Christmas Loans: Context

The holidays can come with a lot of financial strain, from Christmas parties to special gifts under the tree. If your family is counting on you for gifts – and you need additional money to satisfy them – Christmas loans can help.

According to a 2018 Credit Karma study, almost 80 percent of Americans fret over spending on Christmas or holidays, and there are lenders that sell holiday loans expressly for that spending.

A Christmas loan or holiday loan may be a secured or unsecured loan, much like other kinds of personal loans. A number of variables, varying by the lender and including your credit and income, decide your terms and qualifications. 

You need medium to strong credit to apply for the most-favorable terms and most-competitive interest rates.

It could be safer to apply for a guaranteed loan if you have any difficulties with your financial background, which will entail a sort of collateral. 

However, take note: the lender will repossess your equity as interest if you are unable to repay your secured loan and default.

What to know if you’re shopping for a Christmas loan

If you’re set on borrowing for the holidays, here are a few things to keep in mind.

  • Pre-qualification: By pulling a soft credit inquiry, some lenders encourage you to prequalify for a loan, which will not change your credit scores. Submitting multiple applications for pre-qualification will allow you to narrow down your lender list.
  • Monthly installments and a set timetable are installment loans for Christmas loans. That means they’ll have recurring installments due over a fixed period of time — making it easy to schedule into the budget.
  • Interest rates: Personal loans appear to have better interest rates than credit card interest rates, based on lending conditions and how the credit is paid back and when. So taking out a personal loan, as opposed to costing all your holiday purchases, will save you interest.
  • If you want an online lender, fast financing if accepted, the application and funding process is normally quick. You might also collect your loan on the same business day if you’re accepted, allowing you more time to plan for the holidays.

The upside to any loan is, of course, money in your pocket today.

With any loan, however, there can be downsides. You will need to consider these as well.

Downsides to consider about Christmas loans

As in other forms of credit, there are certain dangers facing both you and your lender. Before submitting, here are a couple of the pitfalls to sort out.

  • Fees- Some lenders charge a premium for origination or a tax for prepayment. Such extra costs will add up.
  • Credit effect. Whether you make a late payment or default on your loan, your credit ratings will be adversely impacted. Pay careful attention to the total amount of debt so that you realize that you can handle the installments.
  • If you can’t repay your Christmas loan because of high interest rates or short maturity terms, you could end up making your financial situation worse. Your financial situation could get worse.


Make time to carefully compare the fees, interest rate levels, debt numbers, annual payments and borrower conditions with various lenders while looking for a Christmas loan or holiday loan. Comparing lenders and various forms of loans can help you find the best possible credit opportunities for you.

If you plan to borrow $500 or less, make sure to closely read the terms of the loan-your Christmas loan will simply be a payday loan.

A cheap, short-term loan is a payday loan. By the next paycheck, what you borrow is normally due, along with penalties. Though payday loans can help close the gap before the next payday, payments that are equal to incredibly high interest rates come with them.

Based on various state regulations, payday lenders can charge around $15 per $100. According to the Consumer Financial Protection Bureau, that approximately equates to a 400 percent APR on a two-week loan.

Because of the extremely high cost, payday loans really can never be accepted if you are struggling with an unexpected financial emergency, and before taking out a payday loan, you can also weigh any possible choices.

You should also steer clear of any Christmas loans that turn out to be payday loans if you’re trying to fund holiday expenses.