Taking out a holiday loan from a bank or any other lending sources is quite common nowadays. These loans enable people to fulfill their needs whether it is to buy a home or a car, paying for higher education and even for travelling! According to research, there is a spike in the demand for loans by 39% especially during the spring and early summer.
Yes, there are lots of private money lenders who will give you money to travel but you should take out these loans after being fully acquainted with the lending policies and terms. This will prevent you from unwanted hassles and surprises in the end.
In order to find out more about travel or holiday loans you must first know what exactly is a holiday loan.
- A travel loan is actually a specific type of personal loan that you take out to pay for your vacation expenses.
- A travel loan is a very useful option especially when you want to go for a vacation but do not have ready cash in your hand immediately.
- These loans are typically unsecured loans just like any other personal loans, meaning that these loans are not tied to any assets that the lender can use as collateral.
You can use this money both for domestic travel and abroad, as the case may be.
To take or not to take
Now the question is, whether it is a feasible option to take outa loan just for your personal desire that can be easily postponed till favorable times? Well, this ideally goes for all types of loans that you wish to take out from a traditional bank or any online lending sources such as Libertylending.com or others. This is because you do not want to end up in a tough financial condition simply because you cannot pay back what you owe to the creditors.
- Just like taking out any other loan, you should carefully consider the pros and cos as well as whether or not you really need the loan before applying.
- Moreover, you should only apply for such a loan when you know that you are likely to be accepted. This is because having too many rejected applications will have a negative impact on your credit report. This will in turn make it harder for you to take out a loan in the future.
However, if there is a bargain to be had and at the same time you need the money to pay in full up front for your holiday, then a holiday loan may be a feasible option, provided you know that you have the resources to pay it back in full with interest without falling back on your repayment schedule in the future. It will also keep your savings intact.
Pros and cons of a travel loan
If you are sure that you want a travel loan you must now consider the pros and cons of it so that you are certain that you are making the right decision.
Pros of a holiday loan:
- You will need to make fixed payments if you take out a fixed rate personal loan for your holiday trip. Fixed repayments have a specific advantage. You will know exactly when and how much you will have to pay. This will help you to budget accordingly. On the other hand, this will not be possible if you take out a variable rate loan because the rate of interest will go up and down as per the interest rate of the market index set by the central reserve bank which your lender is bound to follow.
- You can also choose the loan term according to your preference and affordability. According to your source of income and expenses in a month, you can find out how long you need to pay back this loan and choose a longer repayment period if you wish to spread the cost of the loan and your holiday. On the other hand, if you can afford, you may also choose a shorter time to pay it off. This way you will also pay less on interest and save money.
- You will have freedom to spend when you take out a loan for travelling. You can spend it on a debit card, money withdrawn from an ATM or cash from a bank. This is not possible with the credit cards because there are certain fees charged sometimes for using a credit card abroad. Ideally, credit card should be used sparingly, if not at all when you are abroad.
- You can take a payment holiday provided the money lender offers you this option. This means that you will be allow to skip your repayments for a month or two when you take out a loan on this condition. However, for this you will need to meet with the different requirements of the lenders in order to qualify. These requirements include being their customer for a specific amount of time, having less than a specific proportion of your loan remaining to repay and most importantly, having a positive credit and repayment history.
As for the downsides of taking out a travel loan are concerned, you may not get the best deals if your credit score is poor. This means that even if you are offer with a loan you will end up paying higher interest rates. Moreover, you may not get the amount of money you need for your trip.
In addition to that, there is always the general loan risks whenever you accept a loan. The usual risks that all loans come with includes:
- Being charge for late payments
- Damaging the credit score due to late or non-payments and
- The likelihood of your debt growing fast if you cannot repay the amount you borrowed.
Therefore, if you really want to travel on a loan, make sure that you consider the cost of it. Check for the fees and charges attached to the loan, the interest rate, the tenure of the loan and of course your credit history before you apply.