Paying for a Holiday with a Loan

Holiday Loans

Holiday Loans

There is a school of thought that is very much against taking out a loan to pay for a holiday. I guess the thought process behind this is that you shouldn’t borrow for something that can’t re-sell later if you need to.  This is, of course, a laudable and sensible idea, but attitudes change with the times. Years ago you would have struggled to get a loan if you admitted to your lender it was for a holiday; today many lending institutions, both large and small, actively promote loans specifically for holidays. With this in mind, and with many more people taking loans to fund their trips, formulating a sensible method to take such a loan is a necessity.

There are a number of different ways that you can borrow for your holiday these days. Each has pros and cons.

Credit Cards

Though not a loan in the traditional sense, credit cards do give you access to funds that you can later repay. If you intend to pay off your holiday within a month then you may well pay no interest and this is the ideal option. However, if you intend to pay it back over a longer period of time, a credit card has the potential to prove very expensive compared to something like a secured loan.

Secured Loans

Loans can be a convenient way to pay for your holiday, offering fixed payments over a specified time so you know exactly where you are.  That said, you must be confident you can make the repayments. You will often hear these types of loans described as homeowner loans, this is because your home will often be used as collateral for your loan; this is an awfully important thing to risk if you do not think you will make the repayments. The main benefit of these loans is that they usually have a relatively low rate of interest, especially when compared to payday loans and so on, so be sure you know exactly what you are paying back and that you are comfortable with the amount.

Remortgaging

Extending a mortgage to realise some equity from your home is another way of paying for your fabulous break. On the face of it, the increase to your repayments may seem very small, and very tempting, but bear in mind that the overall cost of your holiday could turn out to be astronomical if your mortgage has a long time to run. This is only recommended if you do not have very long to go on your mortgage.

The reason people consider loans is so they can take holidays when the moment is right; when the kids are still at a certain age, or when work commitments are low etc… With this in mind, a good piece of advice when considering a loan is to imagine you are borrowing from yourself in the future.  If you are happy that you could eventually have afforded the holiday then it is a good indication that taking a loan will be a safe option.

Paid article by Kevin Ball on behalf of Norton Finance.

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