Denise Phillips, whose three sons are in the military and she herself is a military veteran wanted to visit Hawaii to spend Thanksgiving with one of her sons. But there was a problem for her as he can’t afford to pay for the tour at once.
So instead of asking for help she started searching for the installment plans and found one through the lending company Affirm. While commenting on this, Denise said that when looked at the offer it said no hidden charges and when she explored it was absolutely true. She said that it was a great experience with Affirm and she is looking forward to more trips with the company in the future.
The military veteran further said that she will use the loan company for her upcoming tour to Alaska which is planned in next month and for another January tour to Bermuda.
While answering the question of why she chose Affirm, Denise said that the company does charges interest but at the beginning of the payment, it presents the total charges as a fee. The charges of the company vary depending on the time period for which the tour is planned and the creditworthiness of the person applying for the loan.
Philips is not the only one who received this offer, recently many companies paid for the traveler’s expenses like ticket fare, hotel fares with the promise that they will return the money later. JetBlue, a US airline company announced its partnership in 2017 with the UpLift, a payment company to allow travelers to pay the expenses on 12-month installments. And APR of those installments was 8.99%. Other companies who provided with the same facility include PayDelay and Airfordable.
But according to finance experts, getting a loan for a trip may be a bad idea. While commenting on this, the co-founder of MagnifyMoney, Nick Clements said that there many other cheaper ways to plan a travel trip than to get a loan. And of those ways is to use a credit card with no interest rate at all, he added.
Obviously, in this case, the customer will have to pay the full payment before the introductory period. While commenting on Denise situation, the Washington-based attorney, Rachel Podnos said that installment plans do not work like that for all. Even at small interest rates, the consumer has to pay more than what the actual price of the trip is, she further added.
According to Bankrate, a financial website, Affirm is charging 30% interest rate which is much higher as compared to other companies. It further stated that the average interest rate is 17%. There is one difference: Affirm does not charge the compound interest rate but it charges the simple interest rate. Podnos further said that after all this discussion, financing the vacations is still a bad idea.
Financing your house, education or even a car is another case but financing vacation is insane, Podnos further added. If you can’t afford you vacations with the cash you have in hand, don’t go on the trip with the loaned amount, Rachel continued.
However, there are sometimes when splitting the payment can actually pay off. Ryan Anderson, the residence of Champaign, discussed his experience of travel hacking. The 25-year-old said that US: CCL, a Carnival Cruise Line helped him to pay the expenses of hotels and flights early.
Anderson said that he had cash in hand but decided to split the payment as he wanted to use $300 as a credit. While commenting on his adventurous trip, he said that if he had to pay interest for his vacations, he wouldn’t go the vacations.
UpLift chief commercial officer, Tom Botts said that you can benefit from installment if you can manage to book the flights and hotels early. As doing so will give you better rates, Botts added. He said that we do not force people to plan a trip but we allow them to go on vacations according to their own convenience.