Compare holiday loans
If you’re planning a special break or holiday of a lifetime, you’ll need to think about how to pay for it.
If you can’t quite afford your idyllic getaway, you might want to consider a holiday loan. Just be aware, it’s a debt you could still be paying off long after your holiday is over.
What is a holiday loan?
A holiday loan is a personal loan that you can use to pay for a holiday.
Like other personal loans, holiday loans are unsecured and generally allow you to borrow from £1,000 up to £25,000.
What does ‘unsecured’ loan mean?
An unsecured loan means you can borrow up to a certain amount of money without having to offer an asset, such as your car or house, as security.
Holiday loans work the same way as unsecured personal loans. As you’re not putting up any kind of security, lenders need to be confident that you’ll be able to pay back the loan.
You’ll stand a better chance of getting an unsecured holiday loan if:
✓ you have a good credit history
✓ you’re on the electoral register
✓ you have a regular income
Should I take out a loan for a holiday?
You should think very carefully before taking out a loan to pay for your holiday. It’s a debt that you could be paying back long after your travels are over.
According to the Office for National Statistics in 2020, household holiday expenditure ranges from £734 a year for those on the lowest incomes, to £7,118 for the top 10% of incomes - averaging out at £2,605. And while these sums might be for more than one break, they’re still considerable.
Plus, there are associated costs with a loan to consider, such as fees, charges and interest rates. The total cost of your holiday could end up being more expensive than you budgeted for.
Ideally, the best way to pay for your trip is to use your savings. The interest that you’ll miss out on from your savings will be much less than the interest you’d have to pay back on a loan. You might find that setting up an account and naming it ‘holiday fund’ is a good incentive to save more.
If you can’t pay for your holiday out of savings, your next best option might be to see if you could get a 0% purchase credit card. You could pay for your holiday on the card and avoid added interest costs, as long as you clear the debt before the interest-free period ends and keep within the terms of the card.
Even if you can’t find a 0% deal, you’ll probably still find that the interest charged on the credit card is less than it would be for a short-term loan.
If neither of the above are an option, a personal loan could help you spread the cost of your holiday. Remember, though, taking on new debt is a big decision, so it’s a good idea to weigh the pros and cons before you apply.
What are the advantages of a holiday loan?
- You don’t need to put up an asset as security.
- The process is usually quick – in some cases, you could receive money on the same day you apply.
- Interest rates and repayment amounts are usually fixed, helping you to budget each month.
- A fixed-term loan allows you to choose how long you want to pay it back.
- If managed carefully, paying off your loan could help to improve your credit score.
- You’ll have a set repayment plan over a fixed time frame, so the debt won’t drift on.
What are the disadvantages of a holiday loan?
- As well as the cost of the holiday, you’ll need to factor in interest charges over the term of the loan – it could end up being an expensive break.
- Missed or late payments could result in a penalty fee and could also damage your credit score, potentially making future borrowing more expensive.
- If you struggle to make the repayments each month, you could end up further in debt.
- If you need money for something urgent, such as an expensive breakdown or home repair, your ability to borrow may be reduced by your existing holiday debt.
What else should I consider when choosing a holiday loan?
Don’t start packing your suitcase just yet. There’s still a few things to consider before choosing a holiday loan:
- Are there any extra fees? Some lenders charge early payment and arrangement charges. To help you compare loan coasts, arrangement fees are included in the APR of a loan – read our guide to What does APR mean for more information.
- You might not get the advertised APR. This is a representative rate, and lenders only have to offer it to 51% of applicants. The actual APR you get may be higher.
- Most lenders only approve loans for those with good credit histories. The best deals (typically the representative APR you’ll see advertised) are usually reserved for those with excellent credit scores.
- If you take out your holiday loan over a longer period, your monthly repayments will be lower. However, you’ll pay more interest in the long run. A shorter term means you’ll pay less interest overall, but have higher monthly repayments.
- How much do you want to borrow? You might be tempted to borrow more and take on unnecessary debt. Only borrow what you need and can afford to comfortably pay back.
How do I apply for a holiday loan?
You need to be eligible to apply for a loan. Criteria can vary between lenders, but generally you’ll need to:
- be 18 or over – for some lenders it may be 21, and other lenders also have an upper age limit
- be a UK resident
- have a regular income (job, pension or benefits)
- be on the electoral register
- have a functioning bank account
- be able to afford the repayments.
You can apply for a holiday loan online, by phone or by visiting the lender’s branch.
Just be aware that when you apply for a loan, the lender will conduct a ‘hard search’ of your credit history, which will be marked on your credit file. If you make several applications in succession, it might damage your credit score.
You can find out which loans you might be eligible for by using Compare the Market’s eligibility checker. It’s a ‘soft search’ and won’t affect your credit score in any way.Find out if you’re eligible for a holiday loan
Compare the Market Limited acts as a credit broker, not a lender. To apply for a personal loan, you must be a UK resident and aged 18 or over. Loan approval is subject to status and eligibility criteria set by the lender.
Frequently asked questions
Can I get a holiday loan to go travelling?
If you’re off backpacking, it may be more difficult to get a personal loan to fund your travels. Most people who go travelling are away for a few months and often live on a tight budget, with little or no income.
Lenders want the assurance that you can pay them back, which often means you’ll need to show them you have a regular income.
You’ll also need to consider how you’ll keep up with regular monthly repayments while you’re away.
Can I get a holiday loan with poor credit?
While it’s not impossible to get a loan with bad credit, it can be more difficult to get approval.
Your choice of lenders may also be limited, as few will accept applicants with a poor credit history.
If you do manage to get a loan to fund your holiday, you’ll most likely have to pay a higher rate of interest.
What are the alternatives to a holiday loan?
Before you start comparing loans, check out other alternatives for funding your holiday:
- Savings – the smartest way to pay for a holiday is to dig into personal savings. It might mean putting off your travel plans until you’ve saved up enough, but it’s better than paying interest.
- Credit card – a 0% credit card would allow you to borrow money and pay for your holiday without paying interest. But make sure you pay your holiday off before the 0% period finishes or you could face a massive hike in interest charges.
- Peer-to-peer lending – borrowing from a peer-to-peer website could mean you pay less interest, although it could depend on your credit score.
How can I compare holiday loans?
Shopping around allows you to compare loans and pick the most suitable one for you.
Any credit offered is subject to status and lending criteria, and based on an assessment of your personal circumstances.
Use our comparison tool to find a personal loan to suit your needs.
What do I need to compare loans?
To help you find a suitable loan, we’ll need some details including:
- How much you want to borrow
- Length of loan term
- Your reason for borrowing, for example, a holiday
We’ll provide you with a list of loans including:
- Loan provider
- Representative or guaranteed APR
- Total cost of the loan
- Monthly repayments
- Chance of approval
What our expert says...
“A holiday loan can help spread the cost of your trip away. But think very carefully before taking one out as you could end up paying off the debt for months or even years to come. Consider alternative options too, like setting up a holiday fund and saving into it each month or using a credit card.”
- Alex Hasty, Insurance and finance expert