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Key takeaways
- Holiday loans are personal loans used to cover holiday-related expenses. They are often installment loans that allow you to get money fast and repay over a set period.
- Consumers can get holiday loans from banks, credit unions, or online lenders. Before taking out a loan, consider how much it will cost and try to prequalify.
- If you want to avoid holiday loans there are other options. Try a buy now, pay later app, use a credit card and pay it off before interest is charged, or take out a cash advance.
The holiday season is in full swing, which means spending money. There are gifts to buy, Christmas trees to put up, and plenty of sweet treats to indulge in. All of this adds up fast and you may be wondering how you’re going to pay for it. That’s where holiday loans come in. They can help you cover all the traditional seasonal expenses but come with their own costs. Read on to learn about holiday loans, compare alternatives, and find the best solution for you.
What are Holiday Loans?
Holiday loans are essentially personal loans used to cover holiday-related expenses. These loans are typically unsecured, meaning they don’t require collateral like your home or car. They often have fixed interest rates and are to be repaid over a set period. The appeal of holiday loans lies in their quick disbursement and the ability to spread the cost of holiday spending over several months.
Where Can I Get a Holiday Loan?
Banks: Many banks offer holiday loans as seasonal promotions with competitive interest rates and perks for existing customers. A lot of times you can also apply online to speed up the process. If you have good or excellent credit, turn to your bank and see what personal loans they offer.
Credit Unions: As member-owned institutions, credit unions often provide lower interest rates and flexible terms for their loans. If you have fair or bad credit, it can be easier to find attractive rates with your credit union since many consider factors beyond your credit score. The catch is that only credit union members can apply for personal loans.
Online Lenders: These lenders offer quick application processes and rapid fund disbursement. They are an attractive option if your credit is poor since many will consider all types of credit scores. Like credit unions, online lenders tend to look at more than your credit score but the terms may not be as good.
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What to Consider When Shopping for a Holiday Loan
When you’re in the market for a holiday loan it’s important to consider the interest rate, repayment terms, fees, – origination fee, application fee, or prepayment penalty, and how applying can affect your credit score. Try to prequalify with multiple lenders before you apply. This way you can find the loan with the best rate and terms. Always compare fees, interest rates, loan amounts, monthly payments, and any other borrower requirements. Make sure that the monthly payments fit your budget. Look for flexible repayment terms from reputable lenders. Comparing prequalification loan offers will help you find the best loan options for you without hurting your credit score. Lastly, only borrow what you can afford to pay back.
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Alternatives to Holiday Loans
While holiday loans can be helpful, they aren’t the only option. The best is of course planning ahead and budgeting. But this is not always realistic or possible. Nor is digging into your savings account. If you don’t want to take out a holiday loan but need some extra cash or flexibility to finance the season, consider these alternatives:
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1. Buy Now, Pay Later Apps
Buy Now, Pay Later (BNPL) apps have gained popularity for their convenience and immediate gratification. They allow you to purchase items and pay for them over time, usually in four installments. They are often interest-free but they may have late or missed payment fees. BNPL apps can be a great way to manage holiday expenses without accumulating long-term debt. Just be careful since buy now, pay later apps can easily lead to overspending.
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2. Credit Cards
If used wisely, credit cards can be an effective tool to fund holiday spending. Look for cards offering holiday promotions like 0% APR for a certain period or cash-back rewards. Always keep track of your spending and only buy what you can comfortably afford to pay back. Your cash back rewards won’t be worth it if you end up accruing interest.
3. Cash Advance Apps
For smaller, short-term needs, cash advance apps like EarnIn, Brigit, and Albert can be a lifesaver. They let you borrow a small amount of your upcoming paycheck – anything from $10 up to $750 – without the high fees of payday loans. There is typically no interest and no credit check. Some apps do request tips and often there is a fast funding fee. These apps can be very useful for last-minute holiday expenses. (EarnIn is not available for Connecticut residents.)
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Final Thoughts
Holiday loans can be helpful in a pinch and it’s possible to get one with a good rate and flexible terms. Ideally, though you will be able to save enough money throughout the year to cover all your holiday expenses. Start planning early, use a budgeting app, and save to give yourself the best gift, a debt-free holiday.
