Is It Possible to Get a Bad Credit Holiday Loan?

Travelling makes life more exciting and fulfilling. But when your financial situation isn’t great, you have to give up your vacation because it’s not an essential expense. 

However, some people don’t give up travelling even if they don’t have money. For this purpose, they can apply for personal loans designed to cover travel costs. These can be used for every type of travel, whether it’s a lifetime holiday at an exotic destination or an extended weekend at a nearby resort.

And since some people aren’t ideal borrowers due to poor credit ratings, they’ll hesitate to apply for loans and thus deny themselves a vacation. So for everyone to have the chance to spend their vacation how they want and where they want, lenders in Australia have made an offer of bad credit holiday loans.

What this article covers:

Is a Bad Credit Holiday Loan the Right Choice for You?

bad credit holiday loan

Many things will affect the answer to this question. For example, if your credit rating is below average because you’re currently overloaded with debt, applying for a holiday loan isn’t a good idea. In such situations, it’s not desirable to borrow more money unless you need it for debt consolidation. 

On the other hand, you can benefit from taking out a bad credit holiday loan if you have good financial habits and a solid income. It means you’re responsible for your financial obligations and can handle the additional debt to finally go on that dream vacation.

How to Apply for Bad Credit Holiday Loans

Now, let’s see what decisions you need to make before applying for a loan. 

Know Your Needs

The first step before applying for a holiday loan is to know how much money you need. Lenders offer different amounts, but for borrowers with poor credit scores, these loans usually start from $1,000 loans to up to several tens of thousands of dollars.

But just because someone can lend you $25,000 doesn’t mean you should take this loan. In other words, if you decide to apply for a travel loan with bad credit, you should only take as much as you really need to meet your travel plans.

Find a Lender

Most lenders operate online, which means you can find information about them with a few clicks. Just make sure you select those willing to work with borrowers with below-average credit scores. 

After you find a few companies that seem legit, you can check their reputation. Unbiased review websites and feedback from previous clients can help you find out whether particular lenders were involved in scams, what kind of customer support they have, etc.

The next step is to visit the lenders’ websites and check their personal loan offers. See how much money you can get with a holiday cash loan and the conditions for applying. Also, you should familiarise yourself with loan terms. This information can help you compare different offers and find the best one.

Loan Eligibility Requirements

holiday loans bad credit

When checking the loan offers, it’s good to find out the eligibility requirements for obtaining it. They’re more or less the same with all lenders, with some being more flexible about lending you more money, approving a longer payment period, granting instant approval loans without a credit check, etc.

But there’s a list of universal requirements all lenders should have. First, only citizens or permanent residents over 18 can apply for bad credit holiday loans in Australia. And they need valid ID documents with a photo for identity verification. 

Your credit rating must also be below average since you plan to apply for loans specifically designed for bad credit borrowers. In most cases, lenders consider anything below 620 as poor credit. They can accept your urgent application even if this parameter is 500, but the repayment terms will be quite strict.

Finally, applicants should have a stable income and full-time or permanent part-time employment. Self-employed individuals (even employed students) can also apply. As for documents, you need your last paycheck, a bank statement, and maybe a letter from your employer.

Some lenders have additional requirements about the minimum loan you can apply for. Also, you shouldn’t have bankruptcies or loan defaults in your recent credit history. If these are the reason for your poor credit rating, most lenders will reject your loan application.

Application Process

If you meet the eligibility requirements, you can start filling out the online form. Remember that no one can guarantee a loan approval until they check your financial situation. And that’s only possible after submitting the application and supporting documents.

Most lenders have fairly straightforward application procedures for holiday loans for bad credit borrowers and all kinds of unsecured financial arrangements.

When filling out the application, you need to specify the amount you need, as well as the reason for asking for money. The latter isn’t always necessary, but lenders often consider it when evaluating your application.

After submitting this form, the answer usually arrives fast, as some lenders offer loan approvals on the same day. In case your application needs clarification or additional documents, credit agents may contact you. 

Compare Several Offers

If the documentation is complete and your application is correct, a loan provider will send you holiday cash loan offers from different lenders. At this point, it’s good to be familiar with loan terms to compare them. 

holiday loans for bad credit

Interest Rates and Initial Loan Fees

The first step is to look at the total loan cost. For starters, there are interest rates and establishment fees. In the case of loans up to $2,000, lenders won’t charge interest as that’s by the government rules for small amount credit contracts. But you’ll pay the establishment and monthly fees. 

The establishment fee is usually a fixed cost that can be spread over the loan lifetime (for example, it’s around $400 when you borrow anywhere from $2,000 to $5,000). Monthly fees go up to 4% of the borrowed amount and are paid every month.

If you plan to borrow more to finance your holiday, you can be charged an annual percentage rate (APR) of up to 30%. Of course, lenders can customise the loan interest to your credit profile, but in general, it’s higher than in standard personal loans .

Another thing that can affect your decision on the offer can be the interest type. Financial experts would say that a fixed rate is better, as it remains the same over the loan lifetime. But in case of shorter repayment periods and smaller amounts borrowed, you might reap more benefits from variable interest.

Repayment Length

Next, check the repayment periods lenders offer you. These can usually go up to several years for larger amounts. Longer repayment periods mean lower monthly payments, but the overall cost of your holiday cash loan is higher. 

You can consider extended loan repayment if you want to avoid too much burden on your monthly budget. Otherwise, it’s always better to opt for a shorter loan term and pay it off sooner. And if you don’t default on loan repayment, it can do wonders for your credit score.

Additional Fees

Each offer should contain a complete estimate of all your expenses over the loan lifetime. It should also include possible fees for early loan repayment or penalties for late payments.

Finally, check if the lender has the option of cancelling the loan if you change your mind or your trip is cancelled. Some companies offer a so-called “cooling-off” period when you can return the borrowed money without additional costs (usually a few days after approval) and even get the money you gave for establishment fees back.

Make a Decision

holiday loan bad credit

Getting a loan quote doesn’t mean you’re approved. Instead, a pre-approval means that the lenders might have a loan offer that meets your needs. But you don’t have to accept it if you think you might get an even better loan deal from another lender. 

But if you do, you’ll probably undergo some additional checks and soon receive a contract from the lender directly to sign. The final approval can happen within an hour or more, depending on the lenders’ check procedure. But if everything goes smoothly, you’ll have money in your bank account by the end of the day.

Just remember that multiple loan applications are a hard inquiry on your credit report, which can further affect your credit score. That’s why you should only apply for second-chance loans that really suit you and where your chances of approval are high.

How Can Bad Credit Holiday Loans Be Used?

The money you receive after the approval of holiday loans for bad credit can be used to finance your travel plans. 

For instance, you can pay for tickets for all means of transportation you’ll use, from aeroplane tickets to cruise fares. But if you need money to get your own vehicle before a holiday, you can apply for specialised loans intended for the purchase of a car, a boat, or even a bicycle.

Bad credit holiday loans can also cover car rental if you’re not travelling with your own car. But if you do, you can use part of the money for fuel, tolls, and even minor car repairs if something happens along the way.

Of course, with this money, you’ll pay for accommodation and hotel amenities and even leave some for pocket money during your vacation. Don’t forget that another wise use of bad credit holiday loans is buying travel insurance, which will protect you from unforeseen situations wherever you are.

Tips on Increasing Chances of Loan Approval

Your credit rating can be bad for many reasons, but you can always fix it. The actions you take are generally visible after a few months, so if you’re not in a hurry to go on a holiday, you can work on your credit score and later apply for more favourable holiday loans from direct lenders in Australia.

For starters, control your expenses and eliminate unnecessary ones. If you have debt, try not to make new ones. Also, try to increase your income by getting a side gig, asking for a raise, or finding a better-paying job. These will lower your debt-to-income ratio, leaving you more money in your monthly budget.

Use credit cards only when necessary. If you have several, use them equally to reduce their utilisation rate (keep it below 30%). Also, close inactive accounts and don’t open new credit lines, at least for a while.

Finally, make an effort to settle your bills and card balances regularly. Avoiding late and missed payments will give the fastest results. You can even take out some smaller loans that can help you improve your credit score (by paying them back on time).

Frequently Asked Questions

Can I Get a No Credit Check Holiday Loan With Bad Credit?

travel loans bad credit

That’s not possible, since lenders need information about applicants’ financial abilities. Even if you apply for small amounts or payday loans you plan to use for travel expenses, lenders still need to assess your finances to ensure you can repay the loan without any problems. These checks don’t harm your credit score.

Do I Need Collateral for Bad Credit Holiday Loans?

Some lenders may ask for collateral if they consider you a very risky borrower or when you want to borrow large sums of money. Considering that the collateral will cover the loan costs if you default on it, it’s not wise to pledge something valuable, like a car or jewellery, for a few days of vacation. 

Can I Apply for a Bad Credit Holiday Loan If I’m on Centrelink?

Some lenders will allow you to apply for holiday cash loans online if you receive government benefits. However, you’ll only be able to borrow smaller amounts of money, especially if Centrelink makes up 100% of your monthly income.

Wrap Up

If your credit rating has fallen below average at some point, it doesn’t mean you should deny everything that makes you happy. You can treat yourself to a holiday trip you’ve been dreaming about for a long time, and holiday cash loans can help you with that. Just make sure you can afford this loan and pay it back with no default.

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