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How does a holiday loan work?
As a form of unsecured personal loan, holiday loans enable you to use the provided funds for a holiday or for travel purposes. On average, these might range between loan terms of one year to seven, and the loan amount can fall anywhere between $2,000 and $50,000. As with other unsecured personal loans, they can offer either fixed or variable interest, which is often between 8% and 17% per annum.
Some credit providers might offer deals which are specifically designed for travel. These might involve you making repayments for several months prior to your holiday, or you might be lucky enough to find a holiday loan that charges no interest.
What can I spend my holiday loan on?
Technically, there aren’t any particular restrictions around how you may or may not spend your holiday loan funds. They are unsecured, which often means fewer limitations in general compared to secured loans. On applying for a travel loan or holiday loan, you’ll be asked by your credit provider to specify how you plan to spend the funds. Online, this will often be a drop-down list of options such as “travel” or “holiday” that you’ll need to select.
Sometimes you might be applying for a holiday loan from a designated travel loan provider, like those offering interest-free loans or holiday payment deferral plans. If this is the case, you’ll probably need to spend your holiday loan only on what is allowed according to the loan specifications.
How can I compare holiday loans and travel loans?
There are a few key factors we’ve put together for you for you to consider while you compare holiday loans:
- Loan terms may are quite often around one year long for a minimum, but may vary greatly regarding maximum repayment period. This will depend very much on the particular loan deal you choose to go with and the amount you’re borrowing. Using a personal loan calculator can give you a good idea around how much each repayment will cost you as you alter your loan term.
- Repayment cost will depend on more than your loan term, however. The amount of your repayment instalments will depend on your interest rate and any maintenance or loan service fees attached to your holiday loan. Longer loan terms will mean lower repayments per month, but you will pay more interest.
- Whether your holiday loan comes with fixed or variable interest will determine the cost of your repayments. Fixed interest rates will mean your interest charges remain consistent throughout the life of your loan, which will often last up to about five years. This is slightly shorter than the average variable rate personal loan, which can last up to seven years for a loan term. A variable interest rate holiday loan will also rise and fall with the market, which might mean lower repayments one month and a larger instalment the next.
- Features and loan flexibility can impact greatly on whether a holiday loan is right for you or not. Holiday loans in particular can come with extras like discounted travel insurance, so look carefully while you compare. The ability to make penalty-free additional repayments is also fairly helpful, and might help you cut down your total interest charges.
What should I think about before while I compare?
A holiday loan can be a fantastic way to snap up a bargain in a flight sale, or allow you to take a long weekend at for a bargain during the off-season. Before applying for a holiday loan however, you should first calculate what the size of your repayments. This way you’ll get an idea of whether or not you will realistically be able to meet them on a monthly basis within the specified loan term.
Check also that you’re going to apply for an amount which will cover the cost of your holiday, and when the repayments will be due if you’re going to make them while you travel.
How do I apply for a travel or holiday loan?
Holiday loans and travel loans are unsecured personal loans. Because of this, they’ll tend to have eligibility criteria that varies between lenders. Compare holiday loans with the table we’ve provided above- once you’ve found a deal with suitable potential, simply click the link to “Go to Site”.
There are often standard information requirements that all lenders will ask for. These include proof of identity, such as your name and the details of where you live. Income, assets and liabilities are also generally required as proof that you’ll be able to repay the loan. Alongside this you’ll generally need to supply the name and contact details of your employer so the loan can be verified by your credit provider.
Did you know you can compare 100’s of holidays personal loans? Browse, filter and compare on our main personal loans comparison page.
What’s the deal with fixed and variable interest rates?
Fixed interest rates will not change over the life of the loan, which makes it easier to budget. By agreeing to a fixed interest rate for the life of the loan, there is no risk that you will miss payments if the interest rate increased. On the flipside, if there is an interest rate cut in the future, you will miss out on any possible savings. Some lenders may not include a redraw facility on fixed rate loans or will include an early repayment fee.
Variable interest rates may rise and fall throughout the life of your holiday loan. This could potentially mean that you will save money in the future if interest rates fall, but if interest rates rise in the future, it could become difficult to continue to meet the monthly premiums. Variable interest rate holidays personal loans tend to be more flexible for payment terms than fixed rate loans, which gives you more options to manage your finances and tailor your payments to work for you.
Do you have a holidays loans repayment calculator?
Yes. Use the filter to adjust your loan amount and term duration to calculate your approximate monthly repayments. When you apply the filter, you will see a breakdown of your approximate monthly repayments as well as the total amount of interest and fees paid.
What are the travel loan eligibility criteria?
Before you apply for a holidays personal loan, be sure to understand and meet the lender’s lending criteria. Below is a high-level overview of eligibility criteria that may impact your chances of being approved for a holiday loan:
Minimum requirements for a holidays personal loan
- Minimum age: Range is between 18-21 years of age
- Minimum income: Range is between $15,000 and $50,000
- Employment status: This varies between lenders, some lender will lend to those on a pension or on benefits, whilst others require that you’re regularly employed
- Residency: (Most lenders require you to be an Australian citizen, permanent resident or have a valid visa). A handful of lender allow 457 visa holders to apply
- Credit score: Some lenders vary their interest rates based on whether you have an excellent, good, average or below average credit score
- Affordability: Lenders will look at your current income minus your outgoing expenses to determine if you have enough left over to repay the amount you wish to borrow
How much can you borrow?
This will depend greatly on your eligibility criteria. We strongly recommend reading this blog on how much you can borrow and whether or not you will be approved.
Information you’ll need to provide
Whether at the branch or online, make sure to have the following nearby:
- Proof of income: A verifiable and steady employment. You may be required to provide copies of your most recent pay slips and employer’s contact information
- A list of your assets, expenses and liabilities
- Identification Documents: Driver’s licence (if you have one) or other forms of ID
- Recent bank statements, going up to 3 months back
Are you self-employed?
If you’re self-employed, you will also need to provide:
- Financial statements for the last year (no older than 18 months)
- Your most recent personal/business tax return (no older than 18 months)
Other things to keeping mind when applying for a holidays personal loan
- It’s advantageous to have a clean credit history. For example, you have no recent defaults and no frequent requests for credit
- Credit cards with large credit limits are seen as liabilities, even if there’s nothing owing. If you have existing liabilities, be certain you can pay them off in addition to your holidays personal loan
There are many additional factors to consider when completing your application, but the above are the most important. If you feel like you may not meet the lender’s eligibility criteria, it may be best to save
Additional product information
Minimum and maximum holidays personal loan amounts and terms
Minimum and maximum loan terms and amounts vary between lenders. We strongly recommend you use the filter to determine the most appropriate lender for you. Most common minimum loan amounts start from $5,000 with maximum terms up to $100,000. However, most lenders will not provide unsecured holidays personal loans beyond $50,000.
Terms range from 6 months to 10 years, with most common terms ranging between 2 and 5 years. You should however check the minimum and maximum term ranges for your preferred lender before applying.
It’s also worth checking to see if there are early repayment fees.
Most lenders allow weekly, fortnightly or monthly repayment. However, some peer-to-peer lenders only allow monthly repayments.
Extra repayment or early penalties
All lenders allow you to repay off your holidays personal loan early, however – you should check each product for any potential early repayment fees.
Not all lenders allow you to redraw on your repayments. Some lenders only allow you to redraw on additional repayments you’ve made, whilst other do not allow redraw at all. Often (but not always) you will find fixed loans will not allow redraw, but offer a lower rate, whilst variable rate holidays personal loans may allow you to redraw additional repayments you have made, but may also charge a higher interest rate.
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