Photo courtesy Thinkstock.
Trip financing is becoming a new trend with several new startups offering financing for travel rather than putting the ticket on a credit card, reports US News & World Report.
“The holiday travel season is fast approaching, and cash-strapped, credit-adverse consumers now have a few new ways to pay for flights at any time of year. This is good news for some groups, millennials in particular, who have shown a taste for travel and a distrust of credit cards,” writes Susan Johnston Taylor.
CheapAir.com uses lending firm Affirm to provide short-term financing for air travel.
“The program allows travelers to finance flights through monthly payments instead of paying upfront. Plus, loans above $100 are available with three-, six- or 12-month loan terms. Interest rates range from 10 to 30 percent APR depending on your creditworthiness, and there is no prepayment penalty for paying off the ticket early,” Taylor reports.
Affirm also has partnerships with Expedia to offer loans for hotels and packages above $200.
While the company thought that its travel products would attract credit card-averse millennials, they have found that the attraction to transparency in financing spans generations.
They like the fact that they see upfront what they're paying [with Affirm, as opposed to revolving credit that's not as transparent]. We actually spread pretty evenly amongst millennials, Gen X and boomers," Christina Ra, head of communications at Affirm, tells US News & World Report.
Airfordable is another player in the trip financing mix. It works more like a trip layaway program. This program allows you to make payments before a trip, but doesn’t release your ticket to you until you have made all of the payments. While these financing options can open up travel experiences that consumers thought out of reach by spreading out payments, some financial experts warn against the practice.
READ MORE: What Is The Ultimate Bucket List Trip?
"It's not appropriate to carry debt beyond the useful life of whatever good or service was purchased with the debt," Thomas Donnelly, a certified financial planner and founder of Calamus Financial Planning in West Hollywood, Calif., tells US News & World Report.
Despite Donnelly’s advice, the jury is still out on whether or not these new financing options are good or bad. Read on here for more advice on the matter from travel and financial experts alike.