Holiday loans

SECURED LOANS: YOUR ASSET(S) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE, LOAN OR ANY OTHER DEBT SECURED ON IT. 

We compare loans that can be paid back over terms of between one and 25 years. The APR interest rate you’ll be charged depends on your personal circumstances, and will be between 3.2% and 99.9%

This is a representative example of what it may cost: a loan of £7,500 over 60 months at 3.3% APR would equate to monthly repayments of £135.60. The total cost of the loan that you pay back would be £8,136.22

What is a holiday loan?

A holiday loan is a personal loan you take out to pay for a holiday. It can be a useful option for when you want to pay for a holiday but you don’t have the funds available immediately.

Holiday loans can generally be used for holidays both domestic and abroad. They are also unsecured in most cases, which means they aren’t tied to any assets that would be used as collateral.

Should I pay for my holiday with a personal loan?

You should always carefully consider whether you need a loan before applying. This goes for all types of loans, as if you aren’t able to pay back what you owe you could find yourself in a tough financial situation.

Even applying for a loan is something you should only do when you’re likely to be accepted. Having too many rejected applications on your credit report is likely to make it harder to take out a loan in the future.

But if there’s a bargain to be had and you need to pay in full up front to secure the holiday or your dreams, then a loan might be answer. There’s a spike in people looking for holiday loans in the spring and early summer, with 39% of holiday loan enquires to MoneySuperMarket coming then.

Data collected by MoneySuperMarket, correct as of July 2018

The first port-of-call when you want to pay for a holiday should generally be your savings. However, if you’re set on a trip and you know you’ll need some extra funds you should consider the pros and cons:

Pros of a holiday loan

Make fixed payments: taking out a fixed rate personal loan for your holiday has the advantage that your repayments are fixed. This means you’ll know when and how much you have to pay, which can help you budget accordingly.

However this won’t be the case if you choose a variable rate loan, as the rate will go up and down depending on the interest rate of the market index your lender uses – in most cases this is the base rate set by the Bank of England.

Choose your term: you’ll also be able to choose how long you’ll take to pay back the loan. You might choose a longer repayment period to spread the cost of your holiday, or you may want to pay it off in a shorter time so you can pay less interest.

Freedom to spend: when you take out a loan you receive the money and you can spend it however you want – whether it’s on a debit card, cash from a bank or money withdrawn from an ATM.

This isn’t always the case with credit cards, where there are sometimes fees for using a cash machine or using the card abroad – not ideal for a holiday.

Take a payment holiday: some lenders offer you the option of taking a payment holiday. This means you’ll be able to miss your repayments for a month or two after agreeing it with your lender. However many lenders will have specific requirements you’ll have to meet in order to qualify, such as:

• Being a customer for a certain amount of time
• Having a positive credit and/or repayment history
• Having less than a certain proportion of your loan left to repay

Cons of a holiday loan

Might not get best deals: the poorer your credit history the less likely it is you’ll be eligible for the top loans. This might mean you end up paying at higher interest rates, or you may not be able to borrow as much money.

General loan risk: even if you are accepted for a loan, you should always remember that borrowing money comes with certain risks. You may be charged for late payments, your credit score could be damaged, and your debt is likely to grow if you can’t afford to pay back what you borrowed.

How much will a holiday loan cost?

The cost of your holiday loan will depend on:

• Fees and charges: whether there are any fees attached to your loan, such as early repayment or arrangement charges
• Interest rate: the overall interest rate you pay, given as APR (Annual Percentage Rate). This includes any fees and charges in the rate, giving you a more complete picture of how much the loan will cost. However the APR only has to be offered to 51% of applicants, which means the actual rate you end up paying could be quite different
• Length of loan: if you choose to pay your loan back over a longer period, the chances are you’ll end up paying more interest on your loan, rather than paying in larger amounts over a shorter period of time. From our data, the most common loan term is one to five years.
• Credit history: the interest rate you’ll pay is ultimately decided by your lender, and they use your credit history to decide what rate they’ll set. If your credit history is strong, the likelihood is you’ll receive a lower rate than someone with a weaker credit report

Data collected by MoneySuperMarket, correct as of October 2018

How do I apply for a holiday loan?

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

Most lenders will also require you to be over 18 with a UK bank account and a debit card – and some will even need you to have lived permanently in the UK for a certain amount of time. Some may even only lend you money if you have an income above a set threshold – the average income of people looking for a holiday loan was £32,741.

You can generally apply for a holiday loan through the phone, online, by post, or by dropping in to your lender’s branch (if they have one). However you should always make sure you’re in the best position possible to apply before doing so, to increase your chances of being accepted.

Data collected by MoneySuperMarket, correct as of October 2018

Things to consider when applying for a holiday loan

You should consider the following before you apply for a loan for your holiday:

• Check your savings: generally the less you need to borrow the better, so if you’re able to use your savings to pay for some or all of your holiday costs you could save yourself paying interest on a loan.
• Consider alternative options: if savings isn’t an option, there are other avenues you may want to consider to fund your holiday, such as peer-to-peer lending or even a credit card.
• Borrow sensible amounts: if you do want to take out a loan to make the holiday extra special, you should have an idea about how much you can afford to borrow and pay back. MoneySuperMarket’s loan calculator can be a useful tool for helping you work out what a loan will cost and whether you can afford it.
• Run a soft search: before you take out the actual loan, you can run a soft search through MoneySuperMarket. This means you’ll be able to see what loans you’ll be more likely to get if you apply – and it won’t affect your credit report, unlike an actual loan application.
• Shop around: when you run a soft search you’ll be given a list of options, ranked by eligibility. By comparing all the options available you’ll give yourself the best chance of finding a loan that’s right for you.

What are the alternatives to a holiday loan?

If you’re considering other options for funding your holiday, you may want to think about:

Credit cards

Many credit card providers offer 0% interest credit cards, which you could use as an interest-free loan to pay for your holiday. You should check with your provider before using the credit card abroad, as many cards come with fees and charges for foreign usage as well as cash withdrawals from ATMs.

You should also be aware that 0% interest periods are rarely permanent, and when they end your provider will often place you on a higher interest rate. This makes it a good idea to try and pay off your loan while you still have 0% interest to pay.

Remember that if you don’t make all of your repayments on time, you might lose the 0% interest incentive completely – and there may even be extra fees to pay as a result.

Travel companies

Some travel agencies and companies might offer an alternative financing arrangement. For example, you may have to pay a certain amount as a deposit for a holiday before paying off the rest of the balance over an agreed time period.

You should always watch for fees, charges, and high interest rates before taking a loan product out, to avoid any nasty surprises.

Peer-to-peer lending

Peer-to-peer lending is when you borrow money directly from other people, rather than going through a bank or building society. This can sometimes mean you’ll find more competitive interest rates for borrowers and potentially higher returns as an investor – learn more with our guide to peer-to-peer lending.

Compare holiday loans

The best way to find an affordable loan that’s right for you is to compare your options on MoneySuperMarket. All you need to do is tell us a little about the loan you need, including how much and over how long, and you’ll get a list of quotes tailored to your requirements.

You’ll be able to sort the list by the interest rate offered and the likelihood of you being approved for the loan, so you can find the best deals in minutes. Once you’ve found the right quote, just click through to the provider to finalise the deal – then you can start planning your holiday.