Ferielån Uten Sikkerhet – Vacationing with a Flexible Holiday Loan

Many people dream of traveling the world or vacationing in some exotic far flung island. However, these trips require funding which a lot of people do not have. What most people have done over time is to save for years so that they can fulfill their dreams. This process can take years and any form of emergency can come up during that period.

Thankfully these days, you do not have to keep postponing your dream trips due to lack of funds. You can now access funding through special financial instruments known as holiday loans or ferielån as they are called in Norway. In this article therefore, we will share tips on how to make the best of this financial instrument to make your dream come true.

Understanding Holiday Loans

As we mentioned briefly above, a holiday loan is a financial instrument that is used to fund a vacation. These loans are very similar to consumer loans but they are specifically for vacations. Additionally, these loans are unsecured because you do not have to present collateral.

The borrowing limit can be as high as NOK 600,000 and the repayment duration as long as 5 years. Bear in mind however, that the amount you will be approved for is totally dependent on your financial history/income.

Criteria for Eligibility

There are basic criteria for eligibility for any loan and the same applies to this one and they include the following:-

1. Applicant must be of legal age which is 18 years.
2. Must have a fixed income that is up to the minimum required by the bank
3. Must be a registered resident in the country or a Norwegian citizen.
4. Must not have any payment notes or debts that have gone to collection.
5. Their total debt must not be more than their annual income.

Pros and Cons of Holiday Loans

Although this credit advance comes in handy for the fulfillment of one’s vacation dream, it shouldn’t be accessed without caution. You need to examine the pros and cons of the loan to determine whether it is worth taking.

Advantages

1. Ease of Application – The process of applying for this loan is quite simple and straightforward. This is mainly because the whole process is digitized.
2. The Process is Fast – You can start the process and get it done within 24 hours especially if you start out at the beginning of a workday. After your application has been accessed and your details verified, you get an agreement form which you sign and then the money is disbursed no later than 3 days after the final paperwork is completed.
3. Fewer Qualification Requirements– The qualification requirements for getting approved for this loan are fewer than most loans and this makes it more accessible to a greater number of people. If you find a vacation offer that has a short window, you can quickly apply for this credit and stand a chance of quick approval because of the less stringent requirements.

Points to Keep in Mind

We all agree that this credit facility has many advantages. However, it is expedient that you consider some of the downsides so that you can make an informed decision.  Find below the 2 most important downsides:-

1. Higher effective interest rate which ranges between 10 to 20 % as against consumer loan interest rate which is 5.03%.Visit this site https://global.oup.com/us/companion.websites/9780190296902/sr/interactive/formulas/nominal/ for more information about effective and nominal interest rates.
2. Higher costs compared to the amount that will be approved. The establishment fee is an average of NOK 950 while the term fee is between NOK 50 and NOK 70.

Factors to Consider Before Applying for Holiday Loans

Now that we have looked at the basics of this financial instrument and its pros and cons, here are some other factors to bear in mind before proceeding to apply for it:-

The State of Your Finances

The repayment period of this loan is usually short and the interest rate is high. This makes it imperative that you consider the state of your finances before you apply for it. Ensure that you can conveniently repay at the due date before taking on this debt because the longer it takes for you to repay, the costlier the loan gets.

Your Budget

First of all, you need to create a budget if you do not have one. Then after that, you look at your monthly income and expenditure and how much extra you have if any. It is on this extra that you can plan your monthly loan repayments. This therefore means that the extra you have per month is what should determine whether you should take out a credit facility for vacation and how much you should apply for.

Consider the Cost of the Loan

Ensure that you know the entire cost of a loan before you apply for it. You can either speak to a financial advisor, a loan agent, or use a loan calculator online. The following is the information to input into a loan calculator:-

1. The loan amount
2. Establishment fees
3. Loan term/repayment period
4. Estimated interest

These pieces of information will help you know the estimated total cost of the loan by the time you are done paying it off.

Consider the Repayment Period

From the required information for the loan calculator, you can infer that the repayment period of a credit facility affects the total cost of the credit. If you choose a long repayment period, you get to make lower monthly payments, but this will result in a more expensive loan at the end of the repayment period.  If however, you choose a shorter repayment period, you get a higher monthly repayment but a cheaper loan at the end of the day.

Alternatives to Vacation Loans

Having examined all the information on this credit facility, you may have come to the conclusion that it is not worth your while taking out the loan. Does this mean that you have to forfeit your desire to travel or postpone it to an unknown later date? The answer is no!

There are alternatives that you can explore to make your dream come true and they include using your vacation pay from work or using a credit card.

Work Vacation Pay

Every worker is entitled to what is known as vacation pay from their employer.  This money is saved up for you throughout the year and is paid out to you annually. You can visit this page for more information on this.

So let’s assume that your dream destination is on offer before you are due to receive your vacation pay, you can request for an advance from your employer. Since this is money already due to you, you can get it and then have your employer deduct it from the source at the appropriate time. This alternative means that you will not have to pay any interest or establishment fees.

Credit Card

There is an interest-free period that issuers offer in which the cardholder does not have to pay interest on whatever they have spent. This interest-free period ranges between 30 and 60 days.

So, if you are expecting some income during or before that interest-free window is closed, you can use a credit card instead of taking out either a consumer or holiday loan. This will be a cheaper option at this point because you will not have to pay any interest on any amount you borrow/use.

Another reason why you should consider using a credit card for your vacation is because most of them come with free travel and cancellation insurance which is activated once you pay for your vacation with your card. Furthermore, you can even get discounts on flights and accommodation.

Another advantage of choosing a credit card as an alternative is that it often comes with free travel and cancellation insurance. This is activated if you use the credit card to pay for the trip. In addition, some credit cards offer discounts on accommodation and flights.

Conclusion

We have discussed the basics of holiday loans and all that you need to know before taking out this loan. We believe that these tips will help you make an informed decision if you take them into consideration going forward.