Would you borrow money to go on holiday?

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By Luke Jovetic
Know Your Money Editor

A holiday is something that a number of Britons rely on, a break from the stresses and strains of life at home and a chance to forget about it all - even if only for a week or two.

However, for some people it seems the need for a vacation outweighs their need to stay in the black.

Travellers getting into debt for a break

A number of UK holidaymakers are getting themselves into debt to pay for a holiday, it has been revealed.

In fact, research from the insolvency trade body R3 found that more than two million Brits have had to borrow money in order to pay for their holiday.

On average the traveller will borrow £1,130 and spend the next seven months paying it back.

The findings indicated those aged between 16 and 24 years old were the most likely to borrow, while people aged 65 and over were the least likely.

In geographical terms it was found that Scottish people were most likely to cover their costs with some form of loan, with 12 per cent admitting they either had or intended to borrow money to cover the cost of a holiday this year.

Meanwhile, those in the North West, the West Midlands and Yorkshire and Humberside were least likely to do so, with just three per cent stating they would.

Is it worth it?
In the report Frances Coulson, R3 vice-president, commented: "That people are prepared to take on a substantial amount of debt for such a long period of time in order to afford a holiday is worrying, especially as these are still economically uncertain times.

"Personal insolvency hit record levels in the first quarter of this year and looks set to rise - so we're urging people not to spend more than they earn."

He added the firm intends to continue to promote the idea that saving, rather than borrowing, to pay for luxuries is the best way to avoid a life spent dealing with financial issues.

Una Farrell, media relations manager for the Consumer Credit Counselling Service, agreed and stated that ideally, saving for a holiday is the best way of paying for it.

She said: "Having a holiday is an important way to deal with the stresses of everyday life, so it shouldn't be something that adds to those stresses by leaving you with a debt problem.

"So, if you are taking out a loan to pay for your holiday, you need to carefully consider how you will be able to repay it."

However, she added she realises holidays are very important to people and many will make the choice to take out credit to pay for them so they can have a break from their everyday life.

A credit card may be the safest way to spend

Another recent report - from the CSMA Club - indicated that some Brits are shunning holidays abroad this summer because of tour operator issues, flight upsets and the debt crisis in the eurozone.

However, those who are planning on going overseas may find the cheapest way to do so is to shop around to find a deal that is tailored to their financial constraints. For those who opt to do this some advice has been issued that may help to ensure any money spent is kept secure.

The Civil Aviation Authority (CAA) has advised travellers the ATOL financial protection scheme currently covers package holidays as there is a levy imposed on every package holiday sold which is used to refund passengers and repatriate passengers who are stranded when a tour operator goes bust.

But it pointed out there is no financial protection to keep this in place for scheduled airlines.

With this in mind people may be wise to use a use a credit card because they are then covered under the consumer credit act.

A CAA spokesman said: "There is some form of financial protection available through a credit card and there are also specialist insurance policies that you can take out to cover you in the event of an airline collapsing."

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