The growing trend of holiday loans

The Growing Trend of Holiday Loans

As Brits jet off abroad in search of sun, new data suggests that the amount borrowed for holiday-specific loans is growing larger each year. Ideally, holidays can be paid for out of income and savings, but many people will need to borrow to fund their trip. MoneySuperMarket explores how Brits are using holiday loans and offers guidance on choosing the right deal.

Analysis of MoneySuperMarket data from January 2016 to April 2018 reveals that the total amount Brits are borrowing specifically for holidays has increased year-on-year, a trend that is expected to continue through 2018.

Our latest report explores how Brits are using holiday loans, how much we’re willing to borrow and what we should bear in mind when considering applying for one.

Brits love a holiday!

Recharging our batteries with regular breaks from work or study is crucial for our mental wellbeing, and Brits typically take two trips abroad on average each year. Those that holiday the most include 25 to 35 year-olds, parents and Londoners.

Interestingly, a survey of 2,000 Brits has shown that at least 48% of people are willing to borrow money in some capacity to go on holiday, whether that’s from a bank, friends or family – suggesting the ways we fund our holidays is diverse.

Methods of funding a holiday

While it is often best to pay for your travels from your income or with savings if possible, taking out a holiday loan is the third most common option after saved cash and credit cards.

How much are UK residents borrowing for holidays?

The data on holiday loans found via MoneySuperMarket shows that the total amount borrowed by Brits since 2016 is over a quarter of a billion pounds - £253.6 million.

In terms of the totals per year, Brits borrowed £109.4 million in 2016, £112.5 million in 2017 and, in the first four months of 2018, £31.7 million.

Shifting from the total amount of holiday loans to the average loan requested by Brits, this grew by 23 per cent from £2,811.64 per person in 2016 to £3,462.18 per person in 2018.

When looking at the months with the highest average amount borrowed, the data identifies the autumn and winter months of October, November and January as times for borrowing the most money. In the colder months, we clearly cheer outselves up by planning ahead to our next summer holiday.

Monthly average loan amounts

While the data shows that the average holiday loan amount is just over £3,000, a recent survey reported that, on average, we’re only willing to borrow £1,715 to fund a holiday. The sizable gap between the two figures could suggest that, when the time comes to actually book their holiday, Brits are willing to borrow more to have the trip they really want.

In some cases, British holidaymakers have taken out a loan roughly 15 times the surveyed maximum, with a holiday loan as large as £25,000.

It’s worth noting that the most frequent loan amount requested – a sizable third of all holiday loans on MoneySuperMarket – is a more modest £1,000.

Sensible borrowing and effective budgeting

Holiday loans can serve a brilliant purpose and allow us to take a holiday we wouldn’t otherwise be able to afford.

But as with any loan, it’s vital to understand the commitment involved in terms of meeting the repayments, and never to borrow more than your can afford to pay back.

With a loan, you have a fixed schedule of repayments, which allows borrowers to budget in advance to ensure they stay on track.

As well as meeting the whole cost of a holiday, these specialist loans are sometimes used to pay for an upgrade of some kind.

Holiday upgrades

Whatever the reason for the holiday loan, it seems many British holidaymakers underestimate how long their debt will take to pay off.

When asked, 44 per cent of Brits say they’d expect a holiday loan to take under a year to pay off – perhaps thinking they would be able to repeat the process the following year for the next trip abroad with two loans overlapping.

However, our data suggests Brits actually choose repayment periods that are more than twice what they thought they would be. The average selected term for a holiday loan is around 30 months, perhaps indicating a willingness to take on a larger financial commitment than they first expected in order to get their desired holiday.

Parents borrowing the beach

With regard to the types of Brits taking out holiday loans, our research shows that parents are one of the best-represented groups.

Parents are three times as likely to take out a holiday loan and are willing to borrow up to four times as much as non-parents, according to our survey of 2,000 Brits. The average parent will borrow a maximum of £2,131 for a holiday - £595 more than Brits without children.

When asked what is the most they would spend per person on a family holiday, it was discovered that parents with two children reportedly spend £240 more than parents with just one.

With that in mind, parents with two children should be prepared to spend up to £4,500 in total for a typical holiday – just under £2,000 more than parents with one child.

If parents were tempted to turn to a holiday loan to cover the costs, our research showed that they are three times more likely than non-parents to use that money to upgrade to business or first class when flying on non-budget airlines. Parents clearly feel they deserve that extra touch of luxury.

Switching our sights over to how men and women approach holiday loans, it’s clear that women are much more likely to splash out on a holiday when kids aren’t invited. Per person, women will reportedly spend over £160 more than they would if kids under 18 were also part of the break. Men, on the other hand, will always spend more per person on holidays.

When looking at our customer data, the average difference in loan amount between genders is a cool £50 million. Men were found to request loans amounting to over 50% more than women - £153 million versus £100 million.

Youth embracing loans as well as credit cards?

Digging into the MoneySuperMarket data shows that those aged between 25-34 are most frequently looking to take out a holiday loan.

That age group has also borrowed the highest total amount since 2016 according to our data – just under £88 million, or roughly a third of the combined British total.

Loans as well as credit cards - total amount of holiday loans since 2016

While 25 to 34 year-olds are the age group that is most frequently engaging with holiday loans, our data reveals that 21-year-olds specifically have the highest number of “click outs” for holiday loans. Click outs being the point where the user leaves MoneySuperMarket to go to the lender’s site to complete the process.  However, the fact that 18-24 year-olds as a group are borrowing less than older cohorts suggests each individual loan is for a lower amount.

Over a fifth of 25 to 34 year-olds suggested that they would consider a holiday loan – meaning they are 3.5 times more open to the idea than 45 to 54 year-olds.

While those in their middle age might be more cautious about taking out a holiday loan, that caution is somewhat thrown to the wind for those around retirement age. Not counting extreme examples with relatively few clicks, we found that 69 year-olds have the highest average loan amount– over £4,500 per loan.

The holiday loan capital of the UK

According to our survey, Londoners are found to take the most holidays per year (2.1, to be precise). This is in stark contrast to the Welsh who take the fewest (1.2 per year). Those from London are also more taken with the fancier elements of a holiday – 30% of them would use a loan to upgrade to a hotel with an infinity pool, roughly three times the typical Brit.

Perhaps surprisingly, the UK’s capital is not the holiday loan capital of the UK, according to our data. That honour goes to Birmingham, followed by Belfast and Glasgow.

It should be noted that, given the size of the London and the number of people from the there who use MoneySuperMarket, our data splits London as a whole into it’s distinct parts, ones that have their own socio-economic differences. If counted in totality, London would have a total of £24.2 million.

The holiday loan capital of the UK

Jersey in the Channel Islands has the highest average loan amount of any location in the UK, at over £4,300.

Know what’s right for you

Regardless of how many holidays you might go on each year, they’re valuable periods of time for us to relax, recharge and perhaps spend time with loved ones.

If possible, it can be attractive to pay for these holidays with your personal savings, but a loan will be necessary in many cases, especially to fund special occasions such as honeymoons and more ambitious summer holidays.

When looking for a loan, it is important to shop around, compare rates of interest and any potential charges, and ensure you understand the terms of payment.

MoneySuperMarket has an Eligibility Checker that allows you to run a ‘soft’ search for loans for which you are likely to be approved without doing any damage to your credit score.

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Whatever you need a loan for, our Eligibility Checker can help.

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