For many Singaporeans, travel is more than just a holiday—it’s a way to recharge, connect with loved ones, and broaden horizons. Whether it’s a long-awaited family trip to Japan, a milestone honeymoon in Europe, or a once-in-a-lifetime solo adventure across South America, the urge to pack our bags and see the world is deeply ingrained.
But with the rising costs of flights, accommodation, and experiences, funding travel dreams is not always straightforward. Some turn to their savings, while others rely on credit cards. Increasingly, however, a growing number of people are considering personal loans as a way to finance their travels.
This article explores why Singaporeans might take a loan for travel funds, weighing up the pros and cons, and offering practical advice for borrowing wisely.
The Rise of Travel Desire Post-Pandemic
After nearly two years of border closures, quarantine rules, and cancelled plans, it’s no surprise that Singaporeans are prioritising travel again. The latest figures from Changi Airport show passenger traffic has rebounded to pre-pandemic levels, while travel agencies are reporting surges in bookings for popular destinations such as Japan, South Korea, Europe, and Australia.
But airfares have risen significantly since 2019. Coupled with stronger foreign currencies against the Singapore dollar in many destinations, even a short getaway can strain a household budget. For larger families, milestone celebrations, or long-haul trips, the costs can quickly run into the thousands.
This is where travel loans—or more broadly, personal loans earmarked for travel—come into the picture.
Why Do People Take Loans for Travel?
Taking out a loan for a holiday may seem extravagant at first glance, but there are several scenarios where it makes sense.
1. Family Trips
For parents with school-going children, the annual June or December school holidays are the best times to travel. But these are also peak seasons, when prices skyrocket. A loan can help spread out the cost of a family holiday without dipping heavily into emergency savings.
2. Milestone Celebrations
Big life events like honeymoons, wedding anniversaries, or graduation trips often call for something special. Many couples would rather start married life with unforgettable memories in Paris than postpone the dream due to budget constraints.
3. Once-in-a-Lifetime Experiences
Some experiences—like a Northern Lights tour in Iceland or a safari in South Africa—are worth seizing when the opportunity arises. A personal loan can help make these bucket-list moments possible without waiting years to save.
4. Visiting Loved Ones Abroad
Singapore is a multicultural hub, with many residents having relatives overseas. Sometimes, a last-minute trip to attend a wedding, reunion, or even a funeral cannot wait. In such cases, quick access to travel funds through a loan can be invaluable.
Loan vs. Credit Card vs. Savings
Before rushing to take a loan, it’s important to weigh it against other options:
Using Savings
- Pros: No debt, no interest to repay, peace of mind.
- Cons: Depletes emergency funds or retirement savings, which can be risky if unexpected expenses crop up later.
Using Credit Cards
- Pros: Convenient, may offer perks such as air miles, cashback, or travel insurance.
- Cons: High interest rates (around 25% p.a. in Singapore) if the balance is not fully paid each month. Debt can spiral quickly.
Taking a Personal Loan
- Pros: Lower interest rates compared to credit cards (typically 6%–12% p.a. from banks; higher from licensed moneylenders but still regulated). Fixed repayment schedule provides discipline.
- Cons: Still debt—requires commitment to monthly instalments. May affect borrowing capacity for other needs.
In many cases, a personal loan strikes a middle ground between draining savings and racking up expensive credit card debt.
Key Considerations Before Taking a Travel Loan
Borrowing for travel isn’t a decision to make lightly. Here are the main factors to keep in mind:
1. Interest Rates
Bank personal loans generally come with lower interest rates than licensed moneylenders, especially if you have a good credit score. Always compare offers across providers before committing.
2. Repayment Terms
Loans can stretch from 6 months to 5 years. While longer tenures reduce monthly instalments, they also mean paying more interest overall.
3. Budgeting Discipline
Ask yourself: Can I comfortably set aside part of my income each month to repay this loan without sacrificing essentials like housing, food, and retirement savings?
4. Impact on Financial Goals
If you’re saving for a BTO flat, wedding, or car, will taking a travel loan set you back? Consider both short-term joy and long-term responsibilities.
5. Alternative Options
Sometimes, scaling down the trip, opting for budget airlines, or planning shorter getaways within Asia may be smarter than borrowing heavily.
Safe Borrowing in Singapore: The Regulatory Framework
Singapore has strict regulations around borrowing, which gives borrowers a measure of protection.
- Banks: Offer personal loans with relatively low interest rates. Approval depends on income and credit score.
- Licensed Moneylenders: Regulated by the Ministry of Law under the Registry of Moneylenders. They are required to display interest rates and fees transparently. Maximum interest is capped at 4% per month, and late fees are strictly controlled.
- Unlicensed Moneylenders (“Ah Longs”): Illegal and dangerous. Borrowers risk harassment, exorbitant charges, and even criminal entanglements. Always check the official Ministry of Law website to confirm if a moneylender is licensed.
Practical Tips for Borrowing Safely
If you’ve weighed your options and decided a loan is the best way to fund your travels, here are some practical steps:
- Borrow Only What You Need: Don’t take a $10,000 loan when your holiday budget is $6,000. Extra funds may tempt unnecessary spending.
- Compare Before Committing: Use online comparison tools to check interest rates, fees, and repayment terms across different banks and licensed lenders.
- Check the Fine Print: Look for hidden charges like processing fees or early repayment penalties.
- Keep Repayment Within 20% of Income: A common rule of thumb is that all your debt repayments (housing, car, personal loans) should not exceed 40% of your income, with personal loans ideally staying below 20%.
- Set Up a Repayment Plan: Automate repayments via GIRO to avoid missing instalments and late fees.
- Don’t Rely on Loans as a Habit: A travel loan should be occasional, not an annual ritual. Otherwise, debt will snowball.
Real-Life Scenarios
To bring this closer to home, let’s look at a few examples:
- The Family Holiday: Mei Ling, a 38-year-old mother of two, wanted to take her children to Disneyland Tokyo during the school holidays. Airfares and accommodation added up to $7,000. Instead of wiping out her savings, she took a $5,000 loan from her bank, repaid over 18 months. This allowed her family to enjoy the holiday while keeping an emergency fund intact.
- The Honeymoon: Jason and Priya had just spent heavily on their wedding. Still, they didn’t want to delay their dream honeymoon in Europe. They took a $10,000 loan, budgeting carefully to repay it over two years. By choosing a loan with a fixed instalment plan, they avoided racking up unpredictable credit card interest.
- The Urgent Trip: Ravi’s father fell ill in India, and he needed to fly over immediately. With limited savings on hand, he took a small loan from a licensed moneylender to cover air tickets and expenses, repaying it within six months once his bonus came in.
The Bottom Line: Is a Travel Loan Right for You?
At the end of the day, taking a loan for travel is about balancing your dreams with your financial reality. Travel enriches our lives, strengthens relationships, and creates memories that last a lifetime. But borrowing for leisure also means accepting the responsibility of repayment.
For some Singaporeans, especially those with stable income and disciplined budgeting, a travel loan can be a sensible way to enjoy experiences now without jeopardising long-term financial health. For others, particularly those already managing multiple debts, it might be wiser to scale down plans or save up instead.
The golden rule is simple: borrow smart, borrow safe, and never let the joy of travel turn into the stress of unmanageable debt.