This Is the Only Time I'd Take Out a Loan to Travel

Personal loans offer a flexible way to borrow money. Unlike mortgages and car loans, which limit your purchase to, well, homes and cars, a personal loan can be used to finance just about anything: home renovations, emergency repairs, weddings, and, yes, travel expenses.

Normally, I wouldn't recommend taking out a personal loan to travel. The interest rates and fees are high, and you'll be putting your credit at risk for an unnecessary expense.

But there is one situation in which I wouldn't hesitate to take out a personal loan to travel, no matter how much it costs me.

When you should take out a loan to travel

The only time I would take out a loan to travel is to visit a loved one who's experiencing a medical emergency. If you don't have an emergency fund, or a family member can't lend you the money, a personal loan may be your only choice.

Some loans, such as emergency loans, are designed to help you in a dire situation. These loans are issued fast and often don't require a stringent credit check. In fact, some lending companies will give you money within 24 hours of your application, while others can give you cash in one to three business days.

Regardless of the loan's terms, I would take out an emergency loan to visit a loved one in a medical emergency, especially if it's terminal. Ultimately, people are more important than money. You might have to work a bit harder (or sacrifice expenses) to pay off the loan, but going into debt isn't permanent, whereas deciding not to visit a loved one in what could be their final moments isn't a choice you can revoke.

Which loan is best for travel?

Ideally, you should find a loan with a low interest rate and a term long enough for you to pay it off.

If you have something to put up as collateral, such as a certificate of deposit (CD), a secured personal loan might be a good choice. Secured personal loans are attached to your assets, which makes lenders feel more comfortable as they can seize assets if you default on the loan. As such, you may get a lower interest rate.

Without collateral, you may have to apply for an unsecured personal loan. Since these loans aren't attached to any assets, your lender can't seize your property if you default. That makes them more risky to your lender, and as a result, your interest rate might be higher.

It's best to avoid predatory loans, like payday and title loans. While predatory lenders will issue personal loans for emergencies, they'll likely give you an outrageously high interest rate, like 400%. This can make it impossible to pay off the loan's balance and trap you in a cycle of debt. I would also avoid cash advances on credit cards. Cash advance APRs are high and apply to your balance immediately after you get your cash.

What credit score do you need?

Generally, most lenders will want you to have a 640 or above to get an emergency loan. That said, some lenders may accept scores as low as 580, often in exchange for a higher interest rate.

How can you avoid emergency loans?

In some circumstances, a personal loan is your only choice to pay for a visit to a loved one in a medical emergency. But they can be expensive. Not only will you pay interest on what you borrow, but you'll also pay an origination fee, which could be 1% to 5% of your loan value. And if you miss a payment or default, it could take years to repair the negative impact on your credit.

To avoid loans in an emergency, here's what you can do:

• Build an emergency fund. Start setting money aside for emergency purposes. You can use our emergency fund calculator to determine how much you should have saved based on your monthly expenses.
• Get a salary advance. This will give you a portion of your paycheck before payday. Some employers offer salary advances as an employee incentive, but you could also speak privately with your employer about getting a one-time advance in an emergency.

Again, I would avoid taking out personal loans for leisure travel or visits to family that aren't an emergency. If an illness or injury isn't making the visit urgent, then borrowing money isn't the best way to fund your travels.