January is the month in which most Belgians start planning their summer vacation. Newly recovered from the Christmas and New Year celebration, workers find it high time to look forward to the next rest period. Credit providers try to respond to this sentiment by promoting their holiday loans in January and February. Some banks specifically recommend the formula as a holiday loan, but many lenders stick to the general names: all-purpose loan or personal loan.
Characteristics of a holiday loan
Holiday loans are in fact personal loans and always have a fixed repayment term. Because the amounts involved are often relatively small ($ 5,000 or less), the term is kept short. As a rule, the credit is repaid within six to twelve months. Of course, a longer period may be chosen, but the idea of paying off for years for a fun journey of 8 to 10 days does not appeal to consumers. The APR on holiday loans is the same at all institutions as on loans for all purposes. To find out where you can borrow the most for a vacation, you can simply compare the loans with all the goals (personal loans) of providers.
Saving versus borrowing for vacation
Traditionally we tend to save for a vacation. By putting aside $ 500 to $ 700 every month between January and July, a holiday pot of $ 3000 to $ 4000 can be built up. This is reasonably sufficient to finance a flying holiday with the family to a sunny destination. But saving means that there is little financial scope to book tickets, hotel rooms, rental cars, and attractions well in advance. As a result, it is not possible to respond to discounts for early reservations and to promotions that only apply temporarily. “Book your airline ticket within 3 days and receive a 20% discount!”
It may be more advantageous to borrow the $ 3,000 or $ 4,000 in January, and then repay this amount in the next six months. The APR on a short-term holiday loan is around 10%, so that the total costs on a credit of $ 4000 become approximately $ 117. By borrowing the total holiday budget becomes available in advance. With a flash promotion from, for example, an airline, you can respond immediately. Even when booking all-inclusive holidays through travel organizations, the discount with an early payment can add up considerably. By cleverly anticipating such discounts and promotions when planning a vacation, it is possible to ultimately save more than the interest that must be paid on the loan.