Holiday loans in Australia – Plan the perfect round trip
There’s nothing more exciting than picking out your favourite holiday destination on a map and planning a getaway. Besides remembering to stock up on sunscreen and selfies, you also need to budget for the upfront costs involved.
If your savings are not up to par, this guide takes a look at available options and how to choose the right holiday loan for your situation.
Holiday/travel loans – What are they and how do they work?
In plain-spoken terms, a holiday loan is simply a personal loan you take out to fund holiday and travel costs. Generally, you can use a personal loan to pay for whatever you want. If your main goal is getting some downtime, the funds could cover anything from food and drinks to tours and transportation.
Typically, holiday loans will have the following features:
- Fixed or Variable rates. A vacation loan can have a fixed rate which maintains an even ‘keel’ throughout the credit duration. It can also have a variable rate which can move up (in which case your repayments might increase), or down (in which case your repayments might decrease).
- Desired amount. How much you can borrow generally varies between $1,000 and $100,000.
- Repayment terms. Repaying your debt can take as long as ten years or as little as one year. Before choosing your loan term, bear in mind that while paying off your debt at a laid-back pace might be great for your budget, it adds to your finance costs in the long run.
- Fees and charges. Paying interest is the norm when you borrow money, but lenders may also add other fees. These may include establishment fees, monthly or ongoing fees, early repayment fees, and late payment charges.
Types of vacation loans for Australians
- Secured/Unsecured. Most personal loans are unsecured, meaning your assets are safe from seizure by the lender if you fail to repay. You can also go with a secured option that puts your asset at risk in exchange for a low rate.
- Peer to peer. Peer to peer (P2P) personal loans are a fall-back alternative to traditional banks and credit unions. They allow you to borrow funds directly from other individuals via secure platforms.
- Joint application. Do you have a travel mate, and are they a reliable friend or family member? You can not only share the fun with them but responsibility for the debt as well. Joint application holiday loans can boost your chances of approval and your borrowing capacity, to name just a few benefits.
- Bad credit. You can still take a break from the humdrum of everyday life even if your credit rating needs a face-lift. However, you should factor in the higher than standard costs when planning your budget.
- In-house financing from travel agents. Some travel companies and agencies also provide convenient finance products. But, this alternative doesn’t always have competitive rates and fees. Furthermore, you might still need to supplement your trip or vacation costs with your savings.
- Line of credit. A line of credit personal loan allows you to make cash withdrawals up to a specific limit. It also has open-ended repayment periods and minimum instalments.
How to compare holiday loans
Holiday loan products usually have a mixed bag of features. A personal loan comparison helps you zero in on the right option for your needs. Typically, a well-researched comparison involves looking at these three factors:
- Borrowing costs. When you’re comparing personal loans on the go, a glance at the comparison rate can tell you if the loan leans towards cheap or not. That’s because this percentage combines the interest rate alongside standard loan fees. A low comparison rate means you get to enjoy your vacation without sacrificing a huge portion of your budget.
- Monthly repayments. Our holiday loan calculator is a neat tool that calculates estimated repayment amounts for different loan types, amounts, and terms. Use it to compare credit offers and to plan for future repayments. To find affordable loan repayments, move the sliders to enter your amount and your term, then click calculate. Repeat these steps as many times as necessary.
- Flexible loan features. Be on the look-out for offers that orient well with your needs. Additional features that may be worth the sign-up include inbuilt travel insurance and early repayment or redraw facilities. You should also be able to choose from weekly, fortnightly, or monthly repayments.
Kick-off your trip with a travel loan application
When you need extra funds in your bank account, an online application is usually the fastest way to make your dream vacation a reality. Start yours by electing your preferred lender and clicking “Go to Site” to visit their website. For most unsecured personal loans, general requirements can be summed up as follows:
- Be an Australian citizen or permanent resident
- Minimum age of 18 years
- Australian ID, driver’s licence, or passport
- Proof of income and employment – bank statements and payslips
- A good credit rating
Holiday and travel loans FAQ
Is using a personal loan to pay for my holiday a good idea?
Typically, getting into debt should be a matter of last resort. But, if the pull of an adventurous holiday is too strong for you, make sure you borrow only what you can afford to make up the difference between your costs and your savings.
Are there any restrictions on how I use the funds?
This depends on your loan type. With unsecured loans (the common option for Aussie borrowers), there are hardly any restrictions to talk about. If any such restrictions exist, they are usually explicitly stated in the terms and conditions.
What happens when I have to cancel my holiday after a successful application?
If you’re lucky, you’ll be able to refund the lender in full at no extra cost. However, some lenders will treat the payback as early repayment and will charge interest and fees accordingly. You may also choose to use the funds for unrelated purposes if the lender approves. That means you’ll pay off the debt through regular instalments and over a fixed period as initially agreed.
Are there any suitable alternatives to holiday loans?
Yes, you could try using your savings (always the most recommended option!) and borrowing from family and friends. Credit cards are generally only viable if you come across a 0% deal with no hidden or expensive fees.
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