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Many lenders are offering special holiday loan promotions, such as free airmiles for a loan, but experts warn that these could be dangerous. They recommend caution when applying for a holiday loan, particularly paying close attention to the interest rate. Many are trying to save money by using a holiday loan instead of their credit cards to pay for a vacation, but high interest rates may make them more expensive than they realize.

Sean Gardner, of MoneyExpert, a comparison website, said: ÒOf course, nobody would advise that you selected your mortgage provider based on how many flights to Rome, cases of wine or free haircuts youÕll get. But with a rate of 5.89 per cent over three years the Airmiles mortgage is amongst the most competitive.”

It is also recommended that homeowners avoid putting up home equity to secure a holday loan. Melanie Bien, a financial analyst stated, “You may need to open a current account and meet certain benchmarks. They will take into account your assets and wealth, particularly investable assets as opposed to the value of your home. If you have lots of equity in your home but nothing else, this may present a problem.”

Related reading: Holiday Loans