Holiday loans can be the financing option that saves the day, if you are looking to travel in the near future, but do not have the means to do so. Is it possible to travel on little to no money? Yes, it is, as long as you opt for the right kind of financing.
But a loan for holiday is not a good choice for everyone, and before you commit to a financing solution like this, it is your responsibility to make sure you are aware of the advantages you can enjoy, as well as the disadvantages that may affect the experience.
What Are The Pros Of Holiday Loans?
You can go on holiday even if you don’t have money
Clearly, one of the biggest draws with holiday loans is the fact that it offers a financing option in a case where there are no other choices. We all need a vacation from time to time, but without money, our options are limited. That is where a holiday loan can make travel possible in a relatively low-effort way. All you have to do is apply, and you might be able to score the money for your dream winter getaway or a much-need summer adventure with your mates.
You can pay back in instalments
Another thing that makes this travel financing option very attractive is that you do not need to repay the amount in one go, but can pay it back in instalments. Depending on the amount you borrow, you and the lending company will agree on fixed instalments and a repayment period. This allows you to borrow and repay the money in a way that is affordable to you and easy to fit into your normal budget, without having to strain your wallet too much.
The loan offers flexibility
The other advantage you enjoy with a holiday loan is that you can use it for any kind of travel plans you want. You are not limited to a set package or certain destinations, seasons, etc. You can use your loan to take a dreamy Christmas trip to ski in the Swiss Alps, you can run away to Paris for a romantic spring weekend with your significant other, or you can take the summer holiday you’ve always wanted in the Caribbean. Nothing is off-limits, as long as you get the trip you want.
What Are The Cons Of Holiday Loans?
The interest rate is high
This is an unsecured loan, which means that you do not have to put an asset up as collateral in order to be able to get the loan. However, that means that you are not providing any kind of tangible security for the lending company, so that results in a higher interest rate. That is meant to make up for the lack of security and allow the lender to recoup some of their loss, should you default on the loan.
It is based on credit score
Another thing you should be aware of is that this kind of loan is offered based on your credit score and whether or not it passes their criteria. If your credit score is good, you don’t have much to worry about (although you are still not guaranteed the best deals), but if it’s not, then you might run into some issues.
They might choose to not lend to you at all, in the worst-case scenario. In the best-case scenario, the amount you can borrow is limited, and the interest rate is very high, because you represent a higher risk for the lending company. That means that you may end up paying back much more than you originally borrowed, making this a very expensive vacation.
Are There Any Good Alternatives To Holiday Loans?
So, let’s say that you’ve reviewed the information included here and you’ve decided that holiday loans might not be for you. Let’s look at what other options there are and maybe one will be suitable for your needs.
You can side-step the whole issue of owing money to anyone by forgoing borrowing, and just choosing to save. It's true that it's difficult, and it may take a long time, but it's the most affordable way to do it. You do not take any risks and won’t lose anything.
If you're not proud of your credit score, then perhaps you may want to opt for a variant that does not require it. A secured loan can be a good bet, as it is secured, like the name says, with an asset you put up as collateral. That can be a house or a car, but be careful – while this option allows for a higher borrowing limit, it also puts you at risk of losing your asset in case of non-payment. Statistics compiled by The Money Charity indicate that 21 properties were repossessed every day in Q3 of 2017.
Do you know someone who has really good credit and owes you a favour? Then get them to co-sign a loan with you and act as your guarantor. Maybe you don’t look trustworthy enough to lenders, but it helps if you partner up with someone who does. Only don’t default on the loan, because your guarantor will have to pay for it themselves.
A credit card can save the say, if you have one! Especially if you can get a 0% interest one, you may even be able to get an affordable vacation that ends up costing you less than with other travel financing options. Be sure to pay it off before the grace period ends, though, lest you be forced to pay a high interest rate.
All in all, as you can see, travel loans can present benefits, but they can also have drawbacks. While a holiday loan can be just the solution you need in order to be able to afford a holiday, it is not an option that will suit every kind of financial circumstance. You want to know the top travel destinations and how to get there with no money? Review the pros and cons and decide if holiday finance is the right option for you.