That BREXIT thing has prompted many people to look further afield for their holiday fun this year, but poorer exchange rates, along with a yearning for some sun, means people are forking out more for their annual getaway.
While some may be lucky enough to have that extra cash tucked beneath their meditation mats, many will need to take out a loan to enjoy a holiday. While a loan can give you that extra boost of cash, care is needed when looking at which loan is right for you.
Not sure if a loan is right for you? The G has some wisdom to share before you jet set to the sun.
Golden rules of holiday loans
First things first, what is a holiday loan?
A holiday loan is just like any other personal loan – you borrow a set amount of money and agree to certain conditions, like when to pay it back. A holiday loan usually comes in the form of an unsecured loan, meaning you won’t have to provide any collateral (like your house) to secure it, although a credit check will take place.
The advantages of a holiday loan
Whether you’re popping over the pond for a family wedding or planning a round the world trip of a lifetime, a personal loan can be a quick and easy way to fund your adventure.
- If you choose to take out a holiday loan your payments will be fixed, meaning you’ll know exactly when and how much you will have to pay. Easy!
- In general, you can usually borrow more than with a credit card and you won’t have to worry about any other fees, as long as you make the agreed payments.
Sounds great right? But don’t reach for your sun cream just yet – there are a few disadvantages to taking out a holiday loan:
- As with all personal loans, it isn’t a flexible option. With holidays and travelling you never know what could be round the corner, so having to take a specific lump sum might not be quite what you’re after.
- You’ll be in debt. While a holiday loan might be a quick and easy fix, it’s worth remembering that you still have to pay the money back with interest on top.
- As with all loans, if you have a poor credit rating you’ll struggle to get your hands on the best deal out there. Check out how your credit score can affect your borrowing and the effect of bad credit.
What are the alternatives to a holiday loan?
Everyone has different needs and a holiday loan may not be quite right for you but fear not, there are plenty of alternatives:
- The obvious alternative is to use a credit card to pay for your holiday. Many of the well-known providers now offer 0% interest for an introductory period. But be careful – if you fail to pay off the full amount at the end of the interest-free period, it’ll cost you. A bonus of using a credit card is that your purchase will be protected under the 1974 Consumer Credit Act which would give you some added protection if your holiday provider was to go bust.
- Go old school. – saving up over a period of time for anything is always a wise decision. Shop around to try and find a deal on a savings account with the most enlightened interest.
- Dipping into your overdraft can be a cost-effective option if you have a 0% or low interest overdraft. But be wise – always check the terms and conditions and make sure you aren’t accruing fees you didn’t know about.
- With some travel companies you can pay a very low deposit (sometimes as little as £1) to secure your holiday and then pay the balance over a set period. This gives you a bit of time to get your finances in order. However, this option is usually only offered on longer trips and you’ll probably still have to pay before you travel.
So there it is – the G’s complete guide to holiday loans. If you do decide a holiday loan is the right choice for you, it’s always best to shop around to find the best deal. Seek and you shall find.
Peace and loans,