When we start counting the reasons we love to go on holiday, we know that the list will be endless. Everyone has a different reason for holidaying. Some of us may want to take a break from work, while some of us are simply “wanderlust”. Jetting off to the sun, sea, and sand is surely expensive. If you feel ripped every time you hit on that payment button – holiday loans may help you treat the debt hangover. Whether it’s a perfect honeymoon you are planning for or a simple weekend getaway, these loans can be of some help.

What is a holiday loan?

It is an unsecured personal loan that you borrow to fund your vacations. You may borrow an amount ranging from £1,000 to £35,000. Since a holiday loan is not backed up by any collateral, a lender charges a high rate of interest. But if you have a stellar credit score, you are in luck – the interest rate will be a lot lower. Also, if you default on the loan, the lender cannot take away your property or anything of value. But if you cannot make the repayments on time, your credit score will be severely damaged. And the lender may take legal action against you by registering a complaint. You may receive a CCJ if you do not repay the lender what you owe.

Can I pay for my holidays in instalments?

Yes. You can repay the holiday loan in fixed monthly instalments. You will get a maximum repayment period of 7 years. But the longer you take to repay, the more you will have to pay back in terms of interest.

Suppose you are borrowing £10,000 at 10% APR for 12 months, you will have to pay £525.87 in interest. That means the total amount repayable will be £10,525.87.

If you borrow the same amount of £10,000 for 3 years at 10% APR, the total repayable amount will be £11,543.47 including the interest of £1,543.47.

Now, you must have been clear about how interest rate works by the loan term.

Can I get a personal loan for my holiday?

Your eligibility for getting a personal loan for a holiday depends on a wide range of factors. Typically, there is not a single thing which can indicate about your eligibility. In addition to this, different lenders have different criteria for lending. Listed below are a few factors that are the common ones considered by almost every lender in the UK:

· Age

You must be 18 years of age or above when you apply for a personal loan. Individuals below 18 years of age do not have the legal permit to get into a lending contract. As borrowing a loan comes with financial responsibility.

· Resident of the UK

You must be a legal citizen of the UK. When you apply for a loan and get approved, you will be required to enter into a legal contract with the lender. Unless you are a resident of the UK, it will not be possible for any lender to entertain your loan application.

· Credit score

You must have a good credit score. Whenever a lender receives a loan application, the first thing they do is – assess the applicant’s credit history. It is because they need to evaluate their risk before lending you the money.

· Debt-to-income ratio

This ratio gives a clear insight into the lenders about your gross monthly income and how much you spend towards your debts. The lower your DTI ratio is, the more your chances are for the loan application approval.

· Employment status

Only checking the credit history will not be enough. Lenders put a focus on your current income source. If you are in a permanent role and you are getting salary regularly to service the debt upon approval – then they will consider your profile.

Where do I go to get a holiday loan in the UK?

You can apply for an unsecured personal loan for a holiday online in the UK. The financial watchdog – the Financial Conduct Authority (FCA) authorizes lenders and credit brokers to safeguard the interests of the borrowers. Most of these lenders offer loans online. However, before you apply to a particular lender, shop around. Explore available options without hurting your credit score.

Compare multiple offers to know who is offering you the best rate for a holiday loan. Remember, the lower the interest rate – the lesser you will have to pay.

Here are 5 tips to help you find the right holiday loan:

  1. Evaluate the amount that you need
  2. Search for FCA registered lenders or credit brokers
  3. Compare multiple offers from several lenders
  4. Check online reviews or feedback of the lender by previous customers
  5. Go through the Terms & Conditions and fine print thoroughly

Borrow according to your affordability and prepare a strong repayment plan to avoid any financial troubles.