Christmas loans to pay for holiday expenses in 2024

From the Christmas presents to the parties and socializing, the holiday season can put a big strain on your budget.

It’s best to explore ways to reduce your expenses first rather than take on new debt, but if you’ve decided that a Christmas loan is right for your situation, here’s what you need to know, including where to apply, how much it might cost and how to get the right loan.

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Where can I get a Christmas loan?

You can get a Christmas personal loan from online lenders and some credit unions. This is because they can lend smaller amounts, unlike banks. Banks typically start their loan amounts at $2,000 to $5,000, which may be too large for a Christmas loan, and it’s best not to borrow more than you need to since you’d be paying more interest.

5 steps to get a Christmas loan

1. Compare lenders and loans. Look at loan amounts, loan terms, rates, fees and eligibility requirements.
2. Get pre-approval. Get pre-approval from your top personal loan choices. This will let you compare loan offers.
3. Pick the best offer and proceed. Your top lender may ask for documents such as ID, pay stubs and bank statements.
4. Get approved. Review your loan contract and submit when you’re ready.
5. Get your money. You’ll be funded through direct deposit or e-transfer.

Is it a good idea to get a loan for Christmas?

Taking on more debt is a decision that shouldn’t be taken lightly, especially if it’s for discretionary spending. If you’re considering applying for a Christmas loan, here are the key questions to ask yourself first:

• What do I need these funds for? Some may need a small Christmas loan to extend their budget for holiday essentials. Avoid shouldering more debt if you’re using the funds to spend more than you need to.
• How much do I need to borrow? Create your holiday shopping list and determine how much financing you need to cover holiday expenses.
• How will I pay this loan back? Before you agree to taking on more debt, do the math to ensure that your post-Christmas budget has the flexibility to keep up with repayments on your Christmas loan.
• Can I qualify for reasonable terms and interest rates? If your credit is in bad shape, you may not be able to take out a Christmas loan without sky-high interest rates and fees.

How to find the best loans for Christmas

Holiday loans can come in all shapes and sizes. Finding the best Christmas loan to suit your needs will depend on a variety of factors, including the following:

• Interest rates. Look at the annual percentage rate (APR), which is the annual interest rate plus fees you must pay to get the loan. It gives you a truer view of the cost of the Christmas loan. Compare personal loan interest rates in Canada.
• Loan amount. Some lenders will only offer $500 as a minimum loan amount, which may be too much debt to incur. Look for a lender that offers the loan amounts that meet your financing needs.
• Fees. You may encounter NSF fees, late payment fees, early repayment fees and origination fees (fee to process your loan).
• Loan term. Loan terms generally range from 3 to 60 months. With smaller loans like Christmas loans, you’ll be offered shorter loan terms. Shorter loans have higher monthly payments, but you pay less interest overall.
• Processing time. With the holidays coming up, search for a loan provider that offers a turnaround time that matches your time frame. You can usually get your Christmas loan from an online lender within 24 to 48 hours.
• Reputation. Check that you’re working with a legitimate lender. Legit lenders do not guarantee approval, ask for any money upfront or pressure you to sign.

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Can I get Christmas loans with poor credit?

If you have bad credit, there are lenders that will work with you as long as you demonstrate you have the ability to repay the loan. Before you apply, consider whether you should take on more debt if your credit score isn’t in great shape. Explore ways to reduce your Christmas spending first.

If you’re certain you can manage the extra debt and you’re set on a bad credit holiday loan, here’s what you should know about bad credit Christmas loans before applying:

• High interest rates. Borrowers with bad credit will encounter interest rates that could go as high as 47%. Before taking out a Christmas loan, know how much you’ll pay in monthly repayments and for how long. Also be sure of the interest you’ll pay in total.
• Don’t borrow more than you need. If the lender approves you for more that what you requested, it’s best not to accept it since you’ll be paying more interest.

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Pros and cons of Christmas loans

Christmas loans, like all types of financing, come with their share of pros and cons that are important to take stock of:

Pros

• They help you afford the holiday season. Christmas time comes with a price tag that some people don’t have the cash flow to afford. A holiday loan removes the financial stress of wondering how you’ll pay for everything you need to get through December.
• They’re quick and convenient. Holiday loans are designed to be easy to apply for and accessible to borrowers with all types of credit. Most online lenders can approve and fund your loan within 1 to 2 business days at most.
• They’re an opportunity to build credit. If they’re managed right and paid off on time, holiday loans are a golden opportunity to improve your credit situation. But make sure you apply to a lender that reports payments to the credit bureaus.

Cons

• They come with interest charges and fees. Not only will you have to repay what you’ve borrowed, but you’ll also need to cover the interest you’ve incurred on your loan, driving up the true cost of your holiday spending.
• They put you further in debt. A Christmas loan is another debt repayment you’ll need to manage moving forward. If you don’t have a repayment strategy, it could be the catalyst for making your financial situation worse.
• They may affect your credit. If you make a late or missed payment on your loan, your credit score will take a hit. If you’re in a precarious position with your credit, another loan may be a risky idea.

Other ways to finance your Christmas expenses

There are other ways people finance their holiday expenses, including the following:

• Credit cards. If your current credit card has a lower APR than the Christmas loan you’re being offered, use it instead to cover Christmas expenses.
• Line of credit. Rely on your line of credit to withdraw funds whenever you need to, including for holiday expenses. Interest rates are only charged on what you actually borrow, not on the entire credit limit.

How to manage your debt during Christmas

Here’s how to avoid slipping up on managing your debts during the most expensive few weeks of the year:

• Get organized with your existing debts. Write down each debt that needs to be paid in December and January, how much you need to pay for each account and mark due dates on your calendar. The last thing you want is a late or missed payment hurting your credit score.
• Create a holiday budget. Create a budget for all of your regular expenses and your holiday expenses. Get specific, too: determine how many presents you need to buy and how much you can afford to spend on each gift.
• Take advantage of skip-a-payment incentives. Some lenders allow you to skip a payment or delay a payment once a year if your account is in good standing. If you have loans that come with this perk, it may be worthwhile to put it to use in December.
• Automate it. Because the holidays are such a hectic time juggling work, family time and social gatherings, you may accidentally miss a due date. Avoid this altogether by automating loan repayments.

Tips to reduce your holiday spending

Here are some tips to get you through the holidays without breaking the bank:

• Stick to your budget. While it may be tempting to pick up extra gifts or splurge on a Christmas feast, spend within the parameters you’ve set in your budget. Your budget will act as a guide so you don’t end up further in the red than you anticipated.
• Use gift cards and rewards points strategically. Put last year’s gift cards and store rewards points you’ve stockpiled to good use. You could trade credit card rewards points for gadgets, gift cards and gas and hotel accommodations.
• Take advantage of sales. In the lead up to Christmas, you can count on deep discounts at your favourite stores. Always comparison shop so you know you’re getting the best deal for the gifts you’re buying.
• Save year round. Set up a Christmas fund, and put away $20 to $50 each month. By next December, you could have $240 to $600 to cover all of your holiday expenses.
• Get creative with gifts. Learn to make thoughtful homemade presents. You could bake Christmas cookie boxes, knit scarves or task your kids with making Christmas cards and finger-painted wrapping paper.

Frequently asked questions

• Can you get a loan for Christmas presents?

  Yes, you can. Christmas loans are essentially personal loans. You can use the funds for any purpose – in this case, to help you pay for holiday-related expenses.

• Can you get a Christmas loan with bad credit?

  Yes, you can. Plenty of lenders provide bad credit loans, which you can use for Christmas expenses. However, it’s best not to take on new debt if you have bad credit.