Travel personal loans – what are they and how do they work?
Travel loans fall under the umbrella of personal loans and function in the same way as most others. Most travel loans will be unsecured personal loans with a fixed interest rate designed for use towards a holiday or general travel.
Generally, lenders will offer potential borrowers an amount between $2,000 and $75,000 and provide the option to pay it back over a term of one year all the way up to seven. These elements, as well as other policies, will be determined by the lender, so they may vary between each different lender depending on the type of loan you receive and your own financial history.
This presents borrowers with a golden opportunity to compare lenders through whatever aspect of the loan they find the most important. We pride ourselves on comparing loans where they matter to you, so you can look at different lenders’ deals in our rate table.
How can I effectively compare travel loans?
Fortunately, travel loan seekers are afforded a wealth of options when it comes to how they may choose to compare between different loans. We’ve listed some of the key areas that you should consider below:
The type of loan
There are four main options when it comes to the types of loans you can go with for your travel needs. Term loans are the most common form of loan in the travel area. These align with the examples mentioned above, ostensibly functioning as an unsecured, fixed-rate personal loan. A line of credit can be another sensible option if you’re looking for travel financing options, which is a pre-defined amount of money like a personal loan but able to be drawn upon whenever the borrower needs it. Credit cards and short-term loans can work for smaller travel loan needs but are not advisable for amounts beyond what you’d be able to pay back within a month due to their extremely high interest rates.
The length of the loan
The time over which your loan spans will go a long way to dictating the amount you’ll pay for each instalment; basically, the longer the loan, the less money you’ll pay. Personal loans tend to cap their loan terms at seven years, with a minimum of one year, but this may differ slightly between lenders. It is also important to note that the longer the loan, the more interest and fees you’ll accrue, so shorter loans may be the way to go if you’re looking to avoid that.
Interest and other fees
Interest rates are easy to compare between lenders, but it’s also important to note how much each different personal loan will set you back in terms of fees. Lenders will have different policies when it comes to the exact amount they’ll charge, but application, instalment, annual, early and late repayment and early termination will all typically come with a cost. Some lenders may not charge for all of these, particularly early or additional repayment fees, so you should check with lenders in advance to find out their policies.
Any other bonuses involved
You may find that some loans will build in some extra sweeteners to draw you towards them, which might be worth considering. An example of this could be discounts on certain aspects of the holiday or insurance. It may not end up deciding which loan you choose to go with, but it can certainly influence it.
Types of personal loan
With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.
Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.
Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.
Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.
If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.
Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.
There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.
Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.
Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.
There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.
Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.
Why compare personal loans through Savvy?
Top tips for planning your next holiday
A personal loan is a good financial boost that can be used to pay off holiday costs. However, you could end up paying more for your holiday than you should without a budget in place. Having a holiday destination in place already gives you the advantage of being able to plan around costs such as accommodation and travel, so you can apply for an adequate amount when applying for a loan. Saving on the side can help you budget for food and spending money which lowers costs.
There are a few things that you can do to minimise the cost of going on holiday. Researching for the best travel deals and discounts on things such as accommodation, meals, rental cars and more will give you clarity on your budget. There are some credit cards that come with rewards and frequent flyer points that can be used to make your travel economical. Checking to see how you can best utilise your points and rewards can be a saving grace.
The type of credit card that you are planning to use abroad can affect your overall bill. Always keep in mind how your card’s interest rate will affect your monthly repayments. If you’re swiping abroad with an ordinary card you can attract a 3% foreign transaction fee, which can dampen anyone’s holiday mood. Using a 0% foreign transaction credit card can be useful as it charges no foreign transaction fee and converts to other currencies with no additional costs.
Having travel insurance will not only give you peace of mind but also protect you when you need it most. Australians choose different ways to insure themselves, which can be through an insurer or using their credit card for travel insurance. However, before you jet set to your destination, it's important you check what your insurance covers. Some travel insurance policies only cover you once you've left Australian soil and can't be used locally.
Pros and cons of travel loans
Making your dream a reality
If you’re not quite at the point with your finances where you can travel on your own funds, a travel loan can unlock the potential for you to go on that holiday you’ve always wanted
Quicker application process
In comparison to larger financial undertakings, the process for applying for a travel loan is much quicker and easier
Greater outlay on your holiday
While loans are very useful for making funds available to you up front, the interest rates and fees that they contain will ensure your overall spend is greater than what you received
Tough early repayment fees
Some lenders may charge excessive fees for making early or additional repayments, so try to go with one that doesn’t slug you if you want that flexibility
Common questions on travel loans answered
Helpful personal loan guides
Still looking for the right personal loan?
Personal loans come in all shapes and sizes, so read more about the ways you can use them, as well as how they might work for you.