Holiday loans

Looking to spread the cost of your holiday? A personal loan is one option.

What is a holiday loan?

A holiday loan is simply a personal loan that you take out to pay for a holiday.

As personal loans, holiday loans are generally available for between £1,000 and £25,000.

They are also unsecured – so they do not require you to use an asset such as your home as security.

Can you get a loan for a holiday?

Yes, you can take out a personal loan to pay for a holiday just as you can to cover the cost of buying a car or installing a new kitchen.

This is the case whether you are holidaying in the UK or going abroad. However, you should always think carefully before taking out a loan.

Can you take a loan to go travelling?

Most people who go travelling for an extended period have little or no income during that time. This could make it difficult to meet the monthly repayments on a personal loan.

Lenders may agree to offer you a loan based on your current circumstances, but if you start missing payments your credit report will be affected and there will be extra interest and fees to pay.

How do you qualify for a holiday loan?

To qualify for a personal loan, you must convince the lender you can and will pay it back.

To do this you need to show evidence of a regular income.

Most lenders also only accept those with good credit histories, and reserve the best deals for those with excellent credit scores.

Use our Eligibility Checker to find out which holiday loan deals you are likely to be offered, without taking the risk of damaging your credit report with rejected applications.

Should I pay for my holiday with a personal loan?

Where possible, it’s always best to use savings to pay for holidays. But if you don’t have that option, a personal loan – or holiday loan – allows you to spread the cost of your holiday.

Pros of a holiday loan

• Fixed payments: Taking out a fixed-rate holiday loan means you know when and how much you have to pay, which can help you to budget accordingly. This is not the case if you choose a variable-rate loan
• Fixed term: With a personal loan, you can choose how long you need to pay it back. A longer term means lower monthly repayments; a shorter term means you pay less interest
• Flexible spending: When you take out a loan you can spend the money using your debit card or withdraw the cash from your account. This isn’t always the case with credit cards, which often impose overseas usage and cash withdrawal fees
• Payment holidays: Some lenders offer you the option of taking a payment holiday – meaning you can miss repayments for a month or two (as agreed) without incurring penalties. However, you will have to meet specific requirements to qualify

Cons of a holiday loan

• Higher costs: Taking out a holiday loan will inevitably increase the overall cost of your holiday due to the interest charged. This is particularly true if you have a poor credit score, as you will not qualify for the cheapest loans
• Repayment problems: Risks associated with borrowing money include being charged for late payments, getting further into debt and damaging your credit score

How much will a holiday loan cost?

The cost of your holiday loan will depend on:

• Fees and charges: Are there any extra fees, such as early repayment or arrangement charges?
• Interest rate: The overall interest rate is given as an APR (Annual Percentage Rate) that includes any extra fees and charges. However, lenders only have to offer the advertised APR to 51% of applicants, which means the actual rate you end up paying could be higher
• Loan term: If you choose to pay your loan back over a longer period, you will generally pay more interest meaning it will cost you more overall
• Credit history: The lender will use your credit history to decide what interest rate you pay. If your credit score is poor, you will pay a higher rate

How do I apply for a holiday loan?

Applying for a holiday loan is like applying for any personal loan. You’ll need to provide some details about yourself, as well as one or two forms of photo ID.

Most lenders will require you to be over 18 with a UK bank account and a debit card; some even need you to have lived permanently in the UK for a certain amount of time. Others only offer loans to people with an income above a set threshold.

You can apply for a holiday loan by phone, online, by post, or by visiting a lender’s branch. The quickest and easiest way to find the best deal is via a comparison site such as MoneySuperMarket, however.

According to MoneySuperMarket data, correct as of September 2019

What are the alternatives to a holiday loan?

A holiday loan is just one way to cover travel costs. Alternatives include:

• Savings: If you can use your savings to pay for some or all of your holiday costs you can avoid paying interest on a loan
• Credit cards: 0% interest credit cards can be used as an interest-free loan to pay for your holiday. But beware: most cards impose foreign usage fees, as well as cash withdrawal charges. To avoid paying high interest, you will also need to clear the debt in full within the 0% interest period and meet the repayment schedule
• Travel companies: Some travel agencies and companies offer finance arrangements. You may be able to pay a deposit and spread the rest of the cost over an agreed time period. Just watch out for fees, charges and high interest rates
• Peer-to-peer lending: Borrowing money from other people via a peer-to-peer website, rather than going through a bank or building society, can mean paying less interest

Holiday loans: Top tips

• Consider alternative options: If dipping into your savings isn’t an option, consider peer-to-peer lending or a credit card
• Borrow a sensible amount: Don’t borrow more than you can afford to pay back. MoneySuperMarket’s loan calculator can help you work out what a loan will cost and whether you can afford it
• Shop around: Use MoneySuperMarket’s Eligibility Checker to see what loans you are likely to get – without affecting your credit report

Compare holiday loans

Find an affordable holiday loan by comparing your options on MoneySuperMarket.

Just tell us how much you need to borrow and over how long, add in a few details about your personal circumstances, and you’ll get a list of quotes tailored to your requirements.