As we all get very excited about gifts as Christmas gets around the corner. But do you know that the Christmas holiday season can make you financially unstable?
Yes, you can get tempted by Christmas loan offers which are given by banks and brokers.
This is to facilitate you but can also be a bad deal in real life. will let you know in a minute.
The Christmas holiday comes with gifts, food, sweets, a feast, and meeting family. And the financial condition is not always favorable for all.
There are many ups and downs where Christmas loans and debt-free loans come to your rescue.
Stick with me to know the advantages and disadvantages of a Christmas loan and what you should know before taking a loan.
And if taking a Christmas loan is out of your league then what are the other ways to enjoy your holiday without being strangled by huge debt.
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Christmas Loan By Any Other Name:
Don’t be a fool by the advertisement for ‘Christmas loan’. Because they are presenting a kind of personal loan also called holiday loans.
Christmas loans can be safe or unsafe. Hence most desirable and profitable interest rates are given to one with handsome income or credit.
One can also qualify for a secured Christmas loan if you are having any problem with your credit but play safe and don’t take risks as in case of default you have to forfeit.
Furthermore, a Christmas loan can be a holiday must-have thing and can also be considered as a financial lump of coal due to the benefits.
It provides in your hard time and also has drawbacks of charging an immense interest rate and adding up charges if not repaid on time.
What to Consider When You Are Shopping for A Christmas Loan:
If you are looking forward to a holiday then give your ear to a few things before jumping on a Christmas loan.
These points will help you understand how Christmas loans work. So let’s get into it.
Prequalification:
Watch your steps because some of the money lenders play very smartly with your mind.
Lender shortlisted people by soft inquires method and does not cause any change in ur credit scores
Interest Rate:
If you are getting a personal loan then the interest rate will be less but for credit cards it’s high.
Monthly Payment with A Chosen Deadline:
For your ease, a Christmas loan can be paid as an installment. This means monthly you have to give some money to the usurer.
Hence depends on the terms and conditions you people agree on.
Money Hand Over Fist:
It is a kind of online lending that is as easy as ABC. If the lender approves your Christmas loan, it will be reached in the shortest possible time.
The Downside to Consider About Christmas Loan?
Each and everything in this world comes with positive and negative points.
Similarly, getting a Christmas loan can be extremely jeopardy due to the following reasons:
Unnecessary Dept:
Lending money is always a headache if it is on non-essential items. It just led you into more and more debt without any basic necessity.
High Borrowing Rate:
Another disadvantage of getting a Christmas loan is interest rates. Many Christmas loans are like payday rather than personal loans.
So you can never escape from the debt cycle once you jump on it.
Poor Financial Statistics:
Most importantly, if you are unable to pay debts on time, it will keep on adding a burden.
Not just because of the high interest rate but also due to less repayment time. And it only worsens your living conditions.
Affect on Credit
If you are unable to repay on time, it greatly impacts your credit score. As it starts getting a negative score.
Buyers Beware Payday Loan:
A payday loan is a type of loan which has a short period to repay with a very high interest rate.
It’s a type of unsecured personal loan and no collateral is needed. A payday loan is basically about how much you earn and having to provide a pay stub.
Usually, the lender charges $15 for every $100 as an interest rate which keeps on increasing with increasing time depending on current laws.
Hence a payday loan is also known as a “cash advance” or “check advance loan”.
Moreover, people are also recognized as predatory lending because of extraordinary excessive interest rates and additional hidden charges.
This gets very difficult for borrowers to repay and fall more and more into debt.
The consumer financial protection bureau itself stated that one should opt for a payday loan only when it gets very difficult to meet both ends.
Also Read: 5 Moving Loans for Relocation Expenses
More Holiday Options:
For every holiday especially for Christmas making a financial blueprint is the foremost and crucial step.
So that you don’t have to panic, after the holiday for a financial hangover.
As long as you think that a Christmas loan will not work well for you, so you can make other alternate options too which are as follows:
Cash Advance:
A cash advance is another short-term loan taken in contrast to a credit card’s balance present. It is more like taking loan cash in return for your credit card limit.
But credit card companies also work smartly and charge 3% to 5% on every $5 to $10.
The most important thing to keep in mind is as soon as you withdraw the loan interest rate starts to apply.
All in all, the cash advance is the quick process of withdrawing a loan.
Credit Card:
A credit card is another good idea if a Christmas loan is a bad option for you.
If you are like once that every month do the payment in full then considering credit card loan is not a nuisance as it comes with 0% interest rate.
The plus point is the repayment period is about 12 to 21months. That interpreted that you have enough time to repay your holiday loans for Christmas.
While on the other hand if the limit is exceeded, the interest rate will be applied of about 20% yearly.
Do not opt for a credit card loan if you cannot repay it in an intro period because of carrying a high-interest rate after a particular time slot.
Take extra caution before taking a credit card loan as they can cause too many hardships, thus greatly affecting your lifestyle.
Peer to Peer Loans:
Taking loans from family and friends is most advantageous but keep in mind a loan is a loan, if not handled properly can become a nightmare and put a crack on relations.
In this loan, there is no middleman as you are lending directly from the owner.
It can be helpful because the interest rates can be low or high according to how much your family and friends compromise nature.
A family or friends loan is more informal than any other loan. It is advisable to always keep a record of loan, due date, interest rate, etc in the form of a contract.
So that no misunderstanding can take place which not only gets allegations on you but also causes damage to relationships.
Furthermore, on taking any interest lenders have to bear the consequences of tax no matter what and how much interest they take.
Another pro for taking a loan from family and friends is nobody cares about credit card history either it is good or bad.
How to Create Debt-Free Holiday:
If you are worried about how you will repay the Christmas loan once taken then grab a paper and pen or your notebook on smartphones and make a list of all your holiday essentials along with their cost.
Now most important is cutting down expenses to keep it in budget and stick to it strongly.
In this way, you can overcome spending a lot on holiday and not end up with grinch-like behavior.
So here are some more pieces of advice you can ponder on.
Setting Budget:
This is one of the best ways to go on holiday without being stuck on a Christmas loan.
As you pre-plan everything and make a list of what gifts you have to buy and do the cost-cutting then do not worry as you won’t end up buying impulsively.
Shop For Gifts All Year:
Shopping throughout the year is also an amazing trick and it causes less burden and makes you a savvy shopper.
You can buy gifts online or from the store especially when it’s a sale season. In this way, you can buy high-quality gifts in fewer amounts that can be within your budget.
Start Saving For The Holiday:
Keeping cash aside for holidays is the most convenient method. This way you not only save a vast amount of money but also can manage it in a better way.
The key here is saving money every month from your total income. The amount of money depends on you and your holiday expenses.
Creative Gifts:
Think out of the box when you want to buy a gift because not all gifts can be bought from shops.
There are thousands of innovative ideas for making your gift unique and even less expensive.
For example, handmade things never get outdated like embroidery, painted mugs, etc.
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Conclusion!
To sum up, focus on your budget and then look for a Christmas loan.
If it’s very important to take a loan for Christmas only in that condition go for it otherwise look for debt-free holiday suggestions from this article.
As we all know if the Christmas loan can help you immediately then it can also get you in trouble that you cannot escape.
Similarly, the high-interest rate is a problem here.
And also if you are unable to pay back the loan amount at the given time then you are surely doomed because of topping up of interest per day.
So choosing your Christmas loan or debt-free holiday loan carefully as all have equal pros and cons.
