Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We are a credit broker and not a direct lender.

Should You Take Out a Loan to Pay for Your Next Holiday?

Should You Take Out a Loan to Pay for Your Next Holiday?

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It’s a situation that great numbers of us (perhaps even all of us) have been in at some point; life is just dull, dull, dull, if not also outright stressful. 

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You’re constantly looking at the clock at work, and can’t help but yearn to be someplace else, without work assignments or deadlines (perhaps a beach somewhere vaguely Mediterranean, or a happening city-break destination like London, Paris, or Berlin, or… you get the idea). 

But another downside of your life right now (or at least, in this hypothetical situation we’re describing), is that you’re not exactly flush with cash. You’d love to head off somewhere exotic this very weekend, but you can’t afford it… unless you take out a loan, perhaps? 

Taking out a holiday loan, means accepting the responsibility to pay it back 

Taking out a holiday loan means accepting the responsibility to pay it back

Full disclosure: in case you’d somehow managed not to notice until now, here at CashCompare, we are a credit broker for all manner of lenders that offer holiday loans to people like you. As a credit broker, we may receive a commission if you choose to take out a loan via our service. So, you might imagine it would be in our interests for us to try to “sell” you a holiday loan. 

That assumption may be true, but it is also in our interests – and that of the lenders we work with – for you to only take on a loan you can be confident you will definitely pay back. 

So, that’s the first important thing to emphasise about a holiday loan; it is about borrowing money in some way, and putting yourself into debt. And of course, with the interest you will need to pay on that loan, you will ultimately end up paying more overall for your vacation, than would have been the case if you had paid in cash from personal savings, for example. 

Before considering a holiday loan, it might be worth exploring other financial options or saving up for your holiday.

A holiday loan might, or might not, work better for you than saving in advance 

A holiday loan might or might not work better for you than saving in advance

However, for those who are yearning to go on holiday and don’t have the time to save money to pay for all those vacation essentials – the flights, transfers, accommodation, admission fees to tourist sites, restaurant meals, and so on – taking out a holiday loan can be one of the quickest and most convenient ways to make it all happen. 

And of course, even if you simply decided to wait and save up the money for your next holiday over time, in both cases, you would effectively be paying money over time to cover the cost of your break. So, it’s hardly as in either of these cases (taking out a loan or saving up in advance), you would be getting a holiday for free. 

It’s also worth bearing in mind that a holiday loan could help you build up your credit score, provided that you complete all the repayments on time. Remember that when you take out a loan, you're committed to a payment schedule. Ensure you fully understand the terms and can manage the repayments. This is because it would enable you to establish a record of having taken out a loan and then paid it all off, which will help make lenders more confident about lending to you in the future. 

Bear in mind that while initially, lenders might conduct a 'soft' search that doesn't affect your credit score when considering your application, they will perform a 'hard' search, which can have an impact on your credit score, only if you accept the no obligation quote.

What form does a holiday loan take? 

What form does a holiday loan take

The term “holiday loan” simply refers to a loan that someone takes out in order to fund a holiday. So, it is fair to say that holiday loans can take many forms. 

However, with it having been reported earlier this year that UK households were expected to spend almost £2,000 – on average – on their holidays this year, a holiday loan is typically a loan taken out for a similar sum (think a few hundred or thousands of pounds).

Holiday loans also tend to be relatively short term loans, with the repayment period lasting for a few months, up to a year. So, if you are able to comfortably afford a holiday loan, you could commit to one now for a holiday set to take place now, and have it all paid off by the time you start to consider where you might go off on vacation next! 

Warning: Borrowing money can result in further debt. Always consider if you can afford the repayments before taking out a loan.

If you’re considering the merits of a holiday loan for you and your household, it’s worth remembering that here at CashCompare, we have a no-obligation quote request form that you can fill in and submit in a few minutes. This will help show you what is possible if you are thinking of borrowing funds for your next break. 

If you're unsure about the best financial solution for you, seek independent financial advice or visit moneyhelper.org.uk for guidance.

"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.

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