Holiday loans are simply personal loans
Holiday loans are discretionary loans used to fund any costs involved with holidays. The difference between your savings and your desired destination can be bridged by obtaining a loan that specifically helps you get away.
Financial institutions such as banks, credit unions and credit card companies issue these loans, and they come with fixed recurring installments for a fixed period of time, normally 12 to 60 months (1 to 5 years).
Holiday loan APRs are set, indicating that when you take out the loan, you lock in the interest rate. This is advantageous over credit cards and personal credit lines, which have unexpectedly fluctuating volatile interest rates.
Usually, holiday loans are unsecured, meaning that they do not need collateral. Because of this, to assess eligibility, financial institutions rely heavily on variables such as the credit score, salary and debt-to-income ratios.
Beware predatory lenders around the holiday season
A holiday loan is not a loan on a payday basis. Payday loan lenders target borrowers who need easy holiday money without a credit check, and lock them with short repayment periods and incredibly high APRs in a costly borrowing loop. Verify that lenders are providing loans at competitive rates while looking for holiday financing solutions online and that payments are appropriate for your financial situation.
Should you get a holiday loan?
Although the holidays are a fun time of year for winter or summer get aways, they can bring a lot of financial pressure as well. In reality, a 2019 LendingTree survey showed 61 percent of Americans dislike the holidays because of spending. There are still extra costs during the holidays that can wreak havoc on all the best schedules, from special dinners, to presents for relatives and friends and holiday travel. If you need to borrow money to get away, perhaps you should consider not going. This is especially true if you don’t see a situation in which your income will increase when the holiday ends. Borrow carefully.
Cost of a holiday loan
The greatest downside of taking out a holiday loan is the interest rate. Although good-credit borrowers can secure more favorable terms and lower APRs than with credit cards, debt for needless expenses and properties that would not appreciate in value is still not recommended. Usually, holiday loan APRs vary from around 10 percent to 25 percent, but with far higher APRs, low credit borrowers can get loan deals.