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From tropical island retreats to exciting city breaks, most people in the UK spend between £1,000 and £4,000 on getaways every year. And if it’s time to tick off another bucket-list trip, you might be considering holiday finance.
With a personal loan in place, you won’t have to stress about paying for all the travel, accommodation and experiences in one go. Plus, the fixed interest rate means you can enjoy some rest and relaxation with peace of mind in your budget.
But as with any debt, it’s important to weigh up the pros and cons of taking out a holiday loan before you borrow - a commitment that can continue long after you come home.
In this simple guide, we explain the fundamentals of holiday finance, including what this type of loan involves, its main advantages and key considerations. Keep reading to find out how you can cover the costs of your next adventure quickly and easily.
A holiday loan is simply a personal loan used for trip-related purposes - from flights and food to activities and accommodation.
It can be a great choice if you need to book as soon as possible but don’t have enough savings to pay for everything all at once, or would just rather spread the cost over time.
If approved, you’ll be able to cover any kind of adventure. Whether you’re planning to sunbathe on a beach or ski down some slopes, holiday finance can fund the associated expenses.
Importantly, a holiday loan has a set repayment term with fixed monthly repayments and a fixed Annual Percentage Rate (APR). This rate is essentially a charge for borrowing, and tends to include any lender fees for set up, ongoing service and other essential features.
A holiday loan works like any other personal loan.
To get started, apply to borrow the amount you need to pay for your holiday. If you’re approved, the lender will give you a set amount of money, often in one lump sum.
You’ll then need to repay this amount (plus interest and lender fees) in monthly payments over a specified time frame, known as the loan term. You can usually make the first monthly repayment straight away, before you’ve even set off on your trip.
Remember that it’s a good idea to pay off debt as soon as possible to sidestep any accruing interest, so work out how much you can comfortably afford to repay each month and don’t miss a beat. If you skip a payment or fail to pay it in full, your credit score could suffer.
Above all, always stick to the repayment terms set out in your holiday loan agreement. Once you’ve paid back the full loan, as well as its interest and any other charges that came with it, your lender will close the account.
Holiday loans can be secured or unsecured. Before you apply, it’s important to understand the key differences between these two options.
With a secured holiday loan, assets like your home or car serve as collateral - if you can’t repay the lender, they’re allowed to sell the asset and pocket any money you owe.
Given this protection is in place, secured loans usually allow you to borrow more money with less interest.
Most holiday loans are unsecured, which means you won't have to risk losing any of your valuable belongings. Additionally, the APR tends to be fixed, so you’ll know exactly how much to budget for your monthly repayments.
While you can’t borrow quite as much as with a secured loan, this is generally the quickest and easiest way to finance your holiday. And unless you’re heading off on a particularly long or luxurious trip, this option should cover your costs.
The amount of money you can borrow through holiday finance depends on a range of factors, from your credit score and income to the lender and type of loan you choose.
At Abound, we offer unsecured personal loans between £1,000 and £10,000. Apply online to find out how much you could borrow in just a few minutes.
The cost of your holiday loan depends on how much money you’re wanting to borrow, how long you’ll have to repay it, and the APR on top. As mentioned above, this rate includes the interest payable on your loan, plus any extra fees charged by the lender.
To find out how much your loan might cost with Abound. Using our simple online calculator, you can run the numbers in a couple of clicks.
Finance for holidays doesn’t have to be complicated. Here’s how getting a loan for a holiday can make your travel plans that less stressful:
While loans for holidays can bring lots of benefits in the right circumstances, you’ll need to weigh up some key considerations first.
If a holiday loan still sounds like the right way forward for your next trip, keep reading for advice on eligibility and the application process.
You can get a holiday loan with Abound if you:
Once you’ve ticked the above boxes, it’s time for us to crunch some numbers. As an Open Banking lender, we look beyond your credit score to check that you can afford the loan repayments.
With your permission, we’ll review things like your account details, ingoing and outgoing payments and extra account features to get a full picture of your financial standing. This is important because you should be able to comfortably afford monthly payments from your regular income, with savings to spare.
Rest assured that while we can view this data, we’ll never be able to move money from your account. And if you want to revoke our access at any time, it’ll only take a few taps within your banking app.
Looking for an easy holiday loan? Get a quick quote and apply online with Abound. If approved, we could get you your money in as little as one day.
Before you begin the application process for a holiday loan, you’ll need to work out exactly how much you need to borrow. Make a list of all the expected costs for your trip, including travel, accommodation, food and any planned experiences.
Equipped with the total price of your getaway, you’re ready to approach lenders.
Here’s how to get a holiday loan with Abound:
That’s it. All you have to do now is start packing.
As with any borrowing, a holiday loan can affect your credit score if it’s not managed properly. For example, if you make a payment past the due date or miss it altogether, this information will be reported in your credit history. And that can lower your credit score.
The upshot? Only borrow money for your holiday if you can afford to pay it off as agreed. Otherwise, it might be a better idea to take a less expensive trip.
That said, if you keep up with repayments, your credit score shouldn’t be negatively affected by holiday finance.
Even better, timely repayments can actually help you to up your credit score over time. That’s because they show credit rating bodies, like Equifax, Experian and TransUnion, that you can borrow and repay money successfully.
If you’re confident that you can make the monthly repayments in full and on time, a holiday loan can be a great way to cover the costs of your upcoming trip.
At Abound, we make holiday finance simple with unsecured personal loans of up to £10,000. Access the money you need in as little as one day and pay it off in fixed monthly installments.
Unlike traditional lenders, we use Open Banking to truly understand your full financial situation when reviewing your application. For you, that means a more practical repayment term and possibly even a lower interest rate.
Get a free quote for your holiday loan with our online calculator.