3 Ways to Leverage 'Buy Now, Pay Later' for Your Dream Vacation

Taking a vacation is pricey, and with inflation soaring over the past few years, the average cost of a domestic trip -- not including airfare -- is $1,584 right now. When you add flight costs or the price of paying for other family members to join you, a dream vacation can easily feel out of reach.

High travel costs are causing some Americans to opt for buy now, pay later (BNPL) options when putting their vacations into their online shopping carts. BNPL plans are essentially loans you apply for when booking your travel that allow you to pay for your trip over time.

Many BNPL companies charge interest rates ranging between 7% to 30% for the loan, but some may have lower special offers. As such, using a BNPL to fund your dream vacation may not always be the best option for your personal finances. But if you score a reasonable rate -- some can be as low as 0% -- there could be a few ways to leverage this option for your dream vacation.

1. Buy your plane tickets

The ticket-purchasing website Alternative Airlines says on its website that you can book flights on more than 650 airlines and use a BNPL service to pay for them.

The website partners with 10 BNPL companies, including PayPal Credit, Affirm, Klarna, and Afterpay, allowing you to make payments on your ticket weekly, bi-weekly, or monthly. Some buy now, pay later companies on the site even offer interest-free payment plans.

2. Book your hotel

Lodging is one of the most expensive parts of any dream vacation, which is why some people choose to pay for it using an installment plan rather than all at once.

There are a couple of different payment methods you can choose from when booking a hotel with BNPL, including a no-interest option through some online travel booking websites. For example, Expedia allows you to reserve some hotel rooms without charging you, and you only pay for the room when you arrive at the hotel.

The company's Book Now Pay Later option won't charge you any interest, making it a better option than some BNPL companies. Expedia says that some hotels may also offer free cancellation, which can come in handy if your travel plans unexpectedly change.

Another option for travelers is to book their hotel and pay for it using a buy now, pay later service like Uplift. The company conducted a survey showing that 48% of travelers are likely to use BNPL for hotels, and 43% of travelers upgraded their hotel options and amenities when doing so.

3. Book the full vacation

Nearly all online vacation booking sites offer the option to pay for your full vacation over a series of installments with a BNPL service. This allows you to spread out the cost of a pricey vacation over time, making it easier to manage the large expense.

But it's good to remember that the more you spend on your vacation, the more you'll owe, depending on your BNPL interest rate. The Consumer Financial Protection Bureau says BNPL late fees are on the rise too, and that in some cases, late fees can make buy now, pay later payment options more expensive than using a credit card.

It's worth mentioning that some vacations allow you to pay in installments without charging any interest. Disney is well known for allowing people to book their entire vacation with just $200 down and then spread out payments leading up to the vacation, paying as much as they want for each payment. The last remaining payment is then due 30 days before you arrive at your hotel.

Keep this in mind when using BNPL

While there can be responsible ways to use BNPL to book your dream vacation, pay attention to the details. If you qualify for a 0% interest rate, then it may not be a bad option. But if you have to pay an interest rate, you're much better off budgeting and saving ahead of time for your vacation.

Also, make sure you'll be able to make your payments on time to avoid late fees. Your dream vacation will likely cost enough already -- there's no need to add fees on top of it.