Financially speaking, it’s not a good idea to take on debt to fund a luxury or unnecessary purchase, like a holiday.

However, the financial decisions that real people make aren’t only about rands and cents. They’re also about quality of life. Almost all our spending decisions involve making trade-offs that balance financial security with other things we hope to get out of life.

For example, we trade money for convenience, fun, beauty, time with family and friends, variety in our day-to-day lives, security, emotional reasons and more.

So is it ever a good idea to take a loan to pay for a vacation?

Arguments for and against taking holiday loans

There are some sound reasons not to consider using a loan to finance (or help finance) a vacation. However, there are also times when taking a holiday loan may be the right decision for you.

Reasons not to take a holiday loan

It’s good financial advice not to borrow money to pay for things you don’t absolutely need. Over the long run, this doesn’t work in your favour, at least financially.

When you borrow funds to help buy an asset like a car or to keep a small business running, you’re left with something of value after repaying the loan. Once a holiday is over, however, the money you’ve spent on it is gone.

Last but not least, remember that because you need to repay a loan and agreed interest, you’ll have to carry on paying for your vacation after the suntan fades and you’re back behind the desk.

When a personal holiday loan may make sense

There are times when borrowing money to cover travel expenses makes sense. Consider some scenarios.

A child in high school has a once-in-a-lifetime opportunity to join a school tour overseas, whether the focus is on sport, art, music or cultural experiences. You might succeed in saving most of the funds but need a short-term loan to cover the rest.

Alternatively, you might feel it’s more than worth the costs involved to take your family on holiday, whether in South Africa or overseas – something that you and they might be completely unable to afford in the future. It’s difficult to put a price on seeing the world’s wonders, or on the value of being exposed to different cultures.

What if your kids have never met their grandparents overseas, or you need to cover the airfare to your best friend’s wedding?

For a family that has had an especially difficult year – perhaps due to an illness, divorce or some other life-changing event – a holiday could be more than just a luxury. It could be a way to reconnect and regain strength.

More selfishly, should you give up a once-in-a-lifetime opportunity, for example to walk a section of the Appalachian Trail, hike in the Himalayan foothills or visit Machu Picchu…while you still can? Alternatively, perhaps you’ve never see the Drakensburg or have always wanted to visit Vic Falls.

Another consideration is that travel isn’t always about having a holiday. You or a family member might need funds because an ailing parent is seriously ill or to attend a funeral, in another province or overseas. It’s not possible to predict or plan ahead for this kind of travel expense, and a loan may be the only way to cover it in full.

In all these cases and more, it’s only you who can decide whether taking a holiday loan is a good idea.

Holiday loans: what to bear in mind

If you’re considering borrowing money to cover the costs of a holiday, there are some provisos to keep in mind before you go ahead:

• ensure you’ll be able to repay the loan
• make sure you know and understand all terms and conditions
• ascertain whether there are hidden fees or possible penalties
• make sure you borrow money only from a reputable loans provider.

Why choose an asset-based loan from Lamna?

Unsecured personal loans, like those available from banks, are loans that aren’t backed by any collateral. Instead, you have to submit to a potentially lengthy loan approval process. Factors like your employment status, current income and credit record will determine whether you qualify for a loan, and at what rate of interest.

If you default on this loan type, it will have a negative impact on your credit rating. The lender may also apply for a garnishee order on your salary or, given a court order, seize your assets.

An asset-based loan from Lamna is a simpler, faster and more straightforward alternative. This type of loan is secured by an asset of value you provide – from a vehicle you own to a luxury watch, jewellery or artwork. We’ll store the asset in a secure facility and, once you’ve repaid a loan and agreed interest, return it to you in the same condition you left it.

Lamna is a registered financial services provider with physical branches in Gauteng, the Western Cape Town and KwaZulu-Natal. We have no need for employment and our interest rates comply with the National Credit Act.

For more information about using an asset to secure a short-term holiday loan (or a loan for another purpose), contact us on 086 111 2866 or simply complete and submit our online application form.