The holiday season is the best time of the year. The holiday is used to relax and to use the time for things that you otherwise don’t get or don’t get enough of. However, it is far from being possible for every employee to take a vacation because a vacation can cost a lot of money. Especially when you want to travel with a family and children.
Taking out a loan for your vacation is possible
But there are ways to go on vacation without generous savings. Quite a few tour operators offer their customers the financing of their vacation through a vacation loan. With this loan, customers can not only finance the travel price. It is also possible to include the additional costs of the holiday such as travel and pocket money on site in the financing amount.
Alternatively, consumers can also finance their vacation with an installment loan from their bank. This is much cheaper and recommendable than using the overdrafting overdraft of the checking account. Here, the banks offer special loans with small loan amounts at comparatively short terms.
And in comparison to the financing offers of the tour operators, an installment loan from the account-holding bank is also cheaper in terms of conditions. A special comparison of providers of small and short loans should clarify this.
However, every borrowing always means a limited amount of liquidity for the borrower and a risk for the lending institution. Therefore, even with a vacation loan, the potential borrower has to meet certain requirements so that he even gets the money for his vacation.
One of the prerequisites for granting a loan is to secure the loan through the disposable income of the borrower. This is evidenced to the bank by submitting proof of salary.
Besides the amount of income, it is not unimportant whether there are other financial obligations to be met through loans. These flow into the calculation for the granting of the holiday loan as much as the persons living in the household or the persons to whom the borrower has to pay monthly maintenance.
Closing and repayment
Once these things have finally been clarified and the bank signals approval of the holiday loan, the loan agreement can be signed. In addition to the loan amount, the term of the contract is decisive in advance. Since a vacation loan is a loan with a rather small loan amount, the term should also be short. After all, who wants to pay off a loan for a vacation that has long been over when the next vacation is in sight?
The loan should then be repaid in full after 12 months at the latest. If one takes into account a loan amount of $ 3000.00, which is awarded at a not unrealistic interest rate of 5%, the monthly rate is around $ 262.00. This rate should then also be available for 12 months.
If you want to treat yourself to your dream vacation, but do not have the full amount of money at your disposal, you can take out a vacation loan. This loan is a normal consumer loan with a short term. As a rule, the money is made freely available so that the borrower can use it to finance his vacation. The agreed interest rates can be fixed or variable. The repayment is made in pre-determined installments. The first installment should generally be due after the end of the vacation and not before.
The special thing about vacation credit is the collateral. For real estate or car financing, the house or car is always there for security. The bank can access this in case of problems. When it comes to vacation loans, there is nothing the bank has as security if the installments are not paid in accordance with the contract. For this reason, many financial institutions take a closer look at the financial situation of the applicant when it comes to vacation loans.
For whom is this funding option useful?
The prerequisite for a vacation loan should always be a stable and secure income, or corresponding reserves. If this is available and a longer vacation trip is desired, then the vacation loan can help to implement this wish.
If the holiday fund is to be replenished with a small amount, it may also make sense not to apply for a holiday loan, but to make full use of the disposition loan. Ev. the bank also grants an increase in the overdraft facility here. Even if the interest rate on the overdraft facility is somewhat higher, interest only accrues on the amount actually used. Each time the money is received, the overdraft facility is cleared first.
Loan amount and term of the vacation loan
The amount of the loan depends on the available capital and the price of the vacation. Any extras (e.g. rental cars) should also be taken into account when applying for the amount of money. The maximum possible loan amount also depends on the applicant’s financial situation and regular income.
The term should be chosen so that the installments are real and the vacation loan is paid off until the next vacation. In most cases, a term of 12 months is real for the holiday loan. Longer terms are also not sensible because in most cases a vacation is planned again after 12 months. The loan should then be paid back.
How can the cheapest loan be determined?
The easiest way to compare the different providers is to use the corresponding comparison computer on the Internet. Every interested party should note that often only certain banks are compared in each comparison portal. It is therefore always a good idea to use several comparison portals. This involves a larger number of financial institutions.
When comparing on the Internet, foreign financial institutions are always included. This is not a problem within the EU. For banks outside the EU, different regulations of the respective countries apply, which everyone should look at carefully before choosing such a financial institution.
If the applicant has been a customer at his house bank for many years, it is always a good idea to go there personally. An individually tailored offer from the house bank can sometimes be cheap.
In any case, a written and binding bid must be obtained from the selected financial institutions. Often, cheap offers in the comparison portal should only be used to attract customers. If it becomes concrete, these good conditions only exist if the creditworthiness is very good.
But in most cases, this group of people does not need a travel credit. For all comparisons, always use the annual percentage rate. Only here are all costs included.
The bank almost always obtains Credit bureau information with the loan application. Every citizen is entitled to free Credit bureau information once a year. The applicant should use this before applying for a loan. Sometimes the Credit bureau data is incorrect or old entries were not deleted on time. The applicant then wonders why he cannot get a cheap loan despite his good credit rating, or the application is completely rejected.
There are also loans without Credit bureau information on the Internet. They are often dubious, too expensive and have high interest rates. In many cases, the borrower must take out expensive insurance as collateral to get the loan.
If the term of the holiday loan is to be longer than 12 months, the applicant should make sure that special repayments are also agreed.
In addition to the normal installment loan, many tour operators also offer installment payments for their trips. As tempting as it sounds, it is always important to check carefully and do the math. Payments in installments at the tour operator are often significantly more expensive than the bank’s cheap vacation loan.
The cheap vacation loan is already available today with approx. 3.5 to 4.5% APR. When paying in installments via the tour operator, 10% is not uncommon.
Think carefully about each holiday loan and check the benefits
Before borrowing, it should be checked carefully whether the household budget can take this additional burden. How important is this vacation. Anyone who has been living in overdraft facility for a long time should carefully consider this step.
In such cases, it can be more relaxing to forego the vacation before you become over-indebted.