Suffering from the winter blues? Daydreaming of a getaway? It turns out your tropical holiday may not be as out of reach as you first thought.

The question to ask – is it cheaper to fund your holiday through a personal loan or more affordable to put it on the credit card?

Both options have their own unique advantages and disadvantages, but really, it comes down to your current financial standing, and how comfortable you are with each method.

So which is cheaper, and what options are available to you?

1. Personal savings

If you can dig into your personal savings for your trip away, you’ll save money from not paying back interest on loans or credit cards. Whilst this is the ideal way to go, for many of us it is simply not an option and requires a great deal of pre-planning.

2. Credit card

When using personal savings aren’t an option, there are still two ways to fund your getaway; the first is through a credit card.

Advantages of credit cards

Cashless: Because you’ve opted to use your credit card, you won’t have to worry about carrying large amounts of cash around, which can be stolen or go missing.

Points: Most credit cards have some sort of rewards program, where you accrue points on your purchases and can often get a return or discount on your overall spend.

Security: This doesn’t apply in all cases, but if you were to lose your card while overseas, some banks retain liability through travel insurance, meaning you’re not completely out of pocket.


Interest rates: Interest rates tend to be considerably higher on credit cards (around 14% p.a.), compared with personal loans, meaning you may end up paying more than you originally intended to.

Fees compound quickly: If you’re booking a holiday on your card a couple of months before departing, your interest rate will usually start building as soon as the transaction is made. This means if you book your flights in January for a holiday in May before repaying it back in July, you’ll be racking up extra interest.

Extra cash can be tricky: Whether by unforeseen circumstances or from enjoying yourself a little too much, you may get to a point on your trip where you need some extra cash. Doing this through a credit card as a cash advance can attract high interest rates, leaving you with a nasty surprise when you arrive back home.


3. Personal loan

If savings aren’t an option, and racking up credit card debt doesn’t sound appealing, then a personal loan may be the way to go.


Lower interest rates: Typically, personal loans can be obtained at a lower interest rate than credit cards, meaning your trip will be more affordable than it would be on a credit card.

Set limits: As your personal loan will be a fixed amount, you’ll know exactly how much you have to spend on your holiday, giving you more time to plan to your trip and making it less likely that you overspend.

Start paying back instantly: There’s nothing worse than going on holiday and returning home to a stack of unpaid bills. Through a personal loan, your broker will set up a repayment plan that works to your advantage. This means you can (if you want) start paying off the loan as soon as it is approved, allowing you to better manage your cash flow.

Set payment schedule: Unlike a credit card, where the total lump sum would appear in your next monthly bill, your personal loan allows you to manage payments over time, without racking up additional interest on potential missed payments.

Building credit: If you’re good at making repayments on time, without issues, having a personal loan can help build your credit score, which will only help you further down the track.


Watch out for fees: There can be additional fees associated with personal loans, such as administration charges and early repayment penalties. A good broker will explain any hidden fees before your loan is approved.

At Nectar, our brokers have access to over 30 lenders across Australia and can find you a great personal loan to suit your needs, with repayments you can afford. So if you’re ready to book your next holiday and could use some financial assistance to get you on your way, get in touch with us here, we’ll be happy to help.