Payday loans are designed to help with financial emergencies and therefore, although you may be able to utilize a payday loan to pay for a holiday, this is not something you should routinely do. It is important that you consider if the loan you take out will cover the total amount of your holiday and whether you actually need to take out a loan to pay for a holiday. You should also, as with all loans, be able to pay back your loan in full by the due date.
When you borrow money online in the form of any short term or personal loan, you can receive an instant decision from many lenders and with some lenders you can even receive the funds you need on the same day, or even within just a few hours of applying online. Although payday loans are typically withdrawn to cover emergency costs, if you desperately need the money for a trip abroad, you may use a payday loan to cover the costs, as long as you have carefully considered your options and whether you really need to go.
How Does a Payday Loan Work?
A payday loan is a type of unsecured, short-term loan intended to tide the borrower over until their next payday, which is also when the repayment of such a loan is normally due. Payday loans are useful to those who are in need of emergency cash as they can lend fast, and from as little as $100 and you can even apply for $1000 loans or more. They also do not always require a check on your banking history, so can be borrowed by people with bad credit as well as anyone who may have had issues with their credit score.
A payday loan can be particularly useful if you need emergency cash to, for example, cover household bills, a vehicle repair, or perhaps an unforeseen family emergency like a medical bill. By borrowing a payday loan, you can get access to the money you need in as little as a day, especially if you withdraw the loan online.
Should I Use Payday Loans to Pay for a Holiday?
There is nothing stopping you from taking out a payday loan to cover your holiday costs. However, as many lenders only offer up to around $1000 your holiday costs must, of course, exist within the set amount. There are lenders that may be able to help you borrow $2000 or even borrow $5000 or more, but it is not recommended to borrow these amounts for holiday expenses. On the other hand, if you only need a small amount of cash for your holiday, such as a couple of hundred dollars, which is too little to be withdrawn from a bank, a payday loan may offer a solution.
Payday loans are also very quick to arrange and can take as little as a few hours to withdraw and get the money into your bank account. This means that if you have left it until the last minute to pay for your holiday, you will be able to get the funds you need quickly. As a hard credit check is not always required, if you wish to pay for a holiday but have a bad banking history, a payday loan may be one of the few options available to you.
Is It a Good Idea to Use Payday Loans for a Holiday?
Payday loans come with very high-interest rates included, so it may be a more financially responsible decision to save them for emergencies. In the US, payday loan lenders can charge up to 600% interest rates, although in several states such as Nebraska and Illinois a cap of a 36% interest rate has been declared. Nevertheless, around 200 million Americans still live in states that allow payday lending without heavy restrictions.
In many other states, however, payday loans are altogether illegal, and therefore you should not look to borrow money in these states in the form of short term and payday loans online. Payday loans can become debt traps if you cannot repay the loan on the set date and if the repayment is rolled over. If this happens, payday loans can become a hefty strain on your finances and sink you further and further into debt.
This may additionally make you vulnerable to damaging your credit history. Just because your lender may not care about your credit, does not mean your banking history is safe. If you cannot repay the loan, by rolling over your debt you make yourself liable to damaging your credit score, affecting your future opportunities.
It may be the case that using a payday loan to cover a holiday is simply too great a risk. If you do not have the money for your holiday now, you must seriously consider if you will have the money to repay the loan after. If this is not the case, it would be best to avoid withdrawing any form of payday loan unless you cannot utilize an alternative choice.
Some alternatives that may allow you to cover or help avoid your holiday costs without needing to take out a payday loan are:
- Borrowing from family or friends
- Using any savings that you have built up
- Opting for a cheaper holiday option that you can afford
- If you’ve built up enough equity in your home, you may be eligible for a home equity loan
- Rescheduling the holiday to a future time when you can afford it
Nonetheless, if the holiday is a necessity (for example, a death or illness in the family causes the need for you to take a holiday) and you cannot take any alternatives to a payday loan, you must simply be sure to stick to the repayment plan of the loan to avoid a debt trap.
In the future, it would be beneficial to attempt to build up an emergency fund to prevent any future necessity of taking out another payday loan.