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Can I get a personal loan for a holiday?

Mark Bristow avatar
Mark Bristow
- 5 min read
Can I get a personal loan for a holiday?

Following the recent announcement of the New Zealand-Australia travel bubble, and with more destinations set to potentially open up in the future, many Australians may be planning their next holiday… and how they’ll pay for it.

If you’re thinking of using some of the annual leave days you built up over a year in lockdown to check out Queenstown, go on that Lord of the Rings tour, or simply return home to see family and friends, you may be interested in a holiday personal loan.

What is a holiday loan?

Sometimes called a travel loan, a holiday loan is simply a personal loan used to help pay for a vacation. This can offer convenience to travellers wanting to pay for flights, accommodation, insurance and other travel expenses, without having to spend time and effort saving up large sums of money.

Borrowing money to pay for a holiday can let you pay off your trip over time. Spreading out your repayments over a longer loan term can help make each repayment more affordable, though you’ll likely pay more interest in total. Choosing a shorter loan term typically means more expensive repayments, but paying less total interest on the cost of your holiday.

With most holiday personal loans, you receive the money in a lump sum after a successful application, and start making repayments straight away. This can be handy if you have a good idea of your maximum holiday budget. But if you overestimate the cost of your vacation, you may be stuck paying interest on a larger loan amount than necessary.  

A line of credit may also be a possible option if you’re not yet sure how much your holiday will cost. Functioning much like a credit card with a limit based on the equity in your home, a line of credit lets you borrow and repay money as you need it, and only pay interest on what you’ve drawn down. This extra flexibility can be useful for taking care of holiday expenses as they come up, though much like a credit card you can find yourself in trouble if you’re unable to make your repayments and interest starts to build.

How can I get a lower interest rate on a holiday personal loan?

Even if a bank or lender advertises a particular personal loan interest rate, you may be offered a different rate depending on other factors, including your credit score and whether or not you’ve secured your loan.

If you have a good credit score, lenders are more likely to offer you a low personal loan interest rate in order to attract your business. If you have bad credit, lenders are more likely to charge higher personal loans interest rates, due to the higher risk that you could default on your repayments. You can check your credit score for free before you apply for a personal loan, so you can get a better idea of how lenders see you and what you can realistically expect when you apply for finance.

While many personal loans are unsecured, you may be able to choose to secure your personal loan with the value of an asset, such as equity in your home, the value of your car, savings in a term deposit, or some other valuable asset. Securing a personal loan can help to lower your interest rate, though you risk losing your collateral if you’re unable to keep up with your repayments.

Can I put my holiday on my credit card?

Using your credit card to pay for a holiday is a valid option, provided your credit limit can accommodate your vacation budget, and you’re confident you can afford to comfortably manage the repayments. Credit card interest rates can be high, so there’re a chance you could end up in debt trouble if you struggle with your holiday expenses.

It’s also important to remember that credit cards may offer other travel benefits that personal loans do not, such as complimentary travel insurance when you book plane tickets, or reward point programs that can help pay for airfares and/or upgrades.

Should I borrow money to pay for a holiday?

Borrowing to pay for a holiday can be convenient, but comes with some risks. If you do your calculations beforehand, and work out how much your holiday is likely to cost you in total, including fees and interest charges, a personal loan or something similar could be a useful option to consider  when you’re planning a trip.

Unlike using a personal loan to start a business, to invest in shares, or to buy a car to drive to work, a holiday personal loan is unlikely to generate much of a monetary return. But if fond memories and some insta-worthy snaps provide you with some significant sentimental value, you may decide that the cost of interest and fees on a holiday personal loan is worth it after all.

If you’re unsure whether a personal loan may be the right option for financing your holiday, or if you simply want more help comparing personal loans, consider contacting a finance broker for more personal financial advice.


This article is over two years old, last updated on April 7, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent personal loans articles.

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Product database updated 23 Jul, 2024

This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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