collecting those rewards points.
4. Alternative financing options: Financing your getaway using a vacation payment plan may not be the best interest rate that’s available to you. Before you commit to a trip payment plan, compare it to the interest rate of your:
- Credit cards.
- Personal line of credit.
- Home equity line of credit.
A closer look at vacation payment plans and what they offer
Two popular vacation payment plans are Flex Pay and Affirm which are used by various travel providers:
- Flex Pay is utilized by Air Canada Vacations, WestJet Vacations, RedTag.ca, SellOffVacations.com, and Sunwing.ca.
- Affirm is the payment plan offered by Expedia.ca.
What Flex Pay and Affirm have in common:
- No down payment required.
- Terms and interest rates depend on credit score, purchase details, and current loan activity.
- Automatic payments can be set up for convenience.
- Soft credit score checks are used, which means your credit score won’t be affected.
- No late fees or prepayment penalties.
- Quick loan application process (just a few minutes).
- Upon approval, multiple payment options are presented, showing monthly payment amounts, interest rates, APR, and total loan cost.
Key differences between Flex Pay and Affirm:
- Interest Rates: Flex Pay’s rates range from 0% to 31.99%, while Affirm’s rates range from 0% to 36%.
- Payment Terms: Flex Pay offers terms up to 24 months, whereas Affirm caps their terms at 12 months.
Do your homework before committing to a trip payment plan
Vacation payment plans offer an excellent opportunity to make travel more accessible and budget-friendly.
By spreading the cost over time, you can manage expenses without depleting your savings or taking on high-interest credit card debt. However, it’s essential to consider factors like interest rates and repayment terms to ensure the trip payment plan aligns with your financial goals.
Depending on your situation, paying monthly for your vacation can help you plan and enjoy the holiday you want without compromising your financial health.
Photo Credit: Anete Lūsiņa