Consumers could be damaging their credit rating by ineffectively planning the funding of their holiday, it has been suggested.
In figures released by Equifax, the average Briton goes on an average of four breaks every year, with the typical family holiday reported to cost some 2,000 pounds. However, with just over half (51 per cent) of those surveyed planning to borrow money to finance their vacation, the credit reference agency warned that a trip away could impact upon their monetary situation. Some 70 per cent of those intending to borrow were said to be planning to use their existing credit cards to pay for their holiday. The firm also revealed that although 57 per cent of respondents claim that they will have cleared their debts within the space of a year, some 29 per cent believe it may take them up to three years until they finish making repayments on borrowing. As a result, it was suggested that taking this period of time to complete paying off money owed could have "a serious impact" on consumers' credit reports.
Neil Munroe, external affairs director for Equifax, said: "With rising interest rates and a general increase in the cost of living it is inevitable that consumers will look to credit to fund big expenses, like the summer holiday. But we believe it's crucial for consumers to understand the impact of taking a long time to pay off that credit. By only paying off the minimum amount each month, holidaymakers could still be paying for the summer sun well into the gloomy days of winter". As a result, Mr Munroe stated that those with "a high level of credit outstanding" from their holiday could find they are unable to get competitive rates of interest when looking to get a cheap personal loan to fund major purchases later in the year.
Consequently, he suggested holidaymakers should take the time to ensure they are getting the most competitive deal possible not only on their break but on the credit they are using to fund going away. Furthermore, obtaining a copy of their financial history was advised to those consumers who are looking to apply for personal loans or a credit card so as to help them get the cheapest rate possible. Making use of price comparison and cashback websites was also mooted as a method in which tourists could reduce pressure on their day-to-day finances. "But the key is to make sure you have a clear plan for paying off the credit in a relatively short time-scale after the holiday is over," the director recommended.
Earlier this year, Frances Walker, spokesperson for the Consumer Credit Counselling Service, claimed that although the majority of Britons use credit wisely, more needs to be done to encourage them to use money lent to them "sensibly". Ms Walker suggested that between four and eight per cent of borrowers get into difficulties paying back personal loans and credit cards after going through an unforeseen change to their circumstances such as divorce or redundancy.
Author Resource:-
Abbi Rouse writes for All About Loans. Visist us today to apply for secured loans for homeowners, and tenant loans for non homeowners.
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