Summer’s here and our thoughts inevitably turn to sun-kissed beaches, the swimming pool, long suppers underneath the vines and time away from the stress of work. But holidays abroad can be incredibly expensive – especially if you have to travel during the school holidays.
However, you can finance the cost of a good summer holiday and spread the repayments over a period of time to make it much more achievable. With interest rates at record low levels, the cost of borrowing continues to remain extremely affordable.
Use your savings
If you’ve got the money saved up, then using it to pay for a great summer holiday makes perfect sense. Interest rates on savings are so low that many people are getting next to no income on them at all. But using your savings to pay for your summer holiday doesn’t mean simply withdrawing it all in cash and using that. Instead, you should use credit cards to book the holiday to take advantage of the protection these offer should something go wrong. If, for example, the airline goes bust before you take your holiday, you’ll be able to recover the money from your credit card company.
That is also the case if you just pay for the deposit using your card. You will still be covered for the full cost of your holiday by the Consumer Credit Act up to a total of £30,000 which is far more than most families would dream of spending on a holiday.
Make sure, though, that you pay off the balance using your savings as soon as the bill comes in.
Rewards credit cards
Many credit cards now come with rewards with it pretty common for one point to be credited to you for every pound that you spend. Some offer other deals with double points for certain transactions – for instance, spending at particular supermarkets of petrol stations. With others, you receive credits worth £30 if you spend £500 or more in the first three months. For those planning to save up points to put towards flights, then the Virgin Atlantic White Credit Card or the Lloyds Bank Avios Rewards card offer Flying Club and Avios miles to use on flights.
Cards that offer 0% interest on purchases
An increasing number of card issuers are offering cards that charge 0% interest on purchases for a set period of time which is usually either 12 or 18 months. This could make it much easier to spread the cost of a holiday while, at the same time, taking advantage of buyers’ protection when booking using the card. Among the deals are some offered by MBNA with its Fluid card, Santander, Tesco ClubCard and others. You should check the small print because some also offer an interest free period on balance transfers so you could reduce your total outgoings as well as paying for a summer holiday. The cards issued by the supermarkets will also offer you points to spend in store when you use the card for purchases.
Using a loan to pay for a holiday will make the vacation more expensive over the long run. That said, there are plenty of very low rate personal loan deals out there which will allow you to spread the cost of a great holiday over three, four, five or even seven years. Even having a poor credit record will not necessarily rule this out as an option for you as increasing numbers of lenders are offering bad credit personal loans.
If you can’t get a personal loan to fund your holiday plans, consider a guarantor loan where a third party acts as security to guarantee your repayments. Several lenders offer fairly sizeable sums – more than enough to finance a decent holiday – and the interest rates are lower than the corresponding bad credit unsecured loans. To find out more see “Guarantor Loans” in the menu at the top of this page.
The cheapest interest rates are available to homeowners with good credit records. But even homeowners with impaired credit can take advantage of a raft of homeowner and secured loans with affordable interest rates.
Some credit cards offer cashback even if there is no interest free period. These allow you to get some money back during a set period after your account is opened. For instance, one gives 5% cashback on up to £2,500 worth of spending meaning that booking a holiday at this price will give you £125 in spending money for nothing.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley