How to pay for a holiday

There are a lot of countries to explore. How far will your budget take you?

Paying for a holiday with savings

  • Saving up to pay for a holiday will take time, but could have benefits, especially as you won’t have monthly repayments and interest charges to think about.

    But borrowing could be an option if you:

    • Can borrow at a low interest rate.
    •  Want to book ahead and spread the cost.
    • Want to keep savings to cover future expenses.
    • Would lose higher interest paid on savings, e.g. from ISAs.
    • Want extra protection on credit card purchases.

    Extra fees and charges might apply when using credit and debit cards abroad, so make sure you understand the costs in advance.

    You could use a mix of savings and credit to pay for your holiday, helping you to keep your borrowing and costs to a minimum.

    More on savings accounts

  • If you’re aged 55 or over, and have been paying into a pension, you might be able to release a tax-free lump sum from your pension fund to pay for the trip of a lifetime. However, it’s important to consider the future impact of this, leaving you with less income when you are older.

    You should speak to a fully qualified pensions adviser, regulated by the Financial Conduct Authority, before deciding whether taking funds from your pension is the right thing to do.

    Find an advisor using

If you plan to use credit

When you apply, lenders contact their preferred credit reference agencies to check your credit record. This may highlight any potential credit risks, and can impact the interest rates and any amount of credit you’re offered.

All lending is subject to an assessment of your circumstances.

With any kind of borrowing, fees and interest might apply. To limit costs, you should only borrow what you can reasonably afford to repay, over the shortest possible term.

More on credit scores

Credit options when paying for a holiday

  • If you’re approved for a loan, the money you borrow will be transferred into your current account, ready to spend on your holiday.

    A personal loan could offer you a fixed borrowing amount, over a term to suit your budget – typically 1-7 years. At the end of that term, the loan will be repaid in full, just as long as you’ve made all of the required payments.

    If interest rates are fixed your monthly repayments will be too, making it easier to keep track and understand your borrowing costs.

    Other lenders might offer loans with variable interest rates. If you choose one of those, just know that your monthly payments could change over time.

    You might be able to make overpayments on some loans without facing early repayment charges, which could reduce the term and amount of interest you’ll pay overall.

    More on holiday loans

  • Depending on the amount of credit available to you, a credit card could be a flexible way to spread the cost of a holiday. Just be aware of the borrowing costs which might apply, including interest fees and other charges.

    An introductory or promotional rate could offer low or even 0% interest on card purchases. To limit your interest costs, plan to repay your balance before any offers expire and higher standard interest rates kick in.

    It’s worth knowing, if you miss a payment or go over your agreed credit limit, you could lose any promotional or introductory interest rates, so if you do use a credit card, manage it carefully.

    Unless a 0% interest rate applies to purchases, to avoid paying interest on purchases, you need to pay off your statement balance in full and on time every month.

    You can repay as much as you want when you’re able to, or as little as the minimum payment each month. Just be aware that if you only pay the minimum, it’ll take longer and cost you more to pay off your balance.

    Where the total purchase price is over £100 and up to £30,000, credit card purchases will usually be covered by Section 75 of the Consumer Credit Act 1974.

    Before you make payments to anyone from your current account, it’s worth making sure the payment details are genuine. There’s a form of fraud, where emails including bank details are intercepted and changed by criminals, so you unconsciously send funds to the wrong account. This can be avoided by making a simple phone call, or requesting a printed invoice including the correct payment details.

    Refer to our fraud hub if you’d like more information about protecting yourself.

    Extra fees and charges could apply when using a credit card abroad, so make sure you understand the costs in advance. There are credit and debit accounts available which feature benefits at home and abroad, such as low fees for transactions made outside the UK.

    More on travel credit cards

  • If you use an overdraft on your current account, you might be charged daily interest, with will be detailed in the terms and conditions of your account.

    Some banks and building societies will allow you to use an unarranged overdraft, but your credit score could be impacted if you do.

    Instead, you could apply for an arranged overdraft on your current account. You’ll only be charged daily interest as and when you use it.

    Just be aware, the amount you can borrow with an overdraft might be more limited than other types of credit and, if you use the full amount, you won’t have that safety-net to fall back on in the short-term.

    An overdraft might not be the most cost-effective way to manage long-term borrowing. Rather than all of your holiday expenses, which might take considerably longer to repay, an overdraft could help you to cover the cost of holiday emergencies, or an essential short trip.

    More on overdrafts

  • You might be able to borrow more against your current mortgage, or remortgage with a new lender to pay for the trip of a lifetime.

    However, this could depend on:

    • Your age and whether you’d be extending your mortgage into retirement.
    • Whether your lender will let you add to your mortgage for this reason.
    • Your personal circumstances and the health of your credit record.
    • Whether you can afford additional repayments.
    • How close you are to paying off your mortgage.
    • The loan to value ratio for your property.

    When interest rates are low, you might consider borrowing more on your mortgage to pay for a holiday. But it’s really important to consider the impact of future changes in interest rates, and your financial circumstances.

    Because your mortgage is secured against your home, it could be repossessed if you don’t keep up with your repayments. That in itself might be a reason to choose an alternative borrowing option.

    If you plan to spread the cost of your annual holiday, we wouldn’t recommend adding to your mortgage, as you’re likely to be paying it off long after you’ve returned from your trip. If it’s a once in a lifetime trip you’re planning, understandably you may need to repay over a longer term, but a mortgage may still not be the most cost-effective option.

    A typical mortgage term is 25 years but, in the UK, you might be able to get a mortgage for anything from 6 months to 40 years. Over a long period, your borrowing costs could really mount up, even at a low interest rate.

    To limit your costs, you should only borrow what you can reasonably afford to repay, over the shortest possible term. Another borrowing option could be cheaper over a shorter term, even if the interest rate is higher.

    You must seek support from a mortgage adviser before you apply to borrow more or change your mortgage to pay for a holiday. You should explore all financing options to find the one which suits your individual circumstances.

    More on mortgages

  • Usually only available to homeowners aged 55 and over, you may be able to release tax-free cash to pay for the trip of a lifetime, whilst staying in your own home.

    This usually takes the form of a loan, secured against your property. You won’t have to pay anything until you pass away, or move out of your home into long-term care.

    To decide whether equity release is right for you, it’s worth speaking to a qualified adviser. They’ll be able to explain the details and help you to explore about other options. We can put you in touch with a Scottish Widows Later Life Lending Advisor, or you can find a qualified adviser through MoneyHelper and the Equity Release Council.

    More on equity release

Holiday basics

In a survey of 2,000 people, Travelex found that the average person in the UK budgets £1,694 for their holidays each year, but will overspend by at least 12%.

Wherever you’d like to visit, in the UK or further away, here are some things to think about:

Your destination

Make sure you research the destination you have in mind. How long will it take to get there, how long do you want to stay, what’s the best time of year to visit and is it safe? You can find information and advice at the government’s Foreign, Commonwealth and Development Office website.


From beach or activity holidays, to immersing yourself in culture and sampling local food, there’s a lot to experience, so list the top things you’d like to do and see.

Suggestions from friends

Ask around for travel tips from people who have visited your destination already. Otherwise, books, travel websites and forums are worth a browse.

Check passports and visas

To travel outside the UK, you’ll need a valid passport. Some countries require at least 6-months’ validity on your passport for entry, and for it to be within 10 years of the issue date, excluding any extensions you’ve been granted. You might also need a visa to visit some countries, so it’s worth checking with the relevant embassy or consulate.


It’s important to protect yourself in the event of flight cancellations, theft of personal belongings and overseas medical assistance. Just make sure the policy you go for meets your needs, for example, some don’t cover winter sports as standard.  

Flights and accommodation

Shop around online, comparing prices from airlines, travel agents and booking sites to find the best offers. To avoid agent fees, it could pay to book direct. Prices are often cheaper out of main tourist seasons, and overnight or mid-week flights could be more affordable if you don’t mind travelling at ‘unsociable’ hours. From budget hostels to luxury hotels, accommodation costs vary, based on your preferences.


You might need vaccinations or health checks before visiting some countries, especially where diseases like yellow fever, malaria and rabies are more common. Book these with your GP in advance, or at pharmacies which offer these services. Your GP can also give you a note if you plan to take medication abroad, just to make sure you’re not breaking any laws. Always carry medication in the original packaging, so it’s easy to identify. If you need advice, contact the relevant embassy or consulate.


If you’re limited by weight, focus on taking essential clothing and shoes only, and pack travel-sized cosmetics where possible. You could wear your heaviest or bulkiest items to travel in. Compression bags could help to make space, especially for the return journey when you’re likely to have souvenirs to fit into your case. Also, make sure you’ve got a name tag on your bag, and for security lock it with a TSA-approved lock. That way, your luggage won’t be damaged if airport authorities need to open your suitcase for security checks.

Getting around

Before you leave home, research public transport options at your destination, the cost and availability of taxis, and what you can reasonably manage to navigate on foot. A Travelex survey revealed that 43% of respondents forgot to budget for airport parking, costing around £35 on average, and another 49% forgot about airport transfers, with an average cost of around £36.

Spending money

Whether you’re on a tight budget, or are willing to spend a bit more, it’s worth budgeting in advance. Some destinations will be more expensive than others, both in terms of getting there, and the average cost of food or activities. It’s also worth considering what you spend in the airport on food or duty free, the cost of using your mobile devices outside the UK, and any tourist taxes which may apply.

A Travelex survey highlighted that 60% of people has been caught out by taxes, costing £36.48 on average. To keep costs down, you could book self-catering accommodation, plan activities in advance, look up affordable restaurants etc. Or you could make small sacrifices at home in advance, boosting your holiday fund.

All statistics from Travelex were published prior to December 2021.

Travel services from Halifax

What are you able to spend on a holiday?

Aside from flights and accommodation, your holiday budget should cover travel insurance, the cost of getting any visas you need, food and spending money.

You can watch your spending to keep costs down, but it’s worth making sure you can afford the holiday you want before you go ahead with a booking. Counting pennies on the beach isn’t high on anyone’s holiday wish list.

A summary on paying for a holiday

Whether you’re planning a dream trip, or a short holiday, setting a budget is a sensible place to start:

  • Plan all holiday costs, from travel and accommodation to insurance and spending money.
  • If you can use savings, you won’t have repayments and borrowing costs to think about.
  • If you need to borrow to pay for your holiday, options could include a personal loan, credit card, overdraft or even adding to your mortgage for the holiday of a lifetime.
  • For the best chance of being accepted for credit, you need to have a good credit score, and enough spare income so you can afford your repayments comfortably.

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