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Holiday loans

Holiday loans

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Last updated: 05 January 2023

Holidays can be expensive, whether it's domestic or abroad the costs add up. Especially if you want to go at the most popular times of year, you might find yourself looking for ways to pay off your holiday over time.

Personal loans for holidays are an effective way of funding a holiday without paying for it all upfront. 

This guide will take you through how holiday loans work, and the pros and cons. We'll also take a look at a few other ways to borrow money; a loan might not be the best option if you have a poor credit score.

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Can I get a loan to pay for my holiday?

If you need money for a holiday but can’t pay for it all up front, you could use a ‘holiday loan’ to pay for it over time (much like how many people take out wedding loans or home improvement loans).

These are a form of personal loans that are unsecured, meaning you do not have to put your house up as collateral in case you can’t make the payments. 

They are often used instead of credit cards as they can offer lower interest, although you don’t get the same security (for example if the holiday company folds).

How do I apply for a holiday loan?

  1. Click the 'start comparing' button below. You will be asked how much you are looking to borrow, the purpose of the loan, and over how long you would like to repay your loan.
  2. Enter your personal details. This takes five minutes, but allows us to find and show a bespoke list of personal loan options available to you without affecting your credit score.
  3. Select your preferred loan rate. If any of the options presented fit into your budget and you are able to to keep up with the monthly repayments, click on this option to continue with it. You will then be provided with more information on how to finish your loan application.

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What are the advantages and disadvantages of holiday loans?

Holiday loan advantages

They can be cheaper

A holiday loan can be relatively inexpensive, and compared to credit cards the interest rates will usually be lower. The interest rate that you are eligible for will largely depend on your personal circumstances and your credit rating though.

Improves your credit score

As with borrowing any money, taking out a personal holiday loan agreement can help you establish a good credit score and good payment habits, as you as you make all your monthly repayments on time!

Credit on your terms

With an unsecured personal loan you can pick the length of time of the loan, adjust monthly repayments, and select an interest rate that is manageable for you. Unlike like with a credit card where it is easy to get caught in a cycle of carrying a balance, personal loans are a more finite form of credit; you know how much you have to pay off each month and how much you will pay over the term of the loan, and you can usually pay off your loan early too (note: this depends on the repayment terms of the loan).

Holiday loan disadvantages

Borrowing money puts yourself at risk

As with any loan, taking out money is a risk if you cannot afford to pay it back. Although they are a simple way of borrowing money, it is important to know the risks and decide whether it’s absolutely essential you get a loan for your holiday.

You are at the mercy of your credit rating

Because its unsecured, if you don’t have a good enough credit rating banks will not lend you the money. If your credit rating is average, you may be allowed to take the loan out but with high interest.

It is debt

Taking out an unsecured personal loan to pay for your holiday should only be done if you have assessed that you will be able to keep up with loan repayments. Accumulating debt can be easy to do, and it people can quickly lose a grip over their finances. We recommend you only consider a loan for a holiday if you are sure you can afford it.

How do holiday loans work?

In order to get a holiday loan, as with any unsecured loan, you will have to pass a credit check. 

This means that the lender will examine your credit history and see whether you can be trusted to pay it back, giving you a score on how trustworthy you are in terms of your financial history. 

Fixed rate loans may be your safest option, as the interest will stay the same the whole time that you're repaying it and helps you budget more effectively. As with other loans, you will need to provide details about yourself and forms of photo ID.

Be aware, all loans are subject to your financial circumstances and borrowing history at the time you make your application.

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What are the alternatives to holiday loans?

Credit Cards

The most common way of borrowing money for a holiday is using credit cards. These can be very useful as many companies will offer 0% interest for a certain period of time. 

Credit Cards also give an added layer of protection to your money, should the travel company go bust it would be easier to recover your money if you paid with a credit card. 

The key to a credit card is making sure you pay it on time as there can be high interest fees if you don’t, there can also be high charges for using them abroad.

Travel Companies

A less known way of financing your holiday can be found directly with a travel agency. Some offer financing, such as putting a deposit down and then paying the balance off. 

If you are considering this, it’s important to read the fine print as they will often have hidden fees and high interest rates.

What to look for when comparing holiday loans

  • It’s important to not just get the first loan that you see. Take some time and compare loans from different lenders, especially if you have a poor credit history.
  • Compare the repayment plan to that on a credit card. A credit card will be interest free for the first month but could still be cheaper if you take a few months to pay it back.
  • Loan applications may affect your credit score. The best way to compare is to run a soft search, where you will be given a list of loans available.
  • Use as much of your own money as possible. As a general rule of thumb, the less money you borrow the better.

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Fergus Cole

Author: Fergus Cole

Fergus is a journalist specialising in the personal finance, energy and broadband sectors. He also has a passion for travel and adventure so tries to make the most of this in any spare time he gets.

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