Taking out Loans to Travel/Itinerary Critique

Hey everyone,

I have a friend who is planning on taking out a $10,000 loan to spend a few months traveling the world. I also have the urge to do the same because it seems so easy and would make my RTW happen so much sooner. But, I remember reading "Vagabonding" by Rolf Potts and a section where he wrote about how working to fund your travels is all part of the experience. Because of the saving, and sacrifice the traveling is more rewarding. Just curious what your opinions are and if any of you have done this in the past?
Personally I don't plan on it, but the idea is tempting, especially when I'm typing this from my cubicle at work!
Also, though I have no dates in mind I'd appreciate any insights or critiques to my RTW plan. 12 months, Hopefully around $20,000 budget. Do-able?
June and July-Kenya & Tanzania
Aug, Sept. Oct.-Egypt, Jordan, Syria and Turkey
Nov-Vanuatu
Dec-Australia
Jan, Feb, Mar, Apr, May-South East Asia

Thanks!

I wouldn't take out a loan to travel not because of any supposed philosophy (sacrifice isn't that glamorous IMO, and all the trust fund babies I met on the road appear to have fun) but rather because it's just plain stupid to do. In short I could not imagine spending money I don't have on something as superfluous as travel for economic reasons, namely you'll be sacrificing later to pay it back with interest just because you were impatient. This is of course assuming you get a job quickly upon return, which isn't guaranteed and I'm sure would be a bit more stressful knowing you need to start making payments...

Anyway the general itinerary doesn't seem completely impossible though I would double check the rainy season details in Eastern Africa. Australia is also raising an eyebrow because it's unfortunately rather expensive right now ie it'd definitely tighten your budget especially when you add flights to there and roundtrip to Vanuatu- what do you want to do there for a month btw?

Ok that's my opinion at least, I'm sure others will chime in momentarily.

Yeah, but it this person going to get approved for this said loan?

Who's handing out loans for "travel"right now? Or even "personal reasons"?

lauracatherine wrote:Yeah, but it this person going to get approved for this said loan?

Who's handing out loans for "travel"right now? Or even "personal reasons"?

Exactly what I was thinking!

I don't think approval is a problem. Many people probably already have a line of credit set up for around that amount. My $5k line of credit required no explanation at all, and my previous bank had set me up for $10k, again with no question about what it would be used for.

The ability to get a loan, of course, certainly doesn't make it a good idea. You're going to have to work to travel, whether it's before or after. And it's a whole lot more fun to work with the anticipation of an upcoming trip than to work knowing that you've got to pay off your last trip before you can even start saving for the next one.

Personally, I only favour taking on debt for things that would qualify as an investment. Where taking on the debt now will make it easier to pay off in the future. Getting an education, buying a house, and starting a business fit that criteria. Unless you've got a solid and realistic business plan about how travel is going to pay for itself, going on a trip doesn't qualify.

But it is a personal choice. I'd be willing to bet at least a few of the people who'll scold you for even thinking about borrowing money to take a trip have, themselves, opted to go on a trip instead of paying off debts. Which is exactly the same financial decision, just worded differently.

edit: I wanted to add that there's a few situations where borrowing money to travel might make sense.
1. Leaving mid-year instead of the end of the year. Let's say you're going for a full year, and can borrow some money and leave in June, or save another six months and leave in December. Provided you pay the loan off within a few years of returning, you'll save more in taxes than you'll pay in interest. (If you don't work at all for a year, you'll lose forever your basic personal tax credit, which is worth a little over $2600 in federal taxes, plus whatever your province's credit is worth...looks like $500ish in ON.)
2. The "now or never." There's certain gaps in life where it's easier to take off for a while. Right after finishing school is one of them, and also a point where you're not likely to have a lot of money. Paying for the trip after the fact may be better than getting caught up in a career and never taking it at all. I don't think this applies to you.

Thanks everyone for replying.

Getting the loan shouldn't be a problem. She's going to school next fall as well so I believe she's just upping her student line of credit. Her Dad is also co-signing for her (or however that works).

2wanderers you brought up great points. Especially:
"I'd be willing to bet at least a few of the people who'll scold you for even thinking about borrowing money to take a trip have, themselves, opted to go on a trip instead of paying off debts"
I would have to agree with this. I'm assuming I will even be one of these people. I have debt already because of university and while I don't think I'll be increasing my debt to travel, I doubt I'll be paying off my debt before travel. My interest rates are still quite low, so I'd just budget in my bills and get my parents to pay monthly while I'm away.

Also thanks for your opinions on "there's a few situations where borrowing money to travel might make sense". Good ways to justify taking out a loan to travel!

Andromeda:
"roundtrip to Vanuatu- what do you want to do there for a month btw?"
I spent 2 weeks in Vanuatu in 2009 and LOVED it. It's the country I'd most like to get back to so far that I've traveled to. 2 weeks was definitely not enough. There are 83 islands so even a month isn't enough! I'm hoping to get to 3 or 4 islands in a month! Last time we were able to visit 2 islands on about $25-$30/day (not including flights--which were about $70 and $120). I'm hoping to plan it so this is my last destination and I can just keep touring around until my money is dried up or I feel it's time to pack it up and head home.

Thanks for all the input. Anyone else?

I'm a Dave Ramsey fan, so my answer should be obvious to anyone who knows who that is. That being said, taking a loan to travel seems to be a double punch to the gut. Not only is there the normal opportunity cost of a long trip, but now you also have the cost of the loan + interest.

In your friends case, she'll now face paying for the trip loan and going to school. In other words, she'll probably not be holding a full-time career oriented job, but rather a uni-type job that pays less. If she follows the usual route of taking student loans to pay for school, that's just more debt racking up.

In the end, it's a personal choice. Personally, I'd never do it... I'd work harder, scrimp, save, whatever I needed to do so I could go on that trip. Wait until the first year of university is done, then go over summer break. At least that way I could enjoy the travel without being dragged down by the fact I'm now in debt over it. Of course, I'm a bit sensitive like that.

About the co-signing - My suggestion would be to give her the money for the trip if he's willing to co-sign. If (when?) she doesn't make her payments, the bank's going to come after him and his credit score. If he doesn't have the money to give her for this trip, then he shouldn't be co-signing a loan himself.

Personal opinion only. It could all work out and be sunshine and kittens. Either way, hope the trip happens sooner or later and everyone enjoys themselves.

[quote="Chebasaz"]I



It could all work out and be sunshine and kittens.


Cool expression!!

A loan to travel...talk about instant gratification. Enjoy now, suffer later possibly.

Maybe do your best to save up money instead?

Chebasaz wrote:I'm a Dave Ramsey fan, so my answer should be obvious to anyone who knows who that is.

I love Dave! I've been listening to his podcasts all during the past few years of working and saving for our RTW trip.

I had friends in college who bragged on their adventurous decisions to take out loans and pay later, saying that travel would always be worth it.

These are the same folks who are now out of work in our particular field, and I can only imagine the extra heartache and headache of unemployment compounded by extra bills.

My husband and I are working hard to save our dollars; we've had to delay the trip due to (temporary) drops in income, but I'd much rather go a little later with a light step and a full wallet.

"Live like no one else so that later you can live like no one else!"