With winter settling in, plenty of Aussies are daydreaming about swapping grey skies for a Bali beach, a Japan ski trip or a mid-year escape with the kids. We are a nation of travellers, and the numbers prove it. Australians took more than 12 million short-term overseas trips in 2024-25, up almost 12 per cent on the year before, with a holiday the most common reason for going. The trouble is that travel is not cheap, which is why a lot of people start wondering whether a travel loan is the way to make the trip happen.
Here is where we are going to be straight with you. A travel loan can be a sensible tool in the right circumstances, and a costly mistake in the wrong ones. Unlike a car you need to get to work, a holiday is discretionary, which means borrowing for one deserves a clear head rather than a heart full of wanderlust. As an accredited finance broker bound by a Best Interest Duty, our job is to help you make the smart call, not to talk you into debt for a beach selfie.
So let’s walk through when borrowing for a trip stacks up, when you are better off waiting, and how to fund a holiday the smart way.
The Honest Question: Should You Borrow for a Holiday?
Start with the uncomfortable truth. When you take out a travel loan, you are paying interest on a memory. The flights are flown and the cocktails are drunk long before the loan is repaid, so you could be paying off this winter’s getaway well into next year or beyond. That is the core risk, and it is worth sitting with before you apply for anything.
That does not make a travel loan automatically wrong, though. It comes down to two things: whether the trip genuinely justifies it, and whether you can comfortably afford the repayments without putting the rest of your budget under strain. With the Reserve Bank cash rate sitting at 4.35 per cent, borrowing is not as cheap as it once was, so the affordability question matters more than ever. Get those two answers right and a travel loan can be a reasonable way to spread a known cost. Get them wrong and you are funding a week of fun with months of stress.
It also helps to separate the emotional decision from the financial one. The thrill of booking can drown out the quieter question of whether the repayments will still feel fine in eight months when the tan has faded. A handy trick is to picture the trip as already over and ask whether you would happily make that repayment for a holiday you have already taken. If the answer is a comfortable yes, you are on solid ground.
When a Travel Loan Can Make Sense
There are genuine situations where borrowing for travel is a fair call rather than a financial own goal. A travel loan tends to make the most sense when:
- It is a once-in-a-lifetime trip with a fixed date, such as a milestone anniversary, a family wedding overseas or a reunion you cannot reschedule.
- You can comfortably cover the repayments alongside your existing commitments, with room to spare if something unexpected pops up.
- The cost is fixed and known, so you are borrowing a set amount for flights and accommodation rather than an open-ended spend that balloons on the trip.
- You need to be somewhere for family reasons, like a funeral, an ill relative or a significant cultural event, where saving up for months is not an option.
In these cases, a fixed-term travel loan with steady repayments can be a cleaner, cheaper way to manage the cost than reaching for a credit card. The key word throughout is affordability. If the repayments fit comfortably, borrowing for a meaningful trip is a defensible decision.
When You Are Better Off Saving First
Just as often, the smart move is to hold off. You are probably better off saving rather than taking a travel loan if any of these ring true. You are already juggling other debts, your budget is tight before you add a repayment, the trip is a spur-of-the-moment want rather than a genuine priority, or you would be borrowing for the spending money as well as the flights.
Borrowing to fund a discretionary holiday on top of existing financial pressure is how a fun idea turns into a debt spiral. If money is already stretched, a getaway you pay off for a year afterwards will likely cause more stress than the break relieves. In that situation, building a travel fund and going a few months later is almost always the better path, and our warning about borrowing page is worth a read before you commit. If you are carrying high-interest debt already, clearing that first with a debt consolidation loan will do far more for your finances than another trip will.
Waiting often makes the trip better, not worse. A few months of saving gives you time to hunt down cheaper flights, snap up deals and plan properly, so you frequently get more holiday for less money. Patience is rarely the exciting choice, but with discretionary spending it is almost always the cheaper one, and a holiday loan you never needed is interest you never pay.
Travel Loan vs Credit Card vs Buy Now Pay Later
If you have decided borrowing is the right call, the next question is how. The three common options behave very differently.
A personal travel loan gives you a fixed amount, a fixed interest rate and a fixed end date, so you know exactly what you will repay and when the debt disappears. That structure and the typically lower rate compared with cards is why many people prefer it for a planned trip. A credit card is flexible and handy for booking, but the high interest, often around 18 to 20 per cent, makes it an expensive way to carry a balance, and the lack of a fixed repayment makes it easy to never quite clear it. A card only really works for travel if you can pay it off in full quickly.
Then there is buy now pay later, including the “fly now, pay later” options at checkout. Buy now pay later is now regulated as credit in Australia, which adds some consumer protection, but it can still be easy to overcommit across several instalment plans at once and lose track of what is going out each fortnight. Used carefully it has its place, but it is no substitute for a properly structured travel loan when the amount is significant. Compare the total cost across your options, not just the headline, before you choose.
One handy tactic: book on a credit card for the consumer protections it can offer, such as chargeback rights if a provider collapses, then immediately pay that card off with your loan or savings so you are not left carrying the high interest. You get the protection without the long-term cost.
What a Travel Loan Really Costs: An Example
Numbers make the decision clearer. A travel loan spreads the cost of a trip, but it does not remove it. Say a family books a $5,000 overseas holiday and funds it with a travel loan over three years. Depending on the rate, the interest could add several hundred dollars to the total, meaning you pay noticeably more than the sticker price for the same week away. Stretch the term longer and that figure only climbs.
Now flip it around. Saving that same $5,000 over a year means setting aside a bit under $100 a week into a travel fund, and you fly with the trip already paid for and zero interest. Neither approach is wrong, but seeing them side by side is the best way to judge whether the convenience of borrowing is worth the cost for your trip, or whether a few months of saving makes more sense. The exact figures depend on the amount, rate and term, so treat this as illustrative rather than a quote.
How to Fund Your Trip the Smart Way
Whether you borrow, save or do a bit of both, a few habits will keep your holiday from blowing a hole in your finances.
Start with a realistic, all-in budget. People routinely underestimate the true cost of a trip by forgetting the extras: travel insurance, visas, airport transfers, baggage fees, currency conversion and the daily spending money that adds up fast. Build the full number first, because under-budgeting is what pushes people to over-borrow halfway through planning. If a travel loan is part of your plan, borrow only the fixed costs you genuinely cannot cover from savings, keep the term as short as you can manage, and compare the comparison rate rather than just the monthly figure so you see the true cost including fees.
A travel fund is the unsung hero here. Setting up a separate account and drip-feeding a set amount each pay turns next year’s holiday into something you barely notice paying for, with no interest at all. If a tax refund is heading your way around EOFY, it can be a brilliant way to cut down or wipe out what you need to borrow. Our guide on smart ways to use your tax refund covers that nicely. And do not skimp on travel insurance to save a few dollars, since one cancelled flight or medical bill overseas can cost far more than the cover. The government’s Smartraveller insurance guidance is essential reading before you go.
If, after all that, a travel loan is the right fit for your circumstances, we can help you compare options across our lender panel and find a structure that suits your budget, all subject to lender approval. You can explore our travel loans and unsecured personal loans to see how they work. The Moneysmart personal loans guide and the Moneysmart budget planner are great free tools for pressure-testing whether the repayments fit before you sign.
What Lenders Look At When You Apply
If you decide borrowing is right for you, it helps to know what shapes your application. Lenders weigh up your income and existing commitments to check the repayment fits comfortably, your credit history as a guide to how reliably you repay, and the amount and term you are after. A clean track record and a sensible loan size relative to your income put you in the strongest position. Because a holiday loan is unsecured in most cases, the rate tends to sit a little higher than secured lending, which is another reason to keep the amount tight and the term short. A broker can read these factors across multiple lenders and match you to a travel loan that suits, rather than you applying blind and risking a knock-back that marks your credit file.
Final Thoughts
A travel loan is neither a villain nor a hero. It is a tool, and like any tool it works brilliantly in the right hands and causes grief in the wrong ones. Borrowing for a meaningful, fixed-cost trip you can comfortably repay is a fair call. Borrowing for an impulse getaway while your budget is already groaning is the costly trap to avoid.
Be honest with yourself about which camp your trip falls into, build a complete budget, lean on a travel fund and your tax refund where you can, and only borrow what genuinely makes sense. If a travel loan turns out to be the right move, we are here to help you compare it properly so your holiday is the only thing that takes your breath away, not the repayments.
Disclaimer
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. It is not personal advice or a recommendation to apply for any product. Before acting on any information, you should consider whether it is appropriate for your circumstances and seek independent financial advice where appropriate.
Get A Loan Finance Pty Ltd is not a lender. We are an accredited finance broker and work with a panel of lenders and finance providers. Product features, eligibility criteria and availability can change without notice, and all finance is subject to lender approval.
