Should You Apply for a Loan to Go on Your Dream Holiday? 6 Things to Avoid

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The answer to this question will never be straightforward. Logic demands you only take out a loan on appreciating assets but if you’ve been feeling burned out, uninspired, or sad, satisfying your wanderlust might just be what you need. In the UK, a low rate personal loan is one of the most convenient ways to pay for your dream holiday. While your savings is ideally the right choice, a personal loan could ease the burden of payment if your personal savings won’t fund your trip to a far-off location.

When applying for a travel loan, here are some things to help you avoid common mistakes

Set a budget: Before borrowing money for your trip, set a budget. Figure out the cost of a plane ticket, hotels, meals, transport, insurance and other miscellaneous expenses. Once you have a figure in mind, you’ll know exactly how much you need.

Credit cards or personal loans? These are the two main ways to borrow for your holiday. A personal loan has a fixed interest rate, monthly payment and repayment schedule. The application process is easy online but it can be safer to go with a personal loan because it forces you to be frugal and live within your set budget. No matter which one you go for, always have a budget set and stick to it.

Credit card and personal loan: A new option is to combine both a personal loan and credit card. If you plan ahead early and you have a good credit score, you can tap into reward points benefits to cover the cost of hotel and flight tickets. Combine it with the lower interest rate of a personal loan to cover expenses on the trip.

Don’t borrow if you don’t need to: If you’re going to borrow money to travel it has to be worth it. If you borrow a large amount, you could be paying off your debt or personal loan for years, and don’t forget about applicable fees and interest. For example, you borrow £5,000 for a trip to New York and you’re paying it back over ten years. You could end up paying up to £10,000 as the total fee.

Find the right loan that fits your travel needs: Before taking a loan, check the interest rates and only consider lenders with the lowest rates. Is it secured or unsecured? Unsecured loans have a higher interest rate but protects your assets against foreclosure.

Only borrow what you can pay back within a year: When taking out a loan, think of how long it will take to pay it back. As a rule of thumb, travel loans should be paid up within a year. The value shouldn’t be so large that it stretches your payment or you’re spending more than you bargained on interest.

Conclusion

When considering a travel loan, you should check your income, expenses and savings. Do you have a stable job that lets you pay for the loan without crippling your income? Do you have other debts you’re paying off? A trip to some of the best locations doesn’t come cheap but an inexpensive travel loan can take you there and back without tipping your budget.

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About Author

Kelly Lewis is the founder of Go! Girl Guides, the Women's Travel Fest and Damesly. She's an optimist, an adventurer, an author and works to help women travel the world.

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