Budgeting for Christmas can help you control your expenses. Ideally, you’ll start saving early and be able to cover the costs with cash and, if you expect one, a Christmas bonus.
If you do borrow, plan to repay your debt within around four to six months of the holiday at most. If your planned expenses take a full year to pay off, you’ll likely be in the same situation next year. And if you have to borrow again, you’ll constantly find yourself paying off Christmas debt.
2. Decide which traditions to keep and which to let go
While you may be tempted to keep every tradition alive forever, you should carefully think about your Christmas expenses and see whether you can do without any of them.
Perhaps you could switch to a gift swap with one family member instead of buying for everyone, or opt to stay in and rent a movie rather than taking everyone to the theatre to see the year’s big release. Lower costs will mean less debt.
3. Avoid Christmas financing traps
Some forms of Christmas financing are dangerous to your finances and more expensive than they’re worth. If you plan to take on debt for the holiday, avoid payday loans, car title loans, and store credit cards.
Payday Christmas loans
Payday loans, or cash advances, are short-term loans that come with fees and interest rates around 400% or higher. These loans can quickly trap you in debt, because they are so expensive that borrowers are often forced to repeatedly borrow.
What to choose instead: Look for a personal https://onedayloan.net/payday-loans-ut/ loan from a bank, credit union, or online lender with flexible credit requirements and quick funding. Rates vary based on your credit history, but people with good or fair credit should look for interest rates around 5% to 15%.
Car title loans
Auto title loans are a form of payday loan that uses your vehicle as collateral. Even though they’re secured, they can come with high interest and fees-and you put the ownership of your car on the line.
What to choose instead: If you need a secured loan, a home equity loan or home equity line of credit may offer you better terms. To keep your important assets safe and keep your borrowing low, though, an unsecured personal loan is your best option.
Store credit cards
Stores often try to get you to sign up for branded credit cards during the Christmas shopping season. You may even get a discount if you sign up. Unfortunately, these often come with high interest rates, poor rewards, and limited spending options outside the store.
What to choose instead: If you need to use a credit card, look for one offering a 0% promotional APR. If you can pay off the balance before the promotional period ends, you’ll finance your Christmas spending for free. And you might even be able to earn credit card rewards or a sign-up bonus while doing it.
Recap of Christmas Loans
1 The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of % and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.