Lenders often advertise a low monthly payment for holiday loans. That figure can look manageable, but it only tells you part of the cost. The number worth checking first is the total amount repayable.
Why the monthly payment can mislead
A longer loan term reduces your monthly payment, but increases the total amount of interest paid overall. The table below shows how this works in practice.
£2,000 borrowed at 14.9% APR: 12 months vs 36 months
| 12-month term | 36-month term | |
|---|---|---|
| Monthly payment | £180.18 | £69.35 |
| Total repayable | £2,162.16 | £2,496.60 |
| Total interest paid | £162.16 | £496.60 |
The monthly payment is £110.83 lower on the 36-month loan, but the total interest cost is £334.44 higher. Spreading the repayments over three years rather than one costs roughly three times as much in interest.
The representative APR is shown to at least 51% of successful applicants, as required under FCA CONC 3.5 on representative APR disclosure. The rate offered to any individual borrower may be higher, depending on their credit profile, which would increase both figures in the table above.
MoneyHelper's 'Taking out a personal loan' page suggests looking at the total amount repayable, rather than the monthly payment, as a more reliable way to compare the real cost of different loan options.
Why this matters for holiday borrowing
Holidays are one-off expenses. The enjoyment ends, but the repayments continue.
As a rough check, it can help to express the total interest cost as a share of the trip budget. On the 36-month example above, the £496.60 interest represents around 25% of the £2,000 borrowed, effectively a quarter of the holiday paid twice. If the loan term stretches well past the holiday itself, comparing that percentage against the value of the trip is a useful prompt before signing.
The FCA requires lenders to show the total amount repayable in loan agreements and pre-contract information under the Consumer Credit Act disclosure rules, so the figure is available before any commitment is made.
The Bank of England base rate influences the general level of consumer credit rates. Fixed-rate personal loans lock in a rate at the outset, which can make budgeting more predictable than variable-rate alternatives.
Is a holiday loan the right option?
A short checklist before applying:
- Have you checked the total amount repayable, not just the monthly figure?
- Is the loan term shorter than, or close to, the time until your next holiday, so you are not still repaying one trip while funding the next?
- Have you compared a personal loan against a 0% purchase credit card? If you can repay the balance within the 0% promotional period (typically 12 to 24 months), a 0% card may cost less in interest than a fixed-rate loan. The risk is that any remaining balance after the promotional period reverts to the card's standard rate, which is often higher than a personal loan APR.
- Have you checked whether the representative APR shown is the rate you have actually been offered?
- Could the repayments remain affordable if your income changed?
Who may be affected
- Anyone considering a personal loan to fund a holiday, short break, or travel cost.
- People who have been shown a monthly payment figure and want to understand the full cost.
- Those comparing offers from different lenders where the APR and loan terms differ.
What to read next
For a fuller explanation of how personal loan costs are calculated, the guides below go into more detail:
If you are concerned about existing debt or are unsure whether borrowing is right for your situation, free impartial advice is available from StepChange and MoneyHelper.
Sources
- FCA, CONC 3.5, representative APR disclosure requirements for consumer credit advertising
- FCA, Consumer Credit sourcebook (CONC), pre-contract information and total amount repayable obligations
- MoneyHelper, 'Taking out a personal loan' (moneyhelper.org.uk)
- Bank of England, base rate data and commentary on consumer credit conditions