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Should I get a travel loan for Christmas?

01 November 2019

 

Holidays can be expensive at the best of times. But when Christmas rolls around and you need to buy presents and put together a fancy family meal, things really start to add up. Last year, Finder1 anticipated that Australians would spend $25 billion collectively on Christmas-related expenses. On average, that’s $1,325 per person!

These expenses are probably ones you’ll anticipate. But what if you have to travel overseas at short notice to spend Christmas with family, or attend your friends’ destination wedding over the New Year? Last minute bookings can be costly.

To get around the Christmas pinch, you may find it useful to consider a travel loan. Though paying off your yuletide after the fact might not be your first thought, it could help your savings stretch a little further if your family is celebrating in, say, London this year.

That’s not to say it’s the best option for your financial situation. Like any kind of loan or credit, you need to weigh up the pros and cons to know if it will actually work for you. 

What is a travel loan?

A travel loan, sometimes called a holiday loan, is an unsecured personal loan you can use for travel costs such as airfares, accommodation and so on. Typically, this kind of loan will attract a higher interest rate than a secured loan. This is because there’s no asset (like a car) that the lender can use to get the owed money back if a borrower can’t keep up with their loan repayments.

How does a personal loan for travel work?

A personal loan for travel is a one-off, lump sum amount that you repay in instalments over a period nominated by you (usually 1-7 years).

Generally, to be eligible for a travel loan you need to:

  • be at least 18 years of age
  • receive regular income
  • have a good credit score, and
  • not be, or have been, bankrupt or insolvent.

Often loan providers won’t lend you less than a few thousand dollars (in addition to fees and other charges). Because of this, it’s important to understand how much your repayments will be and how long it will take you to pay the loan off before entering into a loan contract. Try Suncorp Bank’s Personal Loan Repayment Calculator to estimate how much a loan could cost you over its term.

Pros of taking out a travel loan

Taking out a travel loan can allow you the financial flexibility to fund a trip that exceeds the amount of your current savings. Once you apply for one, which can be done online fairly quickly, you’ll often know if it’s been approved within a few days.

With Suncorp Bank, you can choose a travel loan that’s a Fixed Rate Personal Loan, which determines your repayments from the outset, or a Variable Rate Personal Loan  that could decrease your repayments if interest rates drop (though this does mean that if interest rates go up, so do your payments). Once your application has been approved, the funds will likely be in your account within 24 hours.

Explore Holiday Loans Today  

Cons of taking out a travel loan

When you take out a loan, you need to make sure you’re aware of your repayment obligations. Depending on the amount you borrow, and the length of the loan, you’ll often end up paying more because of interest charges and fees. Additional fees can include:

  • a loan establishment fee, usually financed with the loan,
  • a monthly account keeping fee,
  • late fees, if you miss a payment, and 
  • an early payout fee, if you repay your loan within a certain period.

Alternatives to holiday loans

Whether it’s this year or next, there are ways to spend more quality time with family and friends and less cash:

  • Aim to set aside a little bit of money from each pay throughout the year. That way, as Christmas approaches, you’ll already have funds you can use. Saving just $20 per week will add up to $1,040 in a year!
  • When it comes to gift-giving, you could make yours, set limits on the amount spent per gift, only buy gifts for the kids or even try out Secret Santa.
  • If you’re hosting, be sure to ask everyone coming along to contribute to meals so you’re not responsible for purchasing all the food and drink. This could be a few dollars or even a dish.

For more ideas, take a look at ACIS’s Money Smart 12 money tips for Christmas and you’ll be ready for the festive season before you know it.

Remember, before you take out a personal loan for travel it can be useful to weigh up whether it’s the best option for your financial situation. If you’d like to know more, you can speak with a Suncorp Personal Banking Specialist today on 13 11 55 (8.30am – 6pm AEST). They’ll be able to assess your needs and support you in finding a solution that’s right for you.

Sources:

1 Finder: Australia’s Christmas Spending 2018

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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product

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