It is not a rarity for people to borrow money to go on vacation. Every year, thousands of Danes lend money to go on a summer vacation. This money goes to transport, lodging, food, drink and equipment for activities, just to name a few.
Loans for summer holidays are often a consequence of not having saved up enough during the year to go on summer holidays. Maybe you even forgot about it. Many people therefore consider loans as an alternative to savings, but others believe that it is a costly consequence of not taking one’s personal finances seriously.
Today, however, there are many good opportunities to borrow money for the summer holidays. Here we will take you through the loan jungle and give you an overview of your options for borrowing money for a wonderful and hassle-free summer vacation.
Different types of loans for the summer holidays
You can borrow money for the summer holidays in various ways. Here we will present the most common types of loans for the summer holidays:
- Traditional consumer loans. Here you borrow an amount that you have to pay back afterwards (with installments and interest) over a given period of time.
- Payday loans. Here you borrow the money quickly, but typically no more than USD 6000, which must be repaid within 30 days.
Financing at Travel Agencies. This loan can be related to consumer loans. The difference is that instead of getting the loan through a designated bank or loan provider, the loan is made through the agency where you buy the trip or their business partner.
Consumption loans for the summer holidays
You know the traditional consumer loans from your local bank or various loan providers online. Consumer loans are, as the name indicates, loans of money for consumption. You can borrow larger sums of money over longer periods, and you can pay off installments and interest on a monthly basis over the desired period.
The advantage of a consumer loan is that you can borrow money and pay them back over a longer period of time. The disadvantage, on the other hand, is that you will hang on to the loan for a longer period and that you will have to pay interest on the loan.
Where can I find the cheapest travel loan?
First, find out if your travel agent offers an advantageous financing for your trip. If they do not offer a free loan for your trip, you should be skeptical and look into their prices before you say yes.
Here you can compare both consumer loans and quick loans, and find out the cost of each loan. The golden rule is always to compare loans on the OPP. The APR means annual costs as a percentage and it is mandatory for the loan providers to disclose this.
By comparing loans on AOP you are assured a true and fair view of the total cost of your loan. The lower the APR, the lower the cost of the loan.
If the APR is difficult for you to see, you also have the opportunity to compare the total cost of the loan on loan calculator. That is, how much money it will cost you in dollars and a penny to borrow the money.
Cost of loan
The APR covers the total cost of the loan over a year, as a percentage. But what are the costs associated with borrowing money? You can get answers to that right here, so just read on:
Interest. As many know, you have to pay interest on the money you borrow. These rates are usually higher the higher the risk of the loan. If the money is used for real assets that do not lose much value over time, the interest rates are usually quite low. These types of loans are, for example, home loans and car loans.
Loans for consumption, on the other hand, are associated with a higher risk, as the bank cannot claim consumer goods and in this way get its money back if the borrower should prove to be a poor payer. Therefore, interest rates on consumer loans are often high.
Fees. When you borrow money, in addition to interest rates, other costs may also occur. These costs can be various types of fees in connection with, for example, the creation of the loan and administrative costs. The OPP also takes these costs into account.
Loan for pocket money
If you have to borrow money for travel and hotel, you also have to borrow money for holiday expenses, then you should consider a consumer loan. The loan from the travel agency covers only the cost of the part of the journey you buy from them. If it is only the flight you buy through the travel agency, you cannot therefore borrow money for hotel and pocket money through them.
With a consumer loan, you can borrow money for everything you want to spend money on when you go out and travel. As it is money for consumption, the loan provider does not interfere with what the money you are borrowing is going to be used for. In other words, you are completely free to spend the money as you wish, just as if it were your own.