Holiday loans

How can I spread the cost of a holiday?

Whether you’re jetting off on a city break, escaping to sandy beaches, or travelling the globe, a loan can be a good way to finance your holiday. Of course, in an ideal world you’d use savings – but sometimes that’s not a possibility, and you need to spread the cost over several months or years. As long as you only borrow what you can afford to pay back, a holiday loan can be a sensible and affordable option.

What type of loan is best for financing my holiday?

Loans come in all shapes and sizes – there are several different types, including personal loans, secured loans, and guarantor loans. But which is best for funding a holiday? Well, it depends on what you need, your credit score, and your financial circumstances.

Personal loans are often the best option for financing a holiday, because they’re quite flexible and you can borrow small amounts. However, if you have a low credit score but own a home, you may have better luck applying for a secured loan. If you’re a young person planning your gap year, chances are you don’t have much of a credit history, so you may struggle to get approved by lenders. In this case, a guarantor loan may be useful, as long as you can get a parent (or similar) to agree to it.

To help you weigh up your options, we’ve outlined the pros and cons of using personal, secured, and guarantor loans to fund a holiday. Remember, you should always read the terms and conditions of a loan carefully before you apply.

Personal loans

Pros

  • You can usually borrow as little as £1,000
  • The lender may allow you to start repayments after the first few months, rather than immediately
  • You don’t have to be a home owner

Cons

  • Interest rates on small loans may be high
  • You may need a high credit score to get a good deal

Pros

  • If you have bad credit, lenders may be more likely to approve you for a secured loan than a personal loan
  • You may have longer to pay the loan back

Cons

  • You must be a home owner
  • If you don’t keep up repayments, you could risk losing your home
  • Typically, you can’t borrow less than £5,000

Pros

  • A guarantor can help you get a loan if you have a low credit score
  • You don’t have to be a home owner

Cons

  • You must find a suitable guarantor, preferably a parent with good credit
  • Your guarantor must pay your debt if you can’t, which could put you in an awkward situation

You can compare loans from across the UK market with Experian. It’s free and it won’t affect your credit score. Remember, we’re a credit broker, not a lender† – we can help you find deals, but we don’t provide credit or make the decision to approve you.

Holiday loan or credit card?

There are other ways to finance your holiday than a loan. Depending on your needs and circumstances, a credit card may be more suitable. For example, some purchase credit cards offer a 0% interest rate for a set promotional period. If you’re able to pay back what you owe before this period ends, you won’t have to pay any interest fees. However, you should check the terms carefully – things like international transaction fees can make it expensive to use your card abroad.

Applying for a holiday loan – what should I consider?

Before applying for a holiday loan, you should think carefully about the type of loan you want, as well as:

How much you need to borrow for your holiday

It’s tempting to splash the cash when you’re abroad. But remember, as exciting as a holiday is, it doesn’t last forever – and you don’t want to return home to big loan repayments and no spending money. Draw up a holiday budget, and decide what’s important and what you can do without.

Your ability to make monthly repayments

Think about what you can afford now and in the future. If you want to pay the holiday loan back over a number of years, consider how your financial commitments, income and living costs may change during that time. Be realistic and don’t rely on things that aren’t certain, such as getting a bonus.

Remember, if you can’t keep up with your loan repayments, you may get a default or CCJ (County Court Judgement). These can reduce your credit score, making it difficult for you to borrow money again in the future.

Your ability to get approved for a holiday loan

You can get an idea of where you stand with lenders by checking your free Experian Credit Score. This is a number between 0-999 – the higher it is, the better your chances of getting approved for good credit deals. You can also check your eligibility for personal loans when you compare deals with us. Remember, we’re a credit broker, not a lender†, meaning we can help you find deals, but we don’t provide credit or decide whether to approve you.

The impact on your credit score

Applying too often in a short space of time can reduce your credit score, making it harder for you to get credit in the future. So, try to apply only for holiday loans you’re likely to get, and space out your applications if you have to make more than one.

How should I manage my loan repayments?

Hopefully, you’ll return from your holiday relaxed and well-rested. Ensure you keep that calm by handling your holiday loan repayments responsibly. A well-managed loan can also increase your credit score, as it shows lenders you’re a sensible borrower.

Here are our top tips for managing your loan repayments:

  • Keep track of when your repayments will start, and budget accordingly
  • Make sure your holiday doesn’t drain all your funds – stick to a budget so you’re in good financial shape when you return
  • Try and make your repayments on time and in full every month. If you can’t avoid missing a payment, contact your lender as soon as possible to discuss your options
  • Consider setting up a direct debit for your holiday loan repayments, so you never miss one
  • Try not to take out more credit while you’re paying back your loan
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