Holiday Loans

What is a holiday loan? 

You can use a holiday loan to pay for a wide range of things, not just the cost of a flight. That's good news because these days there are plenty of expenses to consider, from city-wide tours to long days shopping.

In fact, the average Aussie aims to spend about $5,000 on an overseas trip, according to CommBank data from 2022. Budget Direct’s numbers (in 2023) show that many Aussies (30%) budget even more - $5,000 to $10,000. 

With personal loans for travel tending to run between $2,000 and $100,000, you should be able to find one that fits your needs. 

Here are some things you can use your holiday loan on:

• Flights

• Travel insurance

• Accommodation

• Food

• Shopping

• Transfers

• Tours

• Travel experiences

If you want to crunch some numbers a bit more, the Mozo travel loan repayment calculator can help you work out how much to borrow.

Is a holiday loan right for me?

While the right choice comes down to your specific needs, there are some things to consider when applying for a holiday or vacation loan. 

Given that most loans tend to start at around $2,000-$5,000, they probably aren’t ideal for people looking to spend a smaller amount on their trip. For smaller sums, you could consider using money from your savings or creating a budget plan. If you would prefer to borrow as you go, you might find a travel credit card is a better fit. 

However, based on rather high travel costs these days, a personal loan can be very useful. The best thing to do is check your budget and go from there. 

How to budget for a holiday loan

Before applying for a holiday loan you’ll need a good idea of your travel costs and how to plan for them. 

Some quick sums can help around the following:

- flights

- accommodation

- visa charges

- food and drink

- activities

- tour packages

- car rental

- travel insurance. 

Remember, it’s always best to have a little more money than your planned budget to allow for unexpected costs or changes. Be sure to factor that in as you compare loans, too. 

How to compare holiday loans 

The overall cost of a holiday loan is impacted by a few things, including the size of the loan, the interest rate type and whether it’s secured or unsecured. Let’s explore these closer.

• Fixed rates: With a fixed rate loan, your interest rate stays the same for the life of your loan (which makes planning your budget a bit easier). You might lean towards this option if you're worried about a potential rate hike, but these loans tend to be attached to higher interest rates and fewer features.
• Variable rates: These rates are subject to change over the course of the loan. Variable interest rates are generally attached to loans with more flexible features (like early repayments and redraws), but the interest rates can rise over time so remember to account for that. 
• Unsecured loans: Most holiday loans are unsecured, meaning they’re not held against any collateral. An unsecured loan may have a higher interest rate, but it means you aren’t at risk of having your assets repossessed. 
• Secured loans: Secured loans are held against valuable assets and are common with car loans, where the loan is used to buy something valuable. If you do secure a holiday loan against a possession you might score a lower interest rate, but it’s important to stay on schedule with repayments so that you don’t put your personal assets at risk.

What other features should I look out for in a holiday loan?

There are some other important things to compare with holiday loans. 

• Fees: Checking on fees can lead to a lot of money saved. Almost all loans will have an application fee attached, but some holiday loans can have other fees hidden along the way. Look out for break cost fees, late repayment fees, and early repayment fees.

• Loan term: This is how long the loan goes for. Most personal loans last between 1-7 years, and this impacts how much interest you will pay overall. If you wanted to pay off the loan faster, you could consider increasing your repayment amounts or frequency.

• Comparison rate: A comparison rate factors in the interest rate and the fees you’ll be charged with a specific loan. Comparing holiday loans based on the comparison rate (rather than the advertised rate) gives you a more accurate idea of the full cost. Note that the comparison rate is generally based on a set scenario (ie. either a $30,000 loan paid off over 5 years or a $10,000 loan paid over 3 years). So your actual loan will vary in its specifics - especially if it’s for a smaller amount.

• Extra features: Sweeten the deal for yourself with additional perks like free extra repayments or a flexible repayment schedule, all of which can give you the opportunity to pay off your loan earlier, saving on interest. 

How do I apply for a holiday loan?

The application process for a holiday loan will differ from loan to loan.

Generally speaking, you will need to show evidence of your financial standing and credit history for the lender to make an accurate risk assessment. 

If you have good credit, you should be able to apply without issue. Most lenders have options for those with poor credit as well, though it may mean higher interest rates or more rigid terms and conditions.

If you're ready to compare loans, jump back up to the top of this page to see some of the top personal loans in the Mozo database.