What to consider when taking out a holiday loan
For the first time in years, Australians can hop on a plane and fly to Bali.
A must-visit holiday destination before the pandemic, 1.2 million Australians visited Bali in 2019, more than any other nationality in the world. So, no doubt, many are chomping at the bit to return to the beaches of Bali.
And, while some may have the savings to back up an adventure in Indonesian paradise, for others covering the costs may seem a little over the top.
This is where a personal loan could help, as an alternative to something like a credit card.
Why not put my vacation on my credit card?
While a credit card can give you more flexibility when it comes to the potential cost of travel, a personal loan can end up saving you a lot of money in interest.
Currently on the Mozo database, the average secured personal loan rate is 7.57% and the average unsecured personal loan rate is 9.53%. In contrast, the average credit card rate is 16.98%.
How much can I borrow with a vacation loan?
Depending on the lender, you may be eligible to borrow thousands of dollars for your vacation. According to the Mozo database, personal loan amounts currently range from $500 to $80,000.
That said, while you may qualify to borrow a large amount, it’s not a good idea to borrow just for the sake of borrowing. Make sure you only borrow what you need to cover the cost of your vacation.
How to find the right personal loan for your trip – 3 easy steps
There are many possibilities when it comes to finding the right personal loan for your Bali vacation.
With that in mind, here are three simple steps you can take to help you find a loan that suits your dream vacation and your budget.
Step 1: Know your numbers
There are two sets of numbers you really need to get your head around when it comes to financing your vacation with a personal loan:
- Budget your repayments
For starters, it’s important to be realistic about the cost of your trip. Are you planning to sleep in a hostel or do you want the amenities of a five star resort? Whatever you have in mind, calculate the large and small costs you’re likely to incur along the way – flights, accommodation, food, activities, etc. This will give you a good idea of how much you need to borrow.
This brings us to the second set of numbers that need to be calculated: the vacation loan itself. In addition to calculating the loan amount, you also need to consider your repayments.
It is essential to weigh the terms of the loan and the repayment schedule (weekly, fortnightly or monthly) as these will impact the amount of interest you pay over the life of the loan.
To make it easier for you, check out the Mozo Personal Loan Repayment Calculator.
Step 2: Decide on loan features
Once you’ve decided on how much you want to borrow and can afford, it’s time to get down to business.
Along with a manageable interest rate on your personal loan, you’ll also want to consider whether the available features are right for you.
For example, a loan with additional repayments can be convenient because if you happen to have a small surplus in your monthly budget, you can use it to pay off your loan balance at no additional cost.
And a withdrawal facility is also a good loan feature, as it gives you the flexibility to withdraw on your extra repayments in case you need that extra cash later down the track.
Step 3: Apply for the loan
Have you found a loan with all the features you are looking for? It’s time to apply.
One of the best ways to successfully apply for a personal loan is to make sure you meet the eligibility criteria before applying. Generally, these can include:
- Be at least 18 years old
- Hold Australian citizenship or an eligible visa and reside in Australia.
- Meet minimum income requirements
In order to put yourself in the best position to be approved, you should also be prepared for your credit history to be closely scrutinized by lenders. You’ll want to have your credit score in tip-top shape in order to put your best foot forward.
Of course, each lender also has their own set of criteria, so to give yourself the best chance of being approved, be sure to double-check that you meet the requirements for the specific loan you’re applying for.
Ready to start comparing holiday loans? Check out the best options below or head over to our personal loan comparison page to learn more!
* DISCLAIMER: The Comparison Rate combines the lender’s interest rate, fees and charges into one rate to show the true cost of a personal loan. The comparison rates displayed are calculated on the basis of a loan of $30,000 with a term of 5 years or a loan of $10,000 with a term of 3 years as indicated, on the basis of monthly principal and interest repayments, on a secured basis for secured and unsecured loans. basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and durations will result in different comparison rates. Costs such as withdrawal fees or prepayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may affect the cost of the loan.
^ See Mozo Experts Choice Personal Loan Awards information
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