A honeymoon loan is exactly what it sounds like - it is a loan you take out to use on your honeymoon. The national average of a honeymoon costs around $5,000, and one in 10 couples will spend $10,000 on their post-wedding celebration. Everyone wants to go out on a once-in-a-lifetime trip, so some people opt to take out a honeymoon loan.
This is a type of personal loan for a vacation that you can get from banks, credit unions, or online lenders. They will normally have a fixed APR, meaning it will not fluctuate over the lifetime of the loan. The APR can range from 2.49% to 35.99% depending on credit worthiness. If you have great credit, a honeymoon loan could mean that you pay less interest on payments than if you put them on a credit card, which will normally have a variable APR of around 15%.
Things to consider:
In order to qualify for a honeymoon loan, you will need proof of income, maximum debt-to-income ratio, and a minimum credit score. These factors and thresholds will vary by lender, but you can generally expect to need a credit score of 640 or greater, a minimum yearly salary of $10,500 - $25,000, and a debt-to-income ratio of 36% or less.
How to get a honeymoon loan:
- Prepare your documents and look through your credit report. Make sure you know what your score and debt-to-income ratio are.
- Get prequalified. This will allow you to receive APR offers from multiple lenders without a hard inquiry on your credit report.
- Shop around. Compare APRs, loan terms, and origination fees between the lenders to see which one works the best on your terms.
- Finish the application, which will include a hard credit inquiry, submission of pay stubs and bank statements. Note that a hard inquiry on your credit bureau will result in a score decrease.
- Receive your money and start planning your trip. Some lenders can process the application and disburse funds on the same day, while others might take a couple of days.
Honeymoon loans can be great options for those working with a limited budget to take the trip of their dreams. However, you can also cut down on costs during your trip by traveling during the off-season, leveraging points and miles for hotel stays or flights, and being flexible about dates and locations. Look for discounts or flash deals when planning your trip and negotiate wherever possible.
If your credit score is low, which makes your APR high, you could be paying double or more of however much you originally borrowed from interest. Keep this in mind when deciding how much to borrow and how you spend it. Read through the terms and conditions of the loan carefully, and make sure you will be able to make the loan payment every month until the loan has been fully repaid.
Time to go enjoy your honeymoon!
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Original Source: Credello: How Do Honeymoon Loans Work?
