Business Loans taken for package vacations should be properly calculated by borrowers, say analysts
According to the daily Právo, Czechs most often take loans to buy home appliances, renovate their apartment, pay off earlier debts, or buy a car. But every spring and summer, there is a rise in a number of those willing to take loans to pay for upcoming vacations, by the sea, and sometimes more exotic locations. Experts warn taking loans for vacations is often not a good idea: some two percent of Czechs who do, often find themselves in financial difficulties afterwards, having trouble paying off their debts.
A recent study by KRUK, a bulk debt collection company, confirmed as much; its representative suggested in Právo that vacations were a poor choice for taking loans, presumably because the benefit was fleeting, not an appliance or other item which retained value.
Travel agencies themselves offer loans for vacations, among them Invia.cz. Radio Prague spoke to the head of marketing Michal Tůma about the destinations Czechs borrowed for most.
“Czechs most take loans for medium-priced destinations, above all in the Mediterranean, such as Greece and Italy, then Bulgaria on the Black Sea, and Egypt… Loans are most often taken by families used to taking a vacation each year.”
Michal Tůma agrees that loans for vacations fall into their own category, as a package holiday is not indispensable for everyday life. He pointed out, for those who calculated ahead, taking such loans could be advantageous, not necessarily a risk.
“If you pay off the loan in four months there is no interest, so a family or borrower who counts it out properly, can take advantage and pay only after the summer. After all, summer won’t wait. Those who take loans, by a large majority, go through the numbers properly so taking a short-term loan ends up being advantageous. Of course, there are some who throw caution to the wind and borrow beyond their means. They are attracted by the idea of heading to the sea, and don’t think things through.”
The average loan taken, Právo writes, is just under 26,000 crowns with the average cost of a package vacation being 31,000. Sixty percent reportedly pay off their loan in the first four months, the rest largely up to one year; those who do the necessary bookkeeping in advance don’t end up “rudely awakened” chasing debts later.
Stanislav Zíma, the marketing director for our travel agency, Exim Tours, told Právo three percent of customers had bought vacations based on loans in the three years prior to the global economic crisis but that the number had since dropped to just one percent. He concurred that those who took loans were most often families with children traveling to areas in the Mediterranean. In recent years, following the financial crisis and recession, as well as austerity measures by the last government, more and more Czechs have also begun weighing the value of taking vacations at home: at bed & breakfasts, wellness hotels, camping grounds at popular or lesser–known destinations around the country. Domestic vacations – analysts point out – are generally cheaper and still provide a valuable experience for vacationers, both with and without children.