Fly now, pay later Are travel loans a good deal?

By AMRITA JAYAKUMAR

NerdWallet

Dreaming of a spring getaway with white-sand beaches and a cool drink in your hand?

A search for airline tickets can bring your dream down to earth, if the steep fares charged by many airlines outstrip your savings.

What if you could book your trip today and pay for it later — without maxing out your credit cards?

Major airlines including American Airlines, JetBlue, Southwest Airlines and United Airlines integrate buy-now-pay-later concepts into their online booking. Working with technology startups that provide the financing, they offer loans to travelers who would rather pay a fixed amount over time than dip into savings or use high-interest credit cards.

Financing a trip may be a reasonable option in a few situations — for trips that are important and have inflexible dates, for example, or for emergency travel. But if you don’t know how you’ll pay, borrowing isn’t a good idea, experts say.

LOAN OR LAYAWAY

Travel lenders say they appeal to people with average credit scores who may not qualify for travel reward cards that require excellent credit. The loans also can make sense for people who are building credit and prefer the discipline of fixed payments over credit cards’ revolving payments.

It’s not just airlines offering financing for travelers. Travel deal sites such as CheapAir.com, Expedia and Groupon Getaways offer loans through Affirm, a San Francisco-based online lender. Airfordable and FlightLayaway.com offer layaway-style plans, in which you pay off your ticket in online installments before you fly. Other sites market financing to college students.

Some experts advise against going into debt for travel at all, whether you use travel loans or credit cards.

THE COST OF CONVENIENCE

Even when a travel loan might make sense, know how you’ll pay it back, such as by carving money out of your budget or using a tax refund, Snyder says.

Before you choose a loan, understand all the costs, says Graciela Aponte-Diaz, director of California policy for the Center for Responsible Lending, a nonprofit advocacy group.

The typical UpLift customer borrows $500 to $2,500, and the company charges annual percentage rates from 8.99 percent to 36 percent, based on your credit profile. If you borrow $1,500, for example, and pay it back over 12 months at 17 percent – UpLift’s average rate for borrowers – you’ll pay $137 per month and a total of $1,642.

Affirm charges 10 percent to 30 percent APR, and travelers borrow $1,400 on average, says spokesperson Elizabeth Allin. Airfordable charges a one-time service fee equal to about 13 percent of the ticket cost, according to a calculator on the website.

Lenders may also charge cancellation and modification fees if your plans change, or try to sell you travel insurance.

This article was provided to The Associated Press by the personal finance website NerdWallet. Amrita Jayakumar is a writer at NerdWallet. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.