Can you pay for every vacation in installments?
Yes, this is best done with a vacation loan. It is a classic consumer loan. Only that this is not about furniture or a car, but about a journey with payment in installments. You receive a certain amount and pay it back with interest over a specified period. You get a vacation loan for free use. You are not tied to any specific use or to any specific tour operator – for example, you can also co-finance a set of new suitcases.
Attention: Since the purpose of a vacation loan is not fixed, the interest is slightly higher than for a home loan or car finance. Unlike real estate or cars, banks have no security as security.
How do I find the best vacation loan?
You get the best overview in our installment loan comparison. Here you specify the loan amount, the term and the usage – in this case vacation. With information on the monthly charge and the interest rate, you will then be shown the best offers for your vacation with payment by installments. You can apply for the holiday loan at your preferred bank immediately. In the application form for traveling on installments, you have to provide a few personal details for the optimal loan calculation – if all questions have been clarified, you will receive a loan offer from the selected bank and can return it signed. You then have to legitimize yourself using the video or postident procedure. You will then receive the desired amount.
What loan amount makes sense for a vacation on installments?
The best amount for a vacation loan varies greatly from person to person because every vacation involves different expenses. The rule applies: as high as necessary and as low as possible. That means two things:
- Since the interest on the holiday loan is somewhat higher, the loan should only be as high as absolutely necessary. Because every dollars that can be dispensed also entails unnecessary follow-up costs. A young couple in love love may want to experience something special during their honeymoon. But also in order to finance this special holiday in installments, affordability must remain the first thought – also for people who want to fulfill their lifelong dream and want to finance a trip around the world.
- At the same time, you should not set the credit amount too low, since the actual travel price almost always comes with daily expenses on site. Try to calculate in advance what other costs will be added to the travel price due to excursions, car rentals or restaurant visits during the holiday season. Less the available capital, this is your loan amount to finance the planned trip.
Info: “Can you finance vacation in installments?” Used to be a question that did not arise. There was only vacation when there was enough money. However, with the current low interest rates, payment by installments for vacations is no longer uncommon. According to a study by the Society for Consumer Research, 6% of all installment loans are taken out for a vacation. Especially since a vacation loan is cheaper than the extremely high overdraft interest that you have to pay if you overdraw your checking account.
What is the interest rate for a vacation on installments?
When you book a vacation on installments, the interest rate is very different for each borrower. If you have very good creditworthiness, also known as creditworthiness, you can get a loan of $ 5,000 for 1 – 2% effective interest for the trip with payment in installments. If the rating is poor and the term is longer, the interest rate jumps to over 9%. Two examples show possible interest and interest costs.
Examples of interest on a vacation loan
In example 1, the loan amount is $ 5,000, which is required for an all-inclusive trip to Ibiza. If the loan has a term of 2 years, the cheapest offer has an annual percentage rate of 3.19%. As a borrower, you pay interest costs of around $ 165.
In the second example, a vacation loan of $ 10,000 is taken out for a 4-month trip around the world. To reduce the monthly charge, we choose a term of over 3 years. Here too, an effective interest rate of 3.19% must be paid for the best offer, which results in interest costs of just under $ 500.
In both examples, the offers correspond to the two-thirds interest. That is the interest rate that is offered to two thirds of all borrowers.
Differences in loan terms for different vacation loans
|example 1||Example 2|
|Loan amount||$ 5,000||$ 10,000|
|running time||2 years||3 years|
|best interest rate||3.19%||3.19%|
|Monthly rate||$ 215.25||$ 291.45|
|Interest costs at the end of the term||$ 165.41||$ 492.14|
Which is better: installment loan or installment purchase from the tour operator?
Many tour operators also offer their customers the hire purchase. This often looks very practical at first glance – in the course of booking, the financing for the trip is paid in installments. However, the offer of tour operators is usually significantly more expensive than a classic installment loan.
While the installment loan is usually made without any additional surcharges, travel providers often ask for additional items such as one-time service fees. The insolvent travel provider Thomas Cook, for example, paid a fee of 12% of the travel price for installment payments – together with the loan interest, an effective annual interest rate of over 20% was incurred.
How long should I choose the loan term?
If you are thinking about traveling in installments and are thinking about when the loan should be paid off, you can follow a rule of thumb: The loan for the holiday should be paid off before the next holiday begins. This will help you avoid the problem of building up a debt tower that will no longer be manageable at some point.
This means that if a major trip is due once a year, the holiday loan should run for 12 months. When it comes to a special trip such as a honeymoon that only takes place once in a lifetime, the term of the loan can be chosen longer. This reduces the monthly installments, as the following table shows using the two-thirds interest rate.
Comparison of monthly rates with different terms
|Loan amount||Two-thirds interest||running time||Monthly installments|
|$ 10,000||3.19%||1 year||$ 847.80|
|$ 10,000||3.19%||2 years||$ 430.65|
|$ 10,000||3.19%||3 years||$ 291.65|
|$ 10,000||3.19%||4 years||$ 222.18|
Source :vergleich.de, as of November 2019
How important are possible breaks in installments on a vacation loan?
That depends on your personal circumstances. If you are in a permanent employment relationship or are civil servants, then it is rather unlikely that you will have to take a break in the installment – for example due to unemployment. This applies in particular to smaller loans that are paid off after a few months. On the other hand, if you are self-employed and your earnings are irregular, a break in the installment can be very helpful. However, this extends the term of the loan by the suspended months.
Do I need residual debt insurance?
In many cases, residual debt insurance is unnecessary. It pays your monthly installments in the event of illness, accident or death. Experts recommend residual debt insurance for very high loans, such as real estate financing, and if you are the sole earner in the family and want to protect your relatives from financial problems.
Good to know: With a contractually agreed special repayment right, you can repay the entire loan or parts of the loan outside the agreed monthly installments without additional fees. This special repayment can also be useful for a holiday loan. If you are given the opportunity to pay off the loan early, you can use it free of charge.
Under what conditions do I get a vacation loan?
To finance a vacation on installments without or with a down payment, the credit rating is the A&O as with any loan. Your interest rate depends on this, but also the question of whether you can get the loan at all. As a rule, a bank will not grant a loan with a poor Credit Bureau score or only grant it with high interest premiums.
Further requirements for a vacation loan are:
- Legal age
- permanent residence in Germany
- Account details within Germany
- Proof of income
Can I get a vacation loan without Credit Bureau query?
The banks are obliged to check your creditworthiness. Planning a vacation on installments without a Credit Bureau query is therefore often associated with dubious offers. Some providers promise their customers to grant a loan without an entry at Credit Bureau – that is, the creditworthiness is checked, but this has no negative impact. However, you regularly have to pay additional fees for such offers. The alternative for a vacation loan without Credit Bureau query are the so-called P2P loans, i.e. loans from private individuals. With these you also get a bad Credit Bureau score on your holiday allowance – but often at the price of high interest and additional fees.