Did you know that 3% of all personal loans taken out in Canada and the UK every year are personal loans for a holiday i.e. a holiday loan? Added up together, Brits take out an amazing £1,050,000,000 a year on no guarantor vacation loans – that’s over a billion pounds!
Holidays with friends and family provide, for many of us, is the highlight of the year together with Christmas time. However, with the Association of British Travel Agents (ABTA) finding that travelers spend an average of £532 before they’ve even set foot on a plane and Thomas Cook discovering that the average family of four spend £1,027 when they’re abroad, Holiday loans are proving to be far more popular than ever.
Even if you’re staying here in Blighty, it’s not cheap. While 45 million holidays abroad every year, 34 million of us “staycation” in our green and pleasant land.
The six things that we would urge you to consider before taking out a holiday loan are:
Whether you’ve decided to take out a holiday loan for a friend, family member, or partner, make sure you have enough of a safety net to cover your holiday budget should the worst happen. While the worst things that can happen are that you lose your job and the home you live in, there are other things. You could be struck by lightning while on holiday or have an accident when abroad – no matter where you are in the world. Having your own money there to fall back on can go a long way towards ensuring that you’re still able to enjoy yourself.
Will it affect your credit rating?
When you’re taking out a holiday loan, especially one that can be on an interest-free period, there are two ways in which you could see your credit rating affected. Firstly, if you’re new to loans, the way you handle this loan could have a major impact on how applications down the line will be treated. Secondly, if you have problems repaying the holiday loan on time and end up in arrears, the lender may report your non-payment to any number of credit reference agencies and this could negatively affect your rating.
Are you able to repay the loan?
There’s no point in taking out a loan if you know that it’s going to end up costing you more money than it is worth in the future. And if you need to take out a holiday loan, holiday or not, there are certain steps that can be taken to ensure that you’re paid back what you owe. Making sure that you have a decent salary, whatever job you’re getting, is one of those steps. Depending on where in the world your holiday is booked – and depending on what time of the year it is – doing your sums may also be important.
Is it somewhere that you can afford to go?
Sure, you love going on holiday, but are the costs of your holiday the same as what the average person earns in that area? If not, perhaps you’ll find yourself spending more than you would have liked while on holiday – which could end up costing even more when it comes to paying back your loan. Taking out loans for holidays is relatively easy these days and this means that, in many cases, you don’t have to be as well-off as you might have been before. However, if you’re going to stay in a nice hotel or eat in a swanky restaurant and you haven’t saved up enough, then your holiday could end up costing you even more than it would have if you’d taken out a holiday loan.
Can you afford the repayments?
The average holiday loan repayment is £278 per month – that’s based on the average of £1,070 loan over 6 months. While this might sound affordable to most people, it could be a problem for some. If you’re on a low income or are in a job that doesn’t pay very well, then you might have a problem making the payments. If there is even the slightest chance that you might end up behind in your repayments, it’s best to look at other ways of getting your hands on cash.
What do they cost?
One of the reasons why so many people take out holiday loans is because they don’t have to pay anything upfront and will only be required to make a monthly repayment for the loan once they come back from their holiday. However, it’s not just the rates of interest that you need to be concerned with. Other costs associated with getting a loan can be costly and will make the total amount that you pay even higher. Remember that fees can vary widely between loans so it’s important to know what you might have to fork out before your holiday has even started.
What are the benefits of getting a holiday loan?
One of the biggest benefits of taking out a holiday loan is that you don’t have to worry about it while you’re away. You know that, while you’re away, all you need to do is pay your monthly repayments. Some people prefer to take out a holiday loan because they feel it’ll help them save money in the long term – and with many lenders offering low-interest rates on their loans, this can be the case. One of the best ways to get a holiday loan is to see if you can borrow from friends and family.
They’re always there to help out and many of them are more than willing to lend you some cash if you need it. Other people will turn to friends and family for loans because they want their money and want it now, often for expensive holidays. However, if these people are close by when they’re having problems repaying the loan, then this could impact your credit rating and put off lenders from offering you credit in the future.
Holiday loans can be a worthwhile investment that can make your holiday more affordable and, as long as you take your time to think about them and make sure that you’re able to afford the repayments, it could help you keep holiday dreams alive.