Should I use a personal loan for holidays and travel?

Discover how travel loans can fund your dream holiday without draining savings. Compare rates, lenders & options for 2025 travel financing in Australia.

If you’re sick of the winter months and dreaming of the European summer, it might be worth looking at a travel loan to help get you on your way. While the chilly Australian winter settles in, millions of travellers are already planning their next escape, whether it’s chasing sunshine in Southeast Asia, exploring European cities, or embarking on that long-awaited family adventure.

In 2025, Australian travel confidence has rebounded strongly, with 76% of Aussies planning domestic travel and over half eyeing overseas destinations. Despite ongoing cost of living pressures, travel remains a priority, with 43% of Australians planning to travel more this year. For many, the challenge isn’t the desire to travel, but having enough funds readily available to make those dreams a reality.

A travel loan can help you enjoy the trip you’ve been putting off, without draining your bank account. Whether it’s a beach escape, an overseas adventure or a long-awaited family trip, here’s how a holiday loan could help make your plans a reality.

What is a travel loan and how does it work?

A travel loan is simply a type of personal loan that’s used specifically for holiday-related expenses. Like other personal loans, it involves borrowing a fixed amount of money and repaying it over a set term, usually between one and seven years.

The loan is typically unsecured, meaning you don’t need to provide an asset like your car or house as security. Once approved, you receive a lump sum payment which can be used however you like, whether that’s to book flights, accommodation, pay for tours, buy travel insurance, or cover spending money while you’re away. The key advantage is flexibility. You set the loan amount based on your holiday budget and choose a repayment plan that fits your financial situation.

Current market rates and borrowing capacity

The personal loan market in 2025 offers competitive options for travel financing. The average interest rate for unsecured personal loans in Australia is 10.67% per annum as of July 2025, though the lowest rates available start from 5.76% per annum for borrowers with excellent credit. Personal loan rates have also dropped following recent rate cuts, with secured loans seeing a 0.50% decrease in average minimum rates.

Generally, you’ll be able to borrow anywhere from $2,000 to $100,000 for travel purposes, depending on your lender and credit profile.

The average personal loan in Australia is $22,643, with Australians collectively borrowing around $2.5 billion each month in personal loans. This reflects the growing confidence in using structured finance for major purchases and experiences, including travel.

Why choose a travel loan over other finance options?

Immediate access and perfect timing

A travel loan can be a smart way to get your plans off the ground sooner, especially if you’re working within a set timeframe. Unlike saving for months, a personal loan gives you immediate access to funds so you can book flights and accommodation in advance, often securing better deals in the process.

This timing advantage proves particularly valuable in today’s travel market. With 36% of Australians planning to spend more on flights and 31% planning increased accommodation spending in 2025, competition for the best deals intensifies. Early booking through travel loan funding often means accessing promotional rates, securing preferred accommodation, and avoiding the price increases that typically occur closer to travel dates.

Structured repayments and budget certainty

The structured repayments mean you can budget with confidence. Instead of putting large sums on a credit card and dealing with high-interest debt, a personal loan gives you a clear repayment schedule and a set end date. Most travel loans also offer lower interest rates than credit cards, which helps reduce your total repayment over time.

Enhanced borrowing capacity and flexibility

Depending on the lender, you may be able to borrow a larger amount with a holiday loan, which gives you more breathing room to plan the trip you want. Whether it’s business class flights, a villa upgrade, or a once-in-a-lifetime tour, a holiday loan gives you the freedom to stretch your budget without dipping into your long-term savings.

People take out travel loans because they wish to travel but don’t have the necessary funds or savings to get there. Taking out a loan for holiday allows for flexibility as the money is provided completely, and they tend to have lower interest rates than credit cards or other loaning options.

Unlike credit cards, personal loans allow cash withdrawals without cash advance fees, providing flexibility for destinations where card acceptance might be limited or cash transactions offer better rates.

How can you use a travel loan?

Holiday loans are highly versatile and can be used to cover nearly any expense related to your trip. You might use your loan to pay for flights and accommodation, travel insurance, tours and activities, dining and entertainment, transportation or car hire, passports, visas, travel gear or even emergency funds or upgrades while abroad.

Comprehensive travel expense coverage

Travel loans provide complete flexibility in funding your adventure. Major expenses typically include:

• Flights and accommodation: Often the largest components of travel budgets, these foundational costs can be secured early with loan funds
• Tours and experiences: From guided excursions to adventure activities, loans enable you to book premium experiences without compromise
• Travel insurance and documentation: Covering insurance premiums, visa fees, passport renewals, and health requirements
• Transportation: Car rentals, domestic flights, train passes, and local transportation costs
• Travel gear and preparation: Luggage, clothing, electronics, and destination-specific equipment

Special occasions and extended travel

For those planning destination weddings, honeymoons, or family reunions overseas, a travel loan can also help manage costs in the lead-up without relying on credit card debt or last-minute savings. Extended travel plans, gap years, or sabbatical trips often require substantial upfront funding that travel loans can provide.

Given that Australians spend an average of $4,602 on summer holidays, significantly higher than many other countries, travel loans help manage these substantial costs through structured repayments rather than depleting savings accounts.

Current market landscape: Rates, lenders, and options in 2025

The Australian travel loan market offers diverse options from traditional banks to specialist online lenders. Following recent rate cuts, borrowing costs have decreased, making travel loans more attractive for many Australians.

Travel loan vs other financing options: Making the right choice

When financing travel, you have several options beyond travel loans, each with distinct advantages and limitations.

Travel loans vs credit cards

Credit cards can be used for travel instead of a loan for smaller amounts, with certain types of cards designed for travel offering benefits to holiday-goers. They provide flexibility and immediate access to funds, plus frequent flyer points that can discount future travel.

However, credit cards typically carry higher interest rates than personal loans. While some offer interest-free periods, failing to pay the full balance results in ongoing interest charges that can exceed personal loan rates significantly. Credit cards work best for smaller travel expenses under $2,000 or for travellers confident they can repay balances quickly.

Travel loans vs savings approach

The traditional approach of saving for travel has merit but also limitations. Just over 30% of Australians spend 6-12 months saving for holidays, while 20% don’t save for holidays at all. More than 40% book international holidays 1-6 months in advance, often not allowing sufficient time for adequate savings accumulation.

Travel loans enable immediate booking when deals arise, while savings approaches require predicting travel costs and timing months ahead. In rising price environments, delayed purchases through savings can result in higher costs than the interest paid on travel loans.

Alternative financing options

Line of credit products provide flexibility for travellers who prefer drawing funds as needed rather than receiving lump sums. These typically carry lower rates than credit cards but higher rates than secured personal loans, with monthly fees regardless of usage.

Buy now, pay later services increasingly cover travel expenses, though availability varies by destination and provider. These work well for specific bookings but don’t provide comprehensive travel funding.

Australian travel trends driving loan demand in 2025

Australian travel patterns in 2025 reflect both pent-up demand from previous restrictions and evolving preferences that drive travel loan usage.

Rising spending and confidence

Despite cost of living pressures, travel remains a priority for Australians, with 43% planning to travel more in 2025. The data shows that 36% of Australians plan to spend more on flights, 31% on accommodation, and 14% on car hire in 2025. This increased spending, combined with limited savings capacity for many households, creates ideal conditions for travel loan demand.

Aussies are spending more on summer holidays with an average of $4,602, exceeding spending in the US ($4,544), Canada ($3,633), and Europe ($3,144). This higher spending level often exceeds readily available savings, making structured financing through travel loans attractive.

Destination preferences and booking patterns

According to Skyscanner’s Travel Trends 2025 report, the most popular place Australians want to travel next year is Siem Reap in Cambodia, with interest increasing by 529%. Other Southeast Asian destinations like Krabi in Thailand are also trending, benefiting from 34% airfare price drops.

The top experiences and factors determining Aussie travellers’ choice of destination are weather (66%), attractions (65%), food (63%), and culture (59%). Cost factors including currency exchange rates (32%) and tourist attraction costs (32%) heavily influence destination selection, suggesting price-conscious travellers who benefit from travel loan flexibility.

Demographic and planning insights

Nielsen data shows that 76% of Aussies plan domestic travel within 12 months, while 52% target overseas destinations. Younger Australians (18-24) are most likely to travel overseas, with 58% planning international trips.

More than 40% of Australians book international holidays 1-6 months in advance, while 35% book 6-12 months ahead. This relatively short planning horizon often doesn’t align with savings accumulation timelines, supporting travel loan usage for optimal booking timing.

How to apply for a travel loan: Step-by-step process

Applying for a holiday loan is much like applying for any unsecured personal loan, but strategic planning ensures you secure the best terms while borrowing responsibly.

Budget planning and loan sizing

First, figure out your holiday budget and how much you’ll need to borrow. It’s a good idea to break down your expenses: flights, accommodation, tours, meals, insurance, and spending money, so you know what size loan to apply for.

Detailed budgeting prevents over-borrowing and reduces total interest costs. Research destination-specific costs, seasonal price variations, and potential currency fluctuations. Include contingency funds for unexpected expenses or opportunities that arise during travel.

Consider supplementing loan amounts with existing savings. The less money you borrow, the less you’ll pay in interest and fees over the loan term. Many successful travel loan users combine loans for major upfront costs (flights, accommodation) with savings for daily expenses and discretionary spending.

Application process and requirements

Once you’ve got your budget, you can talk with a finance broker who can compare your options. They will be able to find a suitable product to meet your travel needs.

The application process typically involves:

• Documentation gathering: Proof of income, employment verification, bank statements, and identification
• Credit assessment: Lenders evaluate your credit history, existing obligations, and repayment capacity
• Loan structure selection: Choose between fixed or variable rates, repayment frequency, and loan terms
• Approval and funding: Most lenders provide decisions within 24-48 hours, with funds available shortly after approval

Eligibility criteria vary between lenders but generally require Australian residency, minimum income levels (often $25,000+ annually), and satisfactory credit history. Age limits typically range from 18 to 65-70 years depending on the lender.

Timing and booking strategies

Apply for travel loans when promotional fares and accommodation deals are available rather than waiting for perfect savings accumulation. Many travellers benefit from securing loans during airline sales periods or hotel promotional campaigns.

Responsible borrowing: Risks and considerations

While travel loans provide valuable flexibility, responsible borrowing requires careful assessment of your financial capacity and travel planning.

Financial impact assessment

Evaluate your ability to service loan repayments comfortably alongside existing obligations. Travel loans typically require immediate repayment commencement, unlike some other personal loans that offer repayment deferrals.

Consider the loan’s impact on your credit profile and future borrowing capacity. Multiple credit applications within short periods can negatively affect credit scores, so research options thoroughly before applying rather than submitting multiple applications.

Assess your employment stability and income consistency. Travel loan terms typically span 1-7 years, requiring confidence in your ability to maintain repayments throughout this period.

Interest and fee considerations

Compare total borrowing costs beyond headline interest rates. Many travel loans include establishment fees, monthly account-keeping fees, and potential early repayment penalties. Some lenders offer fee-free products that may carry slightly higher rates but lower total costs for shorter-term borrowing.

Calculate total repayment amounts over different loan terms. Longer terms reduce monthly payments but increase total interest costs, while shorter terms save money overall but require higher monthly commitments.

Many lenders offer early repayment options without penalties, enabling borrowers to reduce interest costs if additional funds become available during the loan term.

Travel insurance and protection planning

Most travel loan lenders recommend or require comprehensive travel insurance to protect both borrower and lender interests. Quality travel insurance covers trip cancellations, medical emergencies, and other events that could affect repayment capacity.

Some travel loans integrate with specific travel insurance products or offer discounted insurance through partner providers. Evaluate these offerings against independent insurance options to ensure adequate coverage at competitive prices.

Plan for potential trip modifications or cancellations. Understanding your rights and obligations if travel plans change helps avoid financial stress and protects your credit standing.

Making the decision: Is a travel loan right for you?

Travel loans suit specific financial situations and travel goals, but they’re not appropriate for everyone. Careful evaluation ensures you make the best choice for your circumstances.

Financial readiness assessment

Evaluate your income stability, existing debt obligations, and cash flow capacity. Travel loans work best for borrowers with steady employment, manageable debt levels, and sufficient income to service additional repayments comfortably.

Consider your savings rate and timeline. If you can reasonably save your target travel budget within 3-6 months, paying cash might be more economical than borrowing. However, if saving requires 12+ months, travel loans might enable better timing and deals.

Assess your credit profile and likely interest rates. Borrowers with excellent credit access the most competitive rates, making travel loans more attractive. Those with average or poor credit might face higher rates that reduce the value proposition.

Travel timing and planning considerations

Evaluate your travel flexibility and timing requirements. Travel loans provide most value when specific timing is important - seasonal destinations, limited-time offers, or special events that can’t be delayed for savings accumulation.

Consider destination costs and currency factors. Travel loans work particularly well for expensive destinations where significant upfront costs are required, or when currency movements favour early booking over delayed purchases.

Assess group travel dynamics and family considerations. Travel loans can facilitate group bookings that secure better rates or ensure availability for family trips where coordination is complex.

Alternative strategy evaluation

Compare travel loan costs against other options. High-limit, low-rate credit cards with promotional offers might provide cheaper short-term financing for confident repayers. Home equity loans offer lower rates for homeowners, though with asset security requirements.

Evaluate employer benefits and travel programs. Some employers offer travel advances, sabbatical programs, or salary packaging arrangements that provide alternatives to commercial travel loans.

Consider hybrid approaches combining smaller travel loans with existing savings to minimise borrowing costs while maintaining travel flexibility.

Expert tips for maximising your travel loan value

Strategic use of travel loans can enhance your travel experience while minimising costs and financial stress.

Smart booking and timing strategies

Use travel loan funds to secure early-bird promotional rates and package deals that often provide better value than individual bookings. Monitor seasonal pricing patterns for your preferred destinations and book during typically slower periods for better deals.

Consider booking components separately when it provides better value. Sometimes flights, accommodation, and tours booked individually cost less than packages, though this requires more research and coordination.

Destination selection for maximum value

Research destinations where the Australian dollar provides strong purchasing power and where your travel loan funds will stretch furthest. Consider emerging destinations with growing tourism infrastructure but lower costs than established locations.

Factor in destination-specific costs like tipping customs, local transportation efficiency, and typical meal costs when sizing your travel loan requirements.

Repayment acceleration techniques

Make extra repayments when possible to reduce total interest costs. Many lenders allow unlimited additional payments without penalties, enabling borrowers to pay off loans faster when windfalls or bonuses become available.

Consider using tax refunds, work bonuses, or other irregular income to reduce travel loan balances rather than extending repayment periods.

Making informed travel financing decisions

Travel loans represent a powerful tool for turning travel dreams into reality in 2025’s dynamic travel market. With Australians planning increased travel spending, competitive loan rates following recent rate cuts, and diverse lender options from traditional banks to innovative online providers, the travel loan landscape offers compelling opportunities for strategic borrowers.

The key to successful travel loan usage lies in careful planning, realistic budgeting, and honest assessment of your financial capacity. Whether you’re chasing the European summer, exploring trending Southeast Asian destinations, or embarking on that long-awaited family adventure, travel loans can provide the flexibility to book with confidence while managing costs through structured repayments.

Before committing to any travel loan, consider consulting with finance professionals who can assess your specific situation, compare current market options, and ensure your chosen approach aligns with your broader financial goals. With informed decision-making and strategic planning, a travel loan could be the key to unlocking your next great adventure without compromising your financial wellbeing.

Further questions

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.