Maybe you’ve been thinking about a multiple-month adventure overseas, or are just in need of a couple of soothing weeks in a resort somewhere to forget about the world. Whatever your motivation, a holiday loan can be a straightforward way to get going on your next trip without having to save in advance.
Keen to learn more whether a holiday loan is right for you? We’ve answered some of the most frequently asked questions about these types of loans below.
What do I look for in a holiday loan?
When you are borrowing money for any reason, including a holiday, there are really three key things you’ll want to look at:
- Competitive interest rates: The number one ingredient of any holiday loan worth its salt is a competitive rate. With holiday loans you can opt for a variable rate that could fluctuate over the life of loan or choose the certainty of a fixed rate, even if it means paying slightly more.
- Flexible repayment options: Be on the hunt for a loan that allows your repayments to match up when it suits you, not the bank. You can opt for weekly, fortnightly or monthly repayments. It’s also handy to look for a personal loan that provides you with the flexible option of an extra repayments facility so that you can put any additional cash towards paying off your loan faster if you’re able to. The faster you pay that loan off, the less interest you’re going to have to pay.
- Low fees: With holiday loans you’re likely to come across several types of fees. Firstly, you might need to pay upfront fees like application or set up fees. Sometimes these fees are a flat fee so you’ll pay the same amount whether you’re borrowing $1,000 or $20,000. Ongoing fees are things like service fees and are generally in addition to interest fees. Then there are one off fees like late payment fees and loan discharge fees for when your loan comes to an end.
Should I get a holiday loan or use my credit card?
Weighing up whether to use a travel credit card or a take out a holiday loan will come down to your borrowing needs.
If most of your holiday is going to be put on credit and paid back over a period of time, you’ll want to choose the lowest interest option. There are low interest credit cards that can have interest rates lower than a personal loan but only if you pay off the balance in the quickest time possible. If you just pay the minimum balance each month you could find your holiday will cost you a lot more than a holiday loan where you’ll have fixed monthly repayments.
Credit cards often have other travel benefits that personal loans don’t have like travel insurance or interest free days but to really get value from these benefits you need to pay your balance off in full each month.
To learn more about the pros and cons of each option check out our dedicated credit card versus holiday loan guide.
How much can I borrow on a holiday loan?
One of the major positives about using a personal loan for your holiday needs is that you can borrow more than you’d be able to on a credit card. In most cases you can apply for holiday loans for as little as $2,000 or as much as $50,000 which means almost any travel dream can come true.
Mozo lets you investigate and compare the $5000 personal loans and $10000 personal loans available.
Can I get a holiday loan through a peer to peer lender?
Yes, peer to peer (P2P) lenders provide an alternative way to finance your holiday to credit unions and banks. They are a good option if you’ve got a good credit history as you’ll be eligible for their most competitive rates and they are even an option if you’re new to borrowing and don’t have much of a history already built up. You might have to pay higher interest rates, but generally these loans have flexible features so you can pay back your loan faster and pay less interest. You can can learn more about peer to peer lenders with our extensive P2P guide.
Should I get a secured holiday loan?
If you own your car or house, you might have the option with some lenders of using these assets as security for your holiday loan. Why do this? Well, secured loans often have lower rates and fees so you’ll be able to save money in interest by opting for this type of loan. The drawback? Well, if you default on the loan your provider has the right to seize the assets you’ve put on the table.
If that sounds like too great of a risk to you, or you don’t have any assets you could use to secure your loan, there are a range of unsecured loans in our database to choose from instead. But you’ll likely have to pay that bit more in interest and fees.
Will there be any conditions on how I spend the money?
When you apply for a personal loan, you might be asked the reason for the loan like ‘holiday’ or ‘travel’ but as long as you can prove to the bank or lender that you’ve got the means to pay the money back there shouldn’t be any conditions on what you can use the money for. As soon as the money is deposited into your account you’ll be able to use the money to pay for flights, a five-star hotel or to load up a prepaid travel card to use abroad.
Just remember though, that as soon as the funds are deposited you’ll be required to meet the monthly or weekly repayment schedule, so if you are going on an extended holiday be sure that you set up automatic repayments so that you don’t accidentally forget to make a payment.
How are repayments calculated on holiday loans?
The monthly repayments on your holiday loan will be calculated based on the loan amount and term as well as the interest rate and any associated fees. Luckily, to help you work out how much you possible repayments will be you can try Mozo’s personal loan repayments calculator.
Stephanie is planning to spend a couple of months country-hopping through Europe over summer but needs a holiday loan to make her eagerly-awaited trip happen. After shopping around, Stephanie secures a 9.50% variable interest rate on a $5,000 loan which she’ll pay back over three years.
Using the repayments calculator, her monthly repayments will amount to $160 and that over the life of the loan, she’ll pay $766 in interest.
How do I apply for a holiday loan?
If you’ve done all your due diligence and found a competitive holiday loan in the table above that suits your travelling needs, the process to apply is really simple. Start by clicking on the blue 'go to site' button which will take you to the providers' application website where you can apply right now without having to leave the house.
Just bear in mind that there are a few important documents to have on hand when applying, like:
- Proof of identity - Passport, driver’s license and or Medicare card
- Proof of income - You’ll need to provide several of your most recent pay slips
- Financial details - Make sure you have copies of your income, assets, debts, expenses and liabilities.
How do I pay for things when on my holiday?
Once you’ve sorted out your loan and paid for big ticket items like a cruise, airfares, tours or accommodation you’re going to want access to some cash for things like food and souvenirs.
Head over to Mozo’s travel money hub to discover a range of travel money products along with helpful tips and tricks to make your travel budget stretch as far as possible on your trip.