Search and compare personal loans for holidays

If you’re looking for the opportunity to escape the daily grind and enjoy some well-deserved respite, then it might be time to consider booking in your next holiday. Sometimes an affordable weekend away in a nice hotel is all that's needed, but if you want to spend a week or two in an exotic destination, there could be a chance your day-to-day finances won't quite cover it.

This is where a holiday loan could come in handy, to give you the opportunity to book in a trip ahead of time instead of having to wait until you’ve saved enough to cover the entire expense.

Holiday loans are a type of personal loan that allow you to borrow a lump sum of money for the purpose of funding a holiday, which you’ll then pay back, plus interest, over a predetermined period of time.

Holidays can be expensive, particularly if you’re booking flights and accommodation for your whole family. And while you might already have some money set aside to help pay for a trip away, a holiday loan can bridge the gap between what you've saved and what you need.

Here are some of the reasons people may choose to use holiday loans:

• To plan ahead – Depending on where you’re headed, flights and accommodation for popular tourism destinations often need to be booked well ahead of time. A holiday loan could allow you to book in advance and start paying off your trip well before you’re scheduled to depart.
• To make it to an event – If you’ve been invited to an important event, such as a destination wedding, you’ll need to book your flights and accommodation for a specific date. This could restrict the amount of time you have to save for trip expenses, potentially leaving you a bit short. Taking out a holiday personal loan could allow you to ensure you make it to your important event.
• To take advantage of a special offer – Airlines, hotel groups, cruise lines and the like will occasionally have sales and special deals on offer for a limited time. If you want to capitalise on this but don’t have the cash handy at the time, you might find that a holiday loan could help you cover the cost, so you don’t miss out.

According to MoneySmart, the average Australian wedding costs $36,000, and that’s not including the honeymoon. Whether you’re paying for your wedding with savings, the help of family members, or a loan, it’s not unlikely that you could find yourself a little financially tapped out by the end of the ceremony.

Because prices can rise dramatically as soon as the W-word gets mentioned, your honeymoon could end up costing more than you expect. You may be able to save a little money if you avoid adding too many romantic extras to your trip, but then what kind of honeymoon would that be? You could also consider the discount honeymoon packages offered by some destinations.  

You may be able to add the cost of your honeymoon onto your wedding loan, which could keep your budgeting simple as there’ll be just the one debt to repay once the dust and the confetti has settled. Alternatively, you could apply for a separate holiday loan, such as if you plan on spending more on airfares and accommodation than caterers and floral arrangements.

If you’re considering taking out a holiday personal loan, it’s valuable to understand what you’re looking for so you can make a comprehensive comparison between different products on the market.

Here are some of the features that are important to factor in when you’re comparing your options:

• Fixed vs variable interest rates – Choosing a fixed rate loan means your repayments will remain the same throughout the duration of the loan term. Opting for a variable rate loan, on the other hand, means your interest charges (and therefore your repayments) could fluctuate with the market.
• Secured vs unsecured personal loans - Personal loans for vacations are often unsecured personal loans, as these loans aren’t being used to buy an asset that can be held as loan security or collateral. If you would prefer a secured loan, you may be able to secure the loan against an existing asset in your possession, like a car or home equity. This also means you’ll risk losing your asset if you default on your personal loan repayments, so it’s important to consider your options carefully.
• Loan term – The loan term is the amount of time you’ll have to pay off the loan. Personal loans typically have loan terms between one and five years. Generally speaking, the longer your loan term, the more affordable your regular repayments may be, but the more you’ll likely pay in interest charges.
• Fees – Depending on the loan product you choose, you could be charged a variety of different fees payable in addition to interest charges. These may include application fees, establishment fees, extra repayment fees, early repayment fees, ongoing account keeping fees and more. Consider checking a product’s comparison rate, which includes both the interest rate and the main fees payable, to get a better idea of the loan’s total cost.
• Extra features – Some personal loans offer extra features such as the option to make extra repayments and a redraw facility that allows you to withdraw any extra payments you’ve made. If it’s important to you to have the flexibility to pay off your loan earlier, you may want to ensure the product you choose allows for this.
• Repayments – Your loan repayments are the amount you’ll need to repay on your loan each month, fortnight or week – depending on your repayment frequency. To ensure your repayments will fit comfortably within your budget, consider using RateCity’s personal loan calculator for a repayment estimate.

Your credit history – that is, your track record of borrowing and repaying money – is used to generate your credit score, which may affect the interest rate you’re offered when you apply for a personal loan.

If you consistently make repayments on time, you may have good credit, and may be able to get approved for a personal loan with a lower interest rate. But if you’ve had credit problems in the past, your bad credit could mean you’ll be charged a higher interest rate on your holiday personal loan, or may find it harder to get approved at all.

You could consider securing your personal loan with the value of an asset to help lower the lender’s risk, or look into options to help improve your credit score before you apply. Guarantor personal loans could also be an option if a family member is happy to guarantee your finances.

As with every financial product, it’s important to weigh up the pros and cons of holiday loans before you make the decision to apply. Here are some to consider: