Loans for Holidays
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
6th December 2021
4 minute read
Whatever your ideal holiday is, you might need some extra funds to make your dream a reality. If this is the case then you may consider taking out a personal loan to pay for it.
Whether you’re yearning for some solo soul searching, or would like to head off on an all-inclusive with the family in tow, read on to discover more about borrowing for travel.
What is a Holiday Loan?
A holiday loan is a personal loan specifically used to pay for a holiday. Personal loans for specific causes may also include loans for weddings, a car, or home improvements. When you’ve got itchy feet but you’re not feeling flush enough to fund your own adventures, a holiday loan allows you to skip some of the saving and fast forward straight to the good bit. Holiday loans are usually unsecured personal loans with fixed monthly payments, so you know what you’ll need to budget when it comes to paying the money back – along with the agreed interest.
Holiday loans: a summary
- Loan for various types of holiday
- Usually unsecured
- Usually fixed monthly payments
If you’re desperate to attend a family member’s wedding on foreign shores, or simply need some sunshine, a holiday loan could give you the cash you need up front. You’ll then pay it back over an agreed term, generally between one and five years. The loan amount and length you search for will likely depend on the scale of your adventure.
Compare Loans for Holidays
So, other than the best possible annual percentage rate (APR), what should you be looking for when you compare loans for a holiday? APRs are important because they steer how much borrowing costs you, but they’re not the be-all and end-all. That’s why our moneymatcher allows you to compare the total cost of borrowing, along with highlighting some key points you’ll want to be aware of, all based on your personal circumstances. But for now, let’s go back to APRs because they’re a great place to start.
Borrowing big tends to cost less. So if you want to borrow over £10,000 for an around the world balloon voyage, you may find a lower interest rate than for a loan of a few thousand to pay for some flights. But whenever you borrow, it’s important to only take the amount you need and can pay back. So once you’ve decided on a budget, stick with it.
That said, it can be worth playing around with the amount you’re planning to borrow by a couple of hundred pounds or so. Pushing over a borrowing threshold could mean that even though you’re borrowing a bit more, the corresponding lower rates of interest that are available mean you’re paying slightly less in total. That’ll be handy if you need to pay for travel jabs or a new passport.
Interest Rates & Credit Checks
The interest rates available to you will depend on how creditworthy you’re judged to be, so it’s a good idea to check your credit rating for any stonkers that could put a spanner in the works. The very best deals often need you to fulfil certain criteria too, so when you’re comparing holiday loans, make sure you fit the bill. Don’t forget that advertised APRs aren’t available to everyone.. Only 51% of people accepted for the loan will get the representative rate.
How much you’ll need to pay back each month is another important bit of detail to consider. A faster pay back time will mean you’ll be debt free quicker. However, you don’t want to leave yourself so short that could end up in financial difficulty. Some loans come with a payment holiday built in, so when you return from your jollies you can have a bit of breathing space before payments start. It’s delaying the inevitable obviously and you could pay more in the long run for the privilege, but it can be a useful feature to help you settle back into everyday life.
It may seem a bit of an unlikely prospect right now, but if you’ve got some extra cash in the future, you may want to pay more off your loan or settle it completely. This is when pesky overpayment and redemption fees can come into play, so make sure you scope out if the lender charges those too before you make your choice.
Is a Loan for a Holiday Right for Me?
Although holidays are always tempting, if you can postpone and give yourself the time to save, rather than borrowing, that would be the better thing to do.
For occasions like family weddings or stag and hen dos abroad – events where you don’t want to miss out on the action – you could try to personalise your trip to save some pounds. Staying at more affordable accommodation or joining part way through the holiday could help you to pay less. Paying for a holiday on a credit card with a 0% period is another way to save you money, providing you pay it off before the higher interest rates kick in.
If you do decide to borrow – either by card or with an affordable personal holiday loan, make sure you keep the purse strings in check once your holiday is in full swing. Splashing the cash by credit card when you’re in the resort will give you a big bill to tackle when you get home, which will make it harder to pay off your original borrowing. As always, it’s about finding a balance, sticking to a budget and leaving yourself enough room to breathe.