Holiday Loans UK
When it comes to planning for the holidays, there are many factors that must be taken into consideration. It’s never a bad idea to start thinking about the holiday season well in advance. Good preparations help make the holidays much more special.
The greatest obstacle to having a great holiday is lack of finances. Even with the most immaculate holiday plan, it is impossible to pull it off without adequate funding. For people who find themselves in this situation, holiday loans are one of the options available.
A holiday loan is essentially an unsecured personal loan that is offered by a financial institution to be used to pay for holiday expenses. Because it is unsecured, it carries a high interest rate.
The loan is not strictly meant to cover holiday expenses. You can use it to make special purchases for your family, pay for engagement rings or any other use. Lenders are concerned more about your ability to repay than anything else.
What does it take to qualify for a holiday loan?
In the UK, anyone with good credit, sufficient income and not too much in debt can qualify for a holiday loan. The process of getting a holiday loan is similar to that of getting a personal loan at any time of the year. Different lenders will have different criteria for loan approval. They will also offer different rates.
If you have excellent credit, you will be in a great position to negotiate for better interest rates. Apart from your credit score, there is also the aspect of debt-to-income ratio (DTI). To ascertain your DTI, take your total debt obligations and divide the amount with your total monthly gross income. The higher the ratio, the lower your chances of getting a holiday loan.
Why is a holiday loan a better alternative to using credit cards?
Ideally, you should be setting aside a portion of your income each month and use the money to cover your holiday spending. But for most consumers, saving is not always possible due to their numerous financial commitments.
Although using credit cards to fund a holiday is an option, it can have serious implications for your finances.
Here are some reasons why a holiday loan is a better option:
1.You are clear on how much you are supposed to pay
Once your holiday loan is approved, the repayment terms are set and they cannot be changed over the entire loan period. Credit cards repayment terms are not always as straightforward, especially when new charges are added along the way.
2.Lower interest rates
Holiday loan interest rates are lower than credit card interest rates most of the time. Lenders view holiday loans as carrying a lower risk because there is certainty about how much loan is extended to the applicant.
3.You can only spend what you borrow
With a holiday loan, since you receive a lump sum, you can only spend the amount you are offered. In fact, there is no obligation to spend the whole amount. If you have any balance still left after your holidays, you can use it as part of your payments.
4.Loan terms and interest rate are fixed
When you take a holiday loan, you don’t have to worry about the terms changing over the loan period. This makes it easier to come up with a repayment plan that you can adhere to.
5.The repayment period is clear from the onset
Once you agree to the terms of your holiday loan and sign the papers, you have clarity on the period during which you are supposed to pay it off. Once you pay the loan off, you move on with your life as you start to plan for the next holiday.
How do I shop for a holiday loan?
Looking at various loan options gives you an opportunity to see where you can get the best terms and the lowest interest rates. Your decision should be based on the monthly repayment amount, interest rate and repayment period. To avoid overspending, borrow only what you need.
Although getting a holiday loan does not take long as long as you meet the criteria, it is still important to make your application in good time to avoid the last-minute rush. Some lenders will approve your loan within hours while others might take some days.