Category: Borrowing

How Much Money Should I Borrow for a Holiday?

Many people enjoy taking holidays as they find that they are a relaxing break away from their normal lives. They can help you to forget about problems, have family time, experience new cultures and activities and have fun. However, they come at a cost and therefore many people borrow money to be able to pay for them.

Some will just choose the holiday they want, find out the cost and then borrow that amount of money. However, when you are borrowing money it is important to decide how much you can afford to borrow before you spend anything. It is wise to start by seeing whether you can afford to have a holiday without borrowing any money. If you have savings then it can be best to use these as it will be far cheaper than if you borrow money. People often forget top calculate the cost of their borrowing and if they use a credit card, for example it is hard to calculate anyway as you have no idea how long it will take you to pay it back. Some people take years and therefore pay a lot of interest over that time period.

Therefore before you spend any money on a holiday you need to think about where you will be getting the money from and how you will be able to afford to pay it back. Paying it back is a really important thing to think about. You need to consider how you manage to pay out this money and whether it will cause you stress in doing so. Many people take a holiday to reduce their stress, but if paying for it is stressful, then it could outweigh any benefit of the holiday as you repay it. You may find that by the time you have finished paying for the holiday you will be in dire need of another one which will defeat the object of having one in the first place. If you miss repayments or struggle to make ends meet due to having to make the payments then it could make life very stressful. You could end up having to go without things that you need and have a very uncomfortable time.

It is also worth thinking very hard about the type of loan that you want to get. Different ways of borrowing differ a lot in the way that they work and the cost and so you need to consider what will be the best for you. A personal loan needs regular repayments and this will ensure that the loan gets paid back. A credit card will only require small minimum repayments and you do not have to pay back a certain amount at a certain time. This means that you will be less likely to repay it as quickly. If you take longer to repay a loan it will be more expensive, but you may be able to manage it better than having to pay a regular amount each month. However, it could be more stressful if it takes you a long time to repay and of course, as mentioned earlier, will be more expensive. Different loans will have different interest rates, but it is how long the loan takes to repay that will have a bigger influence on the overall cost. So you need to calculate the total cost until it is repaid which includes all of the interest payments and any charges or fees to be able to compare costs.

So before you consider how much money to borrow for a holiday, you need to think about whether borrowing is the right thing to do. Consider whether you can find a way to borrow at a reasonable cost. Consider the repayments and whether you will be able to cope with them over the term that you will have to pay them for. Also consider what stress borrowing may bring to you and whether it is even worth considering the option. You could choose to save up some money each month instead. This will delay when you can take the holiday but it will mean that once you return form the holiday, you will not have loads of loan repayments waiting for you or a lot of debt to face.