Guide to choosing a travel loan
In this age of consumerism, long working hours and stress, the yearly family holiday has become an essential part of maintaining sanity for many people. But whether you opt for a relaxing beachside break, exciting overseas adventure or snow-filled skiing holiday, that annual escape from reality has become a major financial drain.
So if the budget can't stretch far enough to accommodate that dream holiday you've been looking forward to all year, a personal loan is one option to fund an escape.
What to look for in a travel loan
The most important consideration when borrowing money for any reason is to decide how much you will need. If you only need a small loan, it might be worth considering using a low rate credit card instead, for extra flexibility.
If this is not an option for you, or you find it hard to resist the temptation to spend more than necessary, then the next step is to apply for a personal loan. Many lenders now have specific packages designed for travel purposes, offering additional extras such as discounted travel insurance. However, it's important to remember that it may not be worth borrowing more money than is needed, just to qualify for these additional perks. The increased interest charges on a higher loan amount may well cancel out any benefits gained.
Some travel agents are also able to offer you a loan if you book your holiday through them. Pay careful attention! Loans from travel agencies often have a higher interest rate, higher fees and more rigid conditions.
Your first major decision will be whether you secure your loan against an existing asset, such as your house. Secured loans offer better interest rates than unsecured loans and can also be easier to obtain for people with a bad credit history. Secured loans also usually offer more flexibility and lower fees, however they can take longer to approve.
Holiday loans are generally short-term loans, however don't forget that a loan for just $3000 can still take long time to repay. If you don't want to still be repaying your loan when the following year's holiday season comes around, consider a smaller loan, or maybe even a less expensive break.
When taking out a loan for vacation purposes it could be advantageous to ensure that it's as flexible as possible. Features such as no fees for repaying the loan early, making lump sum repayments or increasing the monthly payment amount can often be valuable.
Where can I get a travel loan from?
Most financial institutions offer personal loans. Some also specify particular loans for travel purposes such as the Encompass Credit Union Holiday Loan or Intech Credit Union Holiday Loan. Some other providers include:
- Easy Street Financial Services
- IMB Banking and Financial Services
Don't forget to try your usual bank, credit union or building society. With today's fierce competition in financial services, many lenders will be able to negotiate with customers to get them a better deal so don't be afraid to ask.
The travel loan is a worthwhile option when trying to squeeze as much enjoyment out of your holiday as possible. However it is still important to limit the amount you borrow to only covering essential costs. You do not want to spend years paying back a two week holiday. Ideally, paying the loan back as soon as possible is the best choice. This will reduce your interest and keep the holiday buzz going long after you return.
For professional and personal advise about borrowing money for a holiday, talk to a qualified financial advisor.