Finding a holiday loan

10 min Read Published: 08 Jul 2024

Finding a holiday loanYou could spread the cost of your next trip by borrowing with an unsecured holiday loan. It could open up more options for your next holiday or make your existing plans more affordable. However, you will need to pay interest on what you borrow and missed repayments could land you with extra fees and charges to pay, as well as damaging your future borrowing power. In this article, you can find the best unsecured holiday loan deals in the UK, plus the key information you should know about financing your next trip abroad.

What is a holiday loan?

Holiday loans are just like other unsecured loans. You select an amount you wish to borrow from a lender, then, if your application is approved, you repay the money - plus interest and fees - over an agreed period of time. This could be months or years, depending on how much you have borrowed and which lender you have chosen.

As with other unsecured loans – most commonly referred to as personal loans – your credit history and financial circumstances will be key to getting you the money you require at the best rate. There is nothing secured against a holiday loan, so the lender will judge your application based on the information available on your credit file and how much money you have coming in. It will need to be confident that you can afford to pay the money back over the agreed term.

The best holiday loan

To source the figures in the table below, we have used the representative examples of repaying a £1,000 loan over three years, a £5,000 loan over five years, a £10,000 loan over five years and repaying a £20,000 loan over five years. This is to show that borrowing more or less money may change the advertised rate of interest, as will altering the loan term. It is also important to remember that the loan amount and rate you are ultimately offered will be based on your specific credit history and financial circumstances, so may differ from the representative APR you see below.

Best holiday loan – July 2024

The best rates on a £1,000 loan

Loan provider Representative APR (from) Available loan term Available loan amount Monthly payment Eligibility checker?
Santander 13.5% 1 - 5 years £1,000 - £25,000 £33.56 No
M&S Bank 14.9% 1 - 7 years £1,000 - £25,000 £34.16 Yes
AIB (NI)¹ 16.4% 1 - 5 years £1,000 - £25,000 £35.01 No
Sainsbury’s Bank 16.8% 1 - 7 years £1,000 - £40,000 £34.97 No
HSBC 16.9% 1 - 5 years £1,000 - £25,000 £35.02 No
Zopa 22.9% 1 - 5 years £1,000 - £25,000 £37.57 Yes
TSB 27.9% 1 - 7 years £300 - £50,000 £39.69 No
Lloyds 29.7% 1 - 7 years £1,000 - £50,000 £40.44 Yes (but you will need to be registered for online banking with Lloyds)
Halifax 29.7% 1 - 7 years £1,000 - £50,000 £40.44 Yes

Representative APR is based on a 3-year loan term

¹You must be an existing personal current account customer with AIB (NI) and registered for Online Services

The best rates on a £5,000 loan

Loan provider Representative APR (from) Available loan term Available loan amount Monthly payment Eligibility checker?
Tesco Bank 7.2%¹ 1 - 10 years £1,000 - £35,000 £98.94 Yes
Sainsbury’s Bank 7.4%² 1 - 7 years £1,000 - £40,000 £99.38 No
AIB (NI)³ 7.9% 1 - 5 years £1,000 - £25,000 £100.83 No
Santander 9.9% 1 - 5 years £1,000 - £25,000 £104.95 No
HSBC 9.9% 1 - 5 years £1,000 - £25,000 £104.95 No
M&S Bank 9.9% 1 - 7 years £1,000 - £25,000 £104.95 Yes
TSB 13.9% 1 - 7 years £300 - £50,000 £113.99 No
Lloyds 16.1% 1 - 7 years £1,000 - £50,000 £119.01 Yes (but you will need to be registered for online banking with Lloyds)
Halifax 17.9% 1 - 7 years £1,000 - £50,000 £123.14 Yes
Zopa 22.9% 1 - 5 years £1,000 - £25,000 £187.68 Yes

Representative APR is based on a 5-year loan term

¹Clubcard members receive a preferential rate, non-members will get from 7.9% and pay £100.49 a month

²Nectar members receive a preferential rate, non-members will get from 7.9% and pay £100.49 a month

³You must be an existing personal current account customer with AIB (NI) and registered for Online Services

The best rates on a £10,000 loan

Loan provider Representative APR (from) Available loan term Available loan amount Monthly payment Eligibility checker?
Tesco Bank 6.1%¹ 1 - 10 years £1,000 - £35,000 £193.02 Yes
TSB 6.2% 1 - 7 years £300 - £50,000 £193.47 No
Santander 6.2% 1 - 5 years £1,000 - £25,000 £193.47 No
M&S Bank 6.2% 1 - 7 years £1,000 - £25,000 £193.47 Yes
Halifax 6.6% 1 - 7 years £1,000 - £50,000 £195.23 Yes
Lloyds 6.7% 1 - 7 years £1,000 - £50,000 £195.67 Yes (but you will need to be registered for online banking with Lloyds)
Sainsbury’s Bank 6.9%² 1 - 7 years £1,000 - £40,000 £196.56 No
HSBC 6.9% 1 - 5 years £1,000 - £25,000 £196.56 No
AIB (NI)³ 7.1% 1 - 5 years £1,000 - £25,000 £197.85 No
Zopa 22.9% 1 - 5 years £1,000 - £25,000 £269.40 Yes

Representative APR is based on a 5-year loan term

¹Clubcard members receive a preferential rate, non-members will get from 6.5% with monthly repayments from £194.79

²Nectar members receive a preferential rate, non-members will get from 7.5% with monthly repayments from £194.35

³You must be an existing personal current account customer with AIB (NI) and registered for Online Services

The best rates on a £20,000 loan

Loan provider Representative APR (five-year term) Available loan term Available loan amount Monthly payment Eligibility checker?
Tesco Bank 6.1%¹ 1 - 10 years £1,000 - £35,000 £386.05 Yes
TSB 6.2% 1 - 7 years £300 - £50,000 £386.94 No
M&S Bank 6.2% 1 - 7 years £1,000 - £25,000 £386.93 Yes
Halifax 6.6% 1 - 7 years £1,000 - £50,000 £390.47 Yes
Santander 6.7% 1 - 5 years £1,000 - £25,000 £391.35 No
Lloyds 6.7% 1 - 7 years £1,000 - £50,000 £391.35 Yes (but you will need to be registered for online banking with Lloyds)
Sainsbury’s Bank 7.0%² 1 - 7 years £1,000 - £40,000 £394.00 No
AIB (NI)³ 7.1% 1 - 5 years £1,000 - £25,000 £395.69 No
HSBC 7.9% 1 - 5 years £1,000 - £25,000 £401.97 No
Zopa 22.9% 1 - 5 years £1,000 - £25,000 £538.80 Yes

Representative APR is based on a 5-year loan term

¹Clubcard members receive a preferential rate, non-members will get from 6.5% with monthly payments from £389.58

²Nectar members receive a preferential rate, non-members will get from 7.5% with monthly payments from £398.42

³You must be an existing personal current account customer with AIB (NI) and registered for Online Services

Holiday loans for bad credit

Having bad credit does not necessarily mean you will not be able to access credit or take out a holiday loan. Bad credit is reflected in a low credit score, however, it is easy to check your current credit score for free. If you find that you have a low credit score then you are unlikely to be offered the lowest interest rates available and may even need to look toward specialist lenders.

The advertised rate – the representative APR – is the APR that the lender expects at least 51% of successful applicants to be offered. Therefore, with bad credit, you are likely to be offered a higher figure. You may also be offered a lower loan amount, or rejected entirely.

If you find yourself in this situation, there may still be borrowing options open to you. Take a look at our article 'How to borrow money with bad credit' to learn more.

How a holiday loan works

The process of getting a holiday loan can be broken down into five key steps:

  1. Price up your trip: Work out how much your holiday is going to cost, going into as much detail as you can. Don't forget about airport transfers, extra tourist taxes, luggage fees and last-minute souvenirs.
  2. Compare holiday loans: Take a look at the loans on this page that fit your holiday budget and think about whether the monthly repayments are affordable.
  3. Apply for your holiday loan: The application should be a quick and easy online process, and you should get the money within a few working days.
  4. Start repaying what you owe: You will need to start repaying your holiday loan once the money has been paid out. To avoid missing repayments, make sure to set up a direct debit to repay the loan each month.
  5. Enjoy your holiday: This is the easy bit. Make the most of your trip, have a great time and take lots of photos.

The key figures in a holiday loan

Here are the key figures to pay attention to when you compare loans for holidays:

  • APR (annual percentage rate) - The cost of borrowing the money in the first year, which broadly defines which loan is the cheapest. APR includes the interest and any standard fees charged by the lender.
  • Representative APR - The APR that the lender expects at least 51% of successful applicants to be offered. The figure you are offered may be higher or lower, but this is a useful way to compare providers.
  • Loan amount - The amount of money you are borrowing. Most of the unsecured holiday loan providers on this page will lend a minimum of £1,000 and a maximum of £25,000.
  • Loan term - The number of months or years you are borrowing the money over. Most major lenders offer between one and seven years to repay your loan, but longer or shorter terms may be available to some applicants.
  • Loan fees - What you will need to pay on top of repaying what you have borrowed. Fees will vary from lender to lender, so it is important to check before you apply.
  • Early repayment charge - A charge applied by some lenders if you try to repay your loan in full before the end of the term.
  • Credit score - A rating of how reliable and trustworthy a borrower you are, based on your credit history. A low credit score can suggest your application will be rejected, but a high credit score is usually a good sign that you will be offered the best rates. Check out our top tips to improve your credit score before you apply.

How much can I borrow with a holiday loan?

Exactly how much you can borrow with a holiday loan will come down to how your financial circumstances and your credit history stack up against your chosen lender's criteria for successful applicants. Generally, they will need to be convinced that your income will be enough to support the repayment of the loan and that your borrowing history assures that you can be trusted to repay the loan.

There will also be an upper and lower limit on what any provider will lend. Most high street lenders cap personal loans for holidays at £25,000 or £50,000. If you are planning a very expensive trip, you may be able to find a specialist lender that exceeds this, or you may need to consider a secured loan (or a cheaper holiday). You might be able to borrow much more with a secured loan and spread your repayments over a longer period, but a significant asset – usually your home – will be at risk of being sold to settle the debt if you are unable to repay.

If you want to borrow below the lower limit of most high street lenders – usually £1,000 – it may be worth considering paying for your holiday with a credit card. If you can get a high enough credit limit to pay for your trip, you could benefit from not having to pay interest with a 0% purchase card or earn valuable rewards or cashback. You would also benefit from Section 75 protection if something went wrong.

What can I use a holiday loan for?

You can use your holiday loan to pay for almost any holiday you wish. The only limit is your imagination and the cost. It could be short stay in an idyllic seaside town, a hectic city break or an epic backpacking adventure. Your lender will not restrict where you want to go on holiday, so long as it is within the boundaries of the law.

In fact, once your application has been approved and you have received the money, you could choose not to spend the loan on a holiday at all. Part of the flexibility of a personal loan is that you can pivot to using the cash for whatever is most urgent. As long as you are not breaking your lender's rules – which usually ban spending for gambling, business purposes, illegal activity or buying property – you can put the money towards any expense you choose.

Pros and cons of a holiday loan

Much like with other forms of borrowing, there are advantages and disadvantages to funding your tip with a holiday loan. We've provided the main pros and cons of a holiday loan below.

Pros of a holiday loan

  • Spread the cost of your trip - You could pay for your holiday over many months or even years, rather than as a lump sum when you book.
  • Pay a fixed amount each month - Most unsecured holiday loans are 'fixed rate' loans, which means you will know exactly how much you need to pay back each month from day one.
  • Lower APR than most credit cards - The APR on your holiday loan will likely be lower than on most credit cards, meaning it would be cheaper to take out a loan than spread the cost on a credit card. Of course, the exception would be using a 0% purchase credit card.

Cons of a holiday loan

  • You will pay more for your holiday - Using a holiday loan means your trip will cost more than it would if you paid for the whole amount upfront from your savings, due to the interest you will be paying on the debt.
  • You will be in debt - Any missed or late repayments on your holiday loan can lead to extra fees and interest, could significantly damage your credit record and lead to difficulties when trying to borrow in the future.
  • Bad credit will make borrowing more difficult and more expensive - If you do not have a great credit record, you will likely have to pay more for your holiday loan or have to accept a lower loan amount than you had hoped for.
  • Credit cards can be cheaper and more useful - Spreading the cost of your trip using a 0% purchase credit card instead of a holiday loan could mean you pay no interest at all if you pay off your balance before the offer period ends, plus you can benefit from Section 75 protection if you do not get what you paid for.

Alternatives to a holiday loan

A holiday loan is not the only option when it comes to funding your next trip. Here are a couple of alternatives to consider:

Credit cards

Using a credit card is the obvious borrowing alternative to taking out a holiday loan. This could mean using a rewards credit card to earn valuable points from your spending, a top cashback card to get a portion back (potentially up to 5%) of what you pay out, or a 0% purchase credit card to spread the cost of your holiday over many months without paying interest.

Paying with a credit card also means that you can take advantage of Section 75 protection meaning you'll get your money back if something goes wrong, as the credit card provider is jointly liable for ensuring you get what you pay for.

You could even combine credit cards to get the greatest benefit. This could mean paying for as much as possible before you go using a rewards card, spending while you are abroad using a top travel credit card, and then transferring your debt to a 0% balance transfer credit card before any interest charges kick in. The best balance transfer credit cards allow over two years to clear your debt before interest charges kick in, though you will need to make at least the minimum payment each month as well as paying a balance transfer fee. There are cards with no transfer fee, but they offer a lower top 0% period of around 12 months.

Savings

If you have the money in the bank then you may not need to borrow money to pay for your holiday at all. You can avoid all the extra costs of a holiday loan by simply dipping into your savings. Of course, you should always make sure you have enough of a buffer for any emergencies.

Keep in mind that many holiday providers do not require you to pay the full amount upfront, so you could continue to save up for your trip after you have booked. Check out our 'Best savings accounts in the UK' page to make sure your money is working as hard as possible.