It’s easy to get carried away by the holiday spirit. Last year, more than one-third of all shoppers took on debt to celebrate the festivities, borrowing an average of$1,249.
While credit cards were the most popular way to borrow, shoppers also used Christmas personal loans to afford all the presents, travel, and entertaining that come with the season.
Personal online loans and credit cards are convenient ways to get fast cash in a pinch. But they aren’t the best options for holiday frivolities.
What Are Online Christmas Loans?
Christmas loans are cash advances that you get online from a digital financial institution. They’re considered small dollar, short term personal loans for the following reasons:
- They usually advance you a small amount of funds, if approved.
- You must repay them relatively quickly, although this may vary from loan to loan, with terms that may last months or years.
These general features of online loans make them ideal for unexpected expenses that you can’t pay out of pocket.
Let’s say your car breaks down, and it’s the only way you can get to work every day. You may consider applying for a loan online to help you fix your vehicle and return to work.
What is the Cost of Borrowing This Holiday?
As with any borrowing option, online personal loans come with rates and fees that you must pay on top of the amount you borrow. Depending on your financial institution and financial situation, these fees may increase what you owe significantly.
Borrowing only makes sense if you can afford these fees.
Some people can. If so, they can be a helpful tool in an emergency that you can’t delay or ignore, like getting your car back on the road.
Some holiday shoppers misuse personal loans online by borrowing them to cover holiday expenses. While this is within your right to do so, no legitimate financial institution will recommend this.
Be Cautious While Using Credit Cards
The majority of shoppers who go into debt did so by using a credit card. Their popularity makes sense. Most people already have a credit card in their wallet, so they don’t have to apply for a loan online to borrow.
Since interest and finance charges don’t apply right away, the plastic in your wallet serves a different purpose in your finances than the average loan online. You may use it for everyday purchases, including holiday expenses. But this can be a slippery slope, which can cause you to go into debt.
To help you avoid overspending while using a credit card, never charge anything you can’t afford to pay off by your next due date. This might be hard to figure out, so sit down with your budget to understand your cashflow.
Are the Holidays Worth Going into Debt?
There’s a lot of pressure on the holidays. Kids might expect mountains of presents under the tree, and adults might take for granted you’re willing to travel across the country to celebrate.
Guilt over not meeting these expectations may convince you to overspend and borrow money.
But if you’re already struggling to afford the holidays, adding online loans and credit card debt won’t make anything better. It will only delay when you face your financial problems until the New Year. Learn how to manage expectations and compromise to celebrate on a budget.