Guide to choosing a travel loan

In this age of consumerism, long working hours and stress, the yearly family holiday has become an essential part of maintaining sanity for many people. But whether you opt for a relaxing beachside break, exciting overseas adventure or snow-filled skiing holiday, that annual escape from reality has become a major financial drain.

So if your budget can't stretch far enough to accommodate that dream holiday you've been looking forward to all year, a personal loan could be your best option to fund your escape.

What should I look for in a travel loan?

The most important consideration when borrowing money for any reason is to decide how much you will need. If you only need a small loan, it might be worth considering using a low rate credit card instead, for extra flexibility.

If this is not an option for you, or you find it hard to resist the temptation to spend more than necessary, then your next step is to apply for a personal loan. Many lenders now have specific packages designed for travel purposes, offering additional extras such as discounted travel insurance. However, it's important to remember not to borrow more money than you need, just to qualify for these additional perks. The increased interest charges on a higher loan amount will, more than likely cancel out any benefits gained.

Some travel agents are also able to offer you a loan if you book your holiday through them. Beware! Loans from travel agencies usually have a higher interest rate, higher fees and more rigid conditions.

Your first major decision will be whether you secure your loan against an existing asset, such as your house. Secured loans offer better interest rates than unsecured loans and are also easier to obtain for people with a bad credit history. Secured loans also usually offer more flexibility and lower fees, however they can take longer to approve.

Holiday loans are generally short-term loans, however don't forget that a loan for just $3000 can still take long time to repay. If you don't want to still be repaying your loan when the following year's holiday season comes around, consider a smaller loan, or maybe even a less expensive break.

When taking out a loan for vacation purposes it's important to ensure that it's as flexible as possible. Make sure there are no fees for repaying the loan early, making lump sum repayments or increasing the monthly payment amount.

Where can I get a travel loan from?

Most financial institutions offer personal loans. Some also specify particular loans for travel purposes such as the Encompass Credit Union Holiday Loan or Intech Credit Union Holiday Loan with an interest rate of 9.55%, no ongoing or early repayment fees and fast approval. Some other providers include:

* Easy Street Financial Services currently offer a competitive, award winning personal loan with no ongoing or establishment fees, no early repayment penalties and a free redraw facility.

* IMB Banking and Financial Services have a secured personal loan at 8.74% pa (fixed) and no monthly account keeping or early repayment fees.

* Savings and Loans Credit Union offer personal loans for as little as $2000 with competitive interest rates and automatic repayments. They also have affiliated travel centres to advise you on your holiday requirements, once your loan is approved.

Don't forget to try your usual bank, credit union or building society. With today's fierce competition in financial services, many lenders will be more than happy to negotiate with customers to get them a better deal so don't be afraid to ask.