Table of Contents
- What Are Holiday Loans?
- How Do They Work?
- Who Can Get Loans For Holidays?
- Who Offers Holiday Loans?
- What Can You Use Holiday Finance For?
- Holiday Loans vs. Credit Cards
- Credit Cards Pros
- Credit Cards Cons
- How To Increase Your Credit Score
- Alternatives To Credit Check Holiday Loans
When you want to go on a getaway, but the money is tight, you may want to consider holiday loans. It can be a great financing solution for people who need a break, but cannot easily afford one. Pay Monthly Holidays! But before you commit to getting a loan to travel, you need to learn everything about this financing option, so you can properly weigh benefits and drawbacks. Here is your ultimate guide to travelling on finance!
What Are Holiday Loans?
Holiday loans, as the name would suggest, are unsecured loans that you get in order to go on vacation or travel. It isn’t a common choice for everyone, but it can be used for a variety of different situations, so you should not overlook this option if you are planning an expensive trip that is difficult to cover.
How Do They Work?
At this point, you might be asking yourself “How do I get the best holiday loan?”. This type of personal loan works just like any other unsecured loan, in that you do not need to have collateral in order to get it. However, your credit score will be paramount to the decision of whether or not you can get financing, how much, and what the interest rate is. The better your financial history, the better the deal you can get.
Applying is simple and straight-forward –you can do it online by just filling in a form with all the relevant details. Your application will be assessed, and the lender will let you know whether or not you are accepted and then what documents you need to send in order to finalise your loan.
The amount you can get, as well as the interest rate, is dependent on your credit rating. The amounts and lending periods vary, but they usually sit at around £7,500 to £15,000, with a possible repayment term of between 12 and 60 months.
Once you get the loan, you will pay it back in fixed monthly instalments over a period that is previously agreed upon with the lender.
Who Can Get Loans For Holidays?
As long as you meet the criteria, you can benefit from this kind of financing. Here are some of the requirements to get holidays on finance.
- Have a good credit rating
- Be over 18 years of age
- Have a UK bank account
However, if the credit check is a problem for you, there are other avenues you can pursue, that we will discuss shortly.
Who Offers Holiday Loans?
This financing option is available at many different lending companies, so make sure to look around and browse different lenders and financing opportunities. There are more options available than you think, and you are bound to find a lender or a broker who can strike a deal for you.
What Can You Use Holiday Finance For?
This type of finance can be used for any kind of travel you like, regardless of season. According to the Office for National Statistics, UK residents made 70.8 million overseas visits in 2016, 8% more than the previous year. These trips cost them a whopping £43.8 billion, a whole 12% more than in the previous year. With numbers like that, it's no wonder we need some help in the finance department when it comes to travelling.
Christmas Holiday Loans
Driving home for Christmas may be the name of the song, but it’s unpleasant to do in real life, especially if your home is hours away. Plane tickets are expensive, especially around this time of year, so air travel finance for the holidays can be an ideal solution. You can get where you need to be quicker and easier in an affordable way.
Summer Vacation Loans
It seems like everyone goes away during the summer and if you can’t afford a holiday, you’re stuck back at home in the miserable UK weather while everyone else is sunbathing in tropical countries. A loan can change that and help finance the summer getaway you need in order to relax and recharge your batteries.
Gap Year Loans
After more than a decade of school, a gap year sounds like heaven. But it also sounds expensive, and if you haven’t saved up for it, it can be tricky to make it work. Taking out a loan to travel can be the solution to your problem; you can fund your gap year adventures and pay it back in affordable instalments.
Holiday Loans vs. Credit Cards
You may be wondering whether a different financing option, such as credit cards, would be more appropriate than a loan. The truth is cards can have advantages and disadvantages, just like loans, so the best course of action is to take a close look at both of these options and decide which one fits your needs best.
You can repay them in fixed instalments
One of the biggest advantages of a loan like this is that you have the ability to repay the sum in instalments. That way, you don’t need to make room in your budget for a massive lump sum to repay, and you also do not need to repay it immediately. You can repay in a way that is affordable to you and in amounts that are pre-determined, so you know exactly what to expect every month and what you need to fit into your budget.
You can choose the time-frame and instalment size
The flexibility of this kind of financing is also a massive draw for customers. You can choose how much you want to borrow, for how long, and how much you can afford to repay every month. For example, you may prefer lower instalments, in which case your loan will be longer, and the amount of interest will be higher. Or on the contrary, you may be interested in minimising interest costs and getting rid of the loan quicker, so you will choose larger repayments, if you can afford them.
You need a good credit score
The big drawback with this option is the fact that you need a good score in order to be able to borrow a decent amount and get a good deal. Not everyone benefits from a good rating, and this can be a severely limiting factor for some, even making it so that they cannot afford to go on holiday.
Remember that even with a good credit score, you are not guaranteed to get the best deals!
You will incur a high interest rate with bad credit
The other major aspect to take into consideration is that bad credit is going to attract a high interest rate, which makes the loan more expensive. Just how much more expensive depends on how poor your rating is. Keep in mind the fact that different lenders will offer different terms for their loans, so it’s good to browse and see what your best option is.
Credit Cards Pros
You don’t need to take out a separate loan
No one likes to go into debt, especially in several places at the same time. It can affect your credit score, as well as make it difficult to manage your finances in an efficient way. Putting your holiday on your card, instead, means you only need to repay money from one source, and you have the advantage of having an established relationship with the lender.
You can get a 0% credit card
A very interesting possibility is getting a 0% credit card, which is a card that charges no interest. However, this feature is only available for an initial period of a few months to a year. If you manage to pay the money back within that time frame, or at least most of it, this may be your most affordable option for holiday financing.
Credit Cards Cons
The interest rate is higher than that of the holiday loans
While the interest rate is a concern for both financing methods, credit cards charge a higher APR than holiday loans. Unless you have a 0% credit card and you manage to pay the money off within that grace period, you might be stuck with a higher rate for the rest of your repayment period, which can make the loan more expensive.
You may be charged extra for using a credit card
While putting the vacation expense on your credit card is convenient, you have to be careful, because a lot of hotels, airlines, and travel agencies will actually charge you extra if you pay with a card. You can expect to have a 1% to 3% additional charge for the use of your card. Depending on how expensive your holiday is, that amount may not be that small. It’s up to you to decide if the convenience is worth the higher price.
How To Increase Your Credit Score
As mentioned, your credit score is the most important aspect of your application and the one that decides whether or not you are accepted, how much money you can borrow, and how high your interest rate will be. If your rating is less than stellar, there are things you can do to pull your credit up and help it along.
Pay off previous debt
The first step is to pay off any and all previous loans or debt you may have incurred. Overdue debt pulls your credit score down, but you can improve it if you pay it off.
Pay off your credit card balance
Same goes for the balance on your card – making the minimum payments doesn't help. Instead, pay off the whole thing every time.
Pay your bills on time
Paying your bills on time can do wonders for your rating. Just make sure to stay on top of all payments, and you will see the score go up.
Don’t forget that you can set up direct debits to make sure you don’t miss payments and increase your credit score at the same time!
Alternatives To Credit Check Holiday Loans
If relying on your credit rating is not an option for you, you don’t have to give up. There are still alternatives to consider if you want to get financing for your vacation. There are options available for everyone, so check out possible choices.
The fastest route to a loan is to secure it with an asset you own, such as a house. That takes the pressure off your financial history and doesn’t require you to pay a very large amount of interest for a poor credit rating. This option also enables you to borrow more money than with an unsecured loan.
However, the drawbacks, here, are that first, you must own a house. And second, you risk losing it if something goes wrong and you cannot repay your loan. Is a vacation worth potentially losing your home?
If you don’t own property, or don’t want to put it up as collateral, there is still something you may consider, which is a guarantor loan. This kind of loan requires someone else to sign with you and assume financial responsibility, should you default on the loan. Essentially, they are your loan security.
The problem here is that it can be difficult to find someone willing to take on the responsibility, because it’s a risky position to be in. No one plans on being unable to repay a loan, but if it happens, it will be up to your guarantor to cover that expense for you.
As you can see, they can be an excellent option for financing when you’re broke, but still need a break. Carefully weigh the pros and cons and see if you can afford to borrow money for your weekend getaway, gap year, or summer adventure.