Holiday Loans – The Way to Your Holiday Dreams

Travelling is something many people enjoy to do, whether they want to visit family or they just need a break to unwind. What could be more exciting than taking time to explore somewhere new?

However, travel is expensive. There are a lot of upfront costs like paying for airfare, accommodations, and other extras. While there are a lot of ways to keep costs low, a holiday loan can help fill in the gaps.

In this guide, we’ll explore the world of holiday loans so you can decide if this is the best way to achieve your holiday dreams. While not right for everyone, they can make travel more accessible and affordable.

What Is a Holiday Loan?

What exactly is a holiday loan? These aren’t talked about as frequently as other types of loans like payday loans, personal loans, and so on. However, they’re not as complicated as they sound.

In simple terms, a holiday loan is a type of personal loan intended to fund travel and holiday costs. While you can use a personal loan to typically pay for anything you want, these types of loans are created with travel in mind.

Like general personal loans, holiday loans include the following:

  • Interest rate: There will be either a fixed or variable rate. A fixed-rate stays the same for the life of your loan while a variable rate can move up or down throughout the loan payoff period. Interest is what you pay on top of your loan balance.
  • Repayment terms: When you choose your loan, you’ll also agree to repayment terms. This is typically how long you have to pay off your loan. It could be anywhere from 1 – 10 years.
  • Fees: Lastly, you might also have additional fees from your lender. Common holiday loan fees are establishment fees, monthly fees, and early repayment fees. You could also owe more if you fail to pay on time.

It’s important to note that a holiday loan is not the same as a payday loan. Payday loans are more predatory, and they have short repayment terms and a high interest rate. While a holiday loan should also be taken seriously, these aren’t the same thing.

How Much Can You Borrow with a Holiday Loan?

The amount you can borrow if you choose to take out a holiday loan varies depending on the lender. You never want to borrow more than you can afford or more than you actually need.

In general, a holiday loan can be taken out for as little as $500 or as much as $100,000. While the latter is rare, the amount you can borrow depends on your credit rating, income, and existing debt.

How do you know how much you need to borrow for your holiday loan? 

  • Total trip cost: How much will your total trip cost, including all travel arrangements, accommodations, and excursions?
  • Savings: Ideally, you will have saved some money for your trip. You’ll subtract this from the total cost.
  • Extras: It’s always a good idea to travel with a little bit of extra cash just in case. Anything could happen, and you don’t want to find yourself without money when you need it.

By subtracting the amount you’ve saved from the overall cost in addition to a bit of extra wiggle room, you’ll have an idea for how much you should borrow. Remember, you’ll want to also have your repayment plan in mind when thinking about how much debt to take on for your holiday.

Types of Holiday Loans in Australia

In Australia, there are a lot of different types of holiday loans on the market. More and more lenders offer a variety of products, so you have a few different options depending on what you’re looking for and your credit situation.

The most common type of holiday loan is an unsecured personal loan. This means your assets are safe from being seized if you fail to pay back your loan on time. If you take on a secured loan, you might get a better interest rate, but your assets (like your car) are at risk. It’s up to you which type feels right for you.

Other than a secure loan, you can also choose to borrow through a peer-to-peer lender. This is also known as crowdfunding loans. This is a modern alternative to traditional banks, and you borrow directly from individuals through a secure platform.

Finally, if you plan your holiday through a travel agent or agency, they might offer their own in-house financing option. This can be convenient, but always make sure you read the fine print to make sure you’re getting a competitive rate and that there are no additional fees.

How to Apply for a Holiday Loan

If you’ve decided a holiday loan is right for you, it’s easy to apply. In many cases, you can apply online from the comfort of your home. However, this is when you want to shop around for the best rate and terms. Applying for several will help you identify which is the best fit for your needs.

When you apply online, you’ll need to share information about:

  • Your income
  • Existing debts and repayments
  • Your expenses
  • How much you want to borrow

Though intended for holidays, these loans don’t typically ask how you plan to spend the funds, where you’re travelling, or what specifically you’ll spend it on. Once you apply, you should receive a result online instantly or via email or mail within a few business days.

When in doubt, a loan expert can help you determine which type of holiday loan is the best fit for you. Not every lender has the best terms, rate, and deals. Having an expert on your side ensures you don’t spend more than you need to.

Things to Know About Travel Loans

There are a lot of misunderstandings about travel loans that you should know upfront. The last thing you want when taking on a new loan is to find yourself wrapped into something you can’t afford.

  • Immediate repayment: Unfortunately, you can’t usually wait until you return from your trip to start paying your loan back. Repayment usually begins immediately, even if you haven’t travelled yet.
  • Package deals: Some lenders offer package deal loans with extra add-ons like insurance or travel deals which could make some lenders more tempting.
  • Early payment fee: If you pay off your loan early, there might be a repayment fee. This is to make sure the lender earns back money on the loan that they lost in interest.
  • Income: If you’re going on a longer trip that might require you to leave your place of employment, make sure you have enough income or savings to pay back your loan on time.

It’s a good idea to work with an expert to make sure you fully understand the situation. A loan is a big commitment. It’s not something to enter into lightly. Staying on top of your terms, fees, and repayment are a must.

Alternatives to Using a Holiday Loan

There are some instances when a holiday loan is not the right fit for your situation. Like with any big financial decision, you’ll want to determine whether this fits into your long-term goals. That might mean choosing an alternative.

You should avoid taking on a holiday loan if you’re already struggling to pay off debt or if you don’t know how you’ll afford to pay it back. You’ll likely have a weekly or monthly repayment plan from your lender when applying for your loan, so determine whether or not that fits in your budget.

There are a lot of alternatives to using a holiday loan to pay for travel. You can try any of the following:

  • Save early: Saving for travel can be intimidating. Taking the time to start your savings plan as early as possible makes it easier to make a bigger dent in your savings budget.
  • Credit cards: While not always a good fit, taking advantage of travel rewards credit cards can help you land good travel deals, free flights, and low-cost hotel stays. For a low-interest credit card, you might even want to pay travel expenses this way.
  • Travel agencies: Some travel agencies and booking companies offer their own payment plans. While they might have high fees, these could be easier and less expensive than taking on a loan.

These options above might be a better fit depending on your situation. Like all things finance, there is no such thing as one-size-fits-all.

Take Your Dream Holiday

If you’re been dreaming of travelling abroad or an exotic getaway, it might be closer than you think. A holiday loan makes it possible to afford a more extravagant, expensive trip. These are available to people of all income levels and credit ratings, though you’ll need to be careful not to get in over your head.

As long as you’re aware of your financial goals and how this loan fits your plan, you can use a holiday loan to see more of the world. Are you ready to take your dream holiday? If so, the experts at Debt Busters can get you started. Contact our office to schedule a consultation today.


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