Please note that lenders may be restricting access to loans for holidays during the coronavirus pandemic. However, this might not apply to loans for holidays that you are planning far in advance. Contact the lender prior to submitting an application to find out what its policy is at this time.
Holiday loans, also known as travel loans, are unsecured personal loans that allow you to use the funds to finance a holiday. Most personal loans allow you to spend the money on any worthwhile purchase or expense, and this generally includes holidays and any other trips.
With a holiday loan, you can generally borrow from $2,000 up to around $50,000 and have between one and seven years to pay it back. You can opt for either a fixed or variable interest rate, typically varying from 8% p.a. to 17% p.a. However, this will vary depending on the type of loan you opt for and your personal credit history.
Holiday personal loans come in three main types:
The most common form of holiday loan is a term loan. With term loans, a set loan term applies.
A line of credit personal loan enables you to draw from a credit limit as you require. With a line of credit, the term is ongoing and repayments are flexible. Generally, you only make repayments on the amount you've actually used.
Tailored travel loans
Some lenders also offer loans that are specifically tailored to travel. You may be able to spread payments for a tour or travel package out over the few months before you leave, or you could be given an interest-free term on a travel loan. Two examples of these types of programs are Tigerair and Zip Money.
Are there restrictions on how I can use a holiday loan?
With an unsecured personal loan, there are generally no restrictions as to how you can use the funds – as long as they are legitimate. When you apply for a loan, the lender will ask you to list how you will use the funds as part of the application process. If the loan is for a holiday, you would select "holiday" or "travel".
If you're applying for a loan from a travel loan provider, such as with holiday payment deferral programs, you will be required to use the funds as set out in the terms.
How can you compare holiday loans?
Fixed or variable interest rate. A fixed rate allows you to lock in a specific rate for the life of your loan, whereas a variable rate may change over the course of the loan. Though you run the risk of the rate increasing, a variable rate loan often has fewer restrictions. For example, you can usually repay the loan early without penalty or make additional repayments throughout the loan term. Fixed rate loans generally have shorter terms – up to five years - whereas variable rate loans can last for as long as seven.
Cost of repayments. When calculating the cost of your repayments, you should take into account the interest rate you will be charged as well as any ongoing account keeping fees. This is because these will contribute significantly to the overall cost of the loan. If you are able to afford higher repayments, doing so could reduce the amount you pay over the life of your loan. Using a repayment calculator can help you plan how you can repay the loan ahead of time.
Loan term. Personal loans generally have a minimum term of one year and a maximum term of seven years. A longer loan term may reduce the size of the repayments you need to make, but will generally mean you pay more in interest over the life of the loan.
Additional features. Take a look at the features being offered by some lenders and decide if you want to take advantage of them. Some lenders offer cheaper travel insurance with their holiday loans as a package deal. It may be worth looking into this and comparing the costs with other insurance providers.
SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan
A and AA grade borrowers
Must be employed
Min. loan amount $10,000
100% confidential application
SocietyOne Unsecured Personal Loan
Borrow from $10,000 and benefit from no ongoing or early repayment fees. You'll receive a fixed rate between 7.50% p.a. and 20.49% p.a. based on your risk profile.
Latitude Personal Loans: 9.24% p.a. comparison rate. Borrow up to $70,000 with the Latitude Finance Services Personal Loan.
What should you consider before applying?
Before you apply for a holiday loan, you should determine the cost of your repayments and decide whether they will be affordable for you. You should also ensure that the amount that you borrow will be sufficient for your holiday and figure out whether the loan term will be manageable. Remember that you will likely have to make repayments while you are away, so make sure you budget for this.
Can I start repaying my loan when I get home from my holiday?
Unfortunately, most personal loans require you to start making repayments right away. These are usually weekly, fortnightly or monthly, depending on your circumstances. This might be difficult for people who are planning on going on a longer-term trip, such as a year-long travel experience.
Personal loan lenders usually determine your eligibility for a loan based on your income and your ability to repay. If you are hoping to go on a longer trip (and therefore potentially leave your current employment) it is essential that you have enough money saved to meet repayments as you travel. Calculate how much of your loan you will be expected to repay before you return to employment and ensure that enough money is set aside. It's also a good idea to set some extra money aside for extenuating circumstances, such as having more time out of employment than you expected when you return.
How to apply for a travel loan
To apply for an unsecured personal loan you should first compare your options using the table on this page. Once you have chosen a loan, click "Go to site". Eligibility criteria differ between lenders, so check that you meet the criteria before you apply.
You will also need to provide certain information to apply. This may include personal details such as your name and address, financial details including your income, assets and debts and your employer's name and contact details.
Matt Corke is Finder's head of publishing for rest of world and New Zealand. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates.
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
You'll receive a fixed rate between 7.95% p.a. and 16.95% p.a. based on your risk profile A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.
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