A new travel service which allows customers to borrow up to £2,000 to pay for their holiday has been launched.

The Fly Now, Pay Later scheme by Travelfund allows holidaymakers to borrow money and pay it back over a set period before and after they travel.

Enrico Di San Marzano, chief operating officer and co-founder of Travelfund, said the scheme would help the cash flow of travel companies because the money borrowed would be instantly given to the agent or operator. 

The lending service expects to fund around 130,000 holidays in the next 18 months and allows people to pay back the money they borrow over a 12-month period at a typical APR rate of 19.9%.

Long-haul tour operator TravelPack.com has signed up for the new service during its pilot stages. Online travel agent Iglu.com has also signed up and will use the service once it is rolled out.

Di San Marzano, who previously headed up Citalia and Sovereign for Tui, said the service would help drive cash flow and would also help agents to convert “window shoppers into bookings”.

“There are a lot of people out there that window shop and this will help encourage them to make a booking,” he said. “This is likely to increase conversion which is low for most travel agents in the UK.

“We also believe it will increase revenues through higher holiday prices because people will look at upgrading their accommodation from half board to full board because they will have the cash to do so.

“This is something that nobody else offers and almost all of the companies we have approached want to be involved in it. People recognise this and they get what difference it will make.”

Currently the service is only available online but Travelfund hopes to have it available in retail shops within a year.

The money can be used on an individual holiday element such as flights, a hotel or a package, but Di San Marzano said they would also be introducing part payment within the next six months.

He explained: “It wasn’t an initial priority but we will be looking at making it so the customer can pay for part of their holiday and have a loan on the rest.”