Before confirming your next holiday accommodations and ticket bookings, analyse your finances. Identify your purse and plan the best way to finance the trip. Holiday loans prove one of the best ways to finance your dream vacation. You can use it to pay for accommodations, hire a personal taxi, and pay other associated costs.
However, vacation loans help you finance nearly every aspect of the trip but share some drawbacks. The blog discusses the benefits and risks of holiday loans on UK premises. It will help you decide right and choose if it’s worth it.
What does a holiday loan imply?
A loan for a holiday is a facility that one can use to cover vacation-related expenses. It involves borrowing a lump sum amount for a specific time. One may get unsecured or secured holiday loans depending on the preference. An unsecured one is the best for individuals with good credit history and limited assets. Additionally, you may get up to 35000 for holiday-associated purposes at fixed interest rates.
You can consider a loan for a holiday if:
- If your savings do not suffice the requirements
- You cannot wait until savings build-up
- Planning a critical holiday/ vacation
Let’s now discuss the pros and cons of using holiday loans for purchases and bookings.
Benefits of using fast holiday loans to fund a vacation
Knowing the benefits of using a holiday loan helps one plan a stress-free vacation. It eliminates the hassle of arranging the cash to fund the needs. Additionally, it prevents one from spending outrageously. Instead, you can assign the funds to vacation-optimised tasks with planning. Here are other advantages of using holiday loans for your trip:
1) Competitive and low-interest rates
Loans for personal vacations are generally competitively priced and more affordable than their counterparts. You may get a loan at low-interest rates and terms. This is possible for individuals with stellar credit history, comprehensive employment growth, and disciplined finances. Additionally, a loan at low-interest rates ensures low repayments and overall costs.
2) Faster turnarounds
You may apply for holiday loans by providing basic information. Later, lenders require some documents with authentic information to approve. You must provide income proof, personal ID, bank statements, and assets (secured loans), to qualify.
Individuals may get unsecured holiday loans within 20 minutes. However, processing secured holiday loans may take 24 business hours. You may get guaranteed same-day loans from a direct lender by meeting the affordability criteria.
What could be better than getting the loan the same day?
3) Top-up if you need more money
Predicting the exact holiday costs may take days even months. However, it may fall short of expectations. What if you exhaust your holiday funds on the second day only? What if you need to pay more for the accommodation booked? Not having financial flexibility may hinder holiday fun. Do not worry. A top-up loan facility allows you to borrow more without worries. You get a new agreement term within 15-20 minutes. However, check whether you can afford it comfortably.
Risks of using fast holiday loans for vacation needs
Like any other loan, these loans have cons. One of the major disadvantages of holiday finance is- cost. The costs may quickly add up if you skip a payment.
Lenders impose late fees, penalties, and other fees on missed payments. It may make your loan costly. However, you can tackle this by ensuring minimal but regular loan payments. Discuss the possibilities with your provider and re-schedule payments.
Here are other cons of holiday loans and the best ways to beat them:
1. You risk losing precious belongings
Individuals with secured holiday loans share the risk of losing the pledged asset. It may happen if one misses payments in a row or defaults. Eventually, the loan provider may legally claim the collateral.
However, you can avoid the situation by seeking additional time to pay the dues. Most loan operators provide 30 days to the borrower for debt clearance. You may get one by revealing the potential to pay the dues within the timeframe.
2. Missed payments raise interest costs
A fixed interest facility provides the flexibility to budget and pay timely. However, it may work reverse if you skip payments. The costs on the other hand continue to rise with debt rollovers. It is not good from the financial and credit perspective. You may default. Consequently, you pay a higher sum than what you should on the loan.
Alternatively, analyse the ways to deal with missed payments. Take the below actions immediately after missing 2 payments:
- Identify your affordability, income and savings
- Stop direct debits for other unimportant tasks
- Update your budget by restricting unnecessary expenses
- Discuss your situation with the provider
3. Paying the loan early
Most individuals mistake flexible payments for early repayments. However, both are entirely different. Flexible payments help you spread the loan costs or change it anytime. Alternatively, early repayment or prepayment implies- paying the loan dues before loan termination/ end.
The latter may impact your credit score and finances and make loans unaffordable. Eventually, you may get a CCJ for the loan default. It impacts your financial situation in the long term.
However, you can avoid the situation by:
- Analysing the loan agreement terms carefully.
- Check for additional costs like- prepayment or additional fees that may add up to the costs.
- Does pre-payment penalty apply to partial or full payment?
- Identify the circumstances that may make you pay more. Note these somewhere to avoid impulse payments.
How to use a loan for a holiday wisely?
If you believe a holiday loan is right for you, compare your options. Shop around for the best API, loan costs and interest rates on holiday loans in the UK marketplace. Next, create a budget for the payments. Make sure that it does not hamper your other lifestyle aspects.
Additionally, double-check your income nature, and liabilities to rule out any default possibilities. Most importantly, consider the most affordable ways to finance your trip before choosing holiday loans.
Bottom line
Thus, the blog discusses some of the best benefits and risks associated with holiday loans. Analyse each carefully before deciding. Check interest rates, APIs, early repayment charges and hidden fees to avoid surprises. Precisely, a well-educated loan eliminates the last-minute panic. It safeguards your finances and credit score.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
