Holiday loans aren’t the only way to finance your Christmas expenses. Consider the alternatives below, such as credit cards and buy now, pay later (BNPL) plans, to decide which option makes the most sense for your unique financial situation.
Budgeting for holiday spending
It’s easy to forget what a financial drain the holiday season can be when you’re busy enjoying the summer months. But if you account for holiday spending in your budget year-round, you won’t have to stress when cold weather hits. Follow these steps to budget for the holidays:
- Determine how much money you need to cover expenses. Account for things like holiday travel expenses and gifts. Once you’ve set your budget, do your best to stick to it.
- Divide that by the number of months you have left to save. For instance, if you want to save $600 for the holidays and you’re starting in September, you’ll need to save $200 per month to reach your goal in three months.
- Pay for holiday expenses without borrowing money. This way, you don’t have to stress about finding financial help for Christmas when you could be enjoying the holidays with loved ones.
Personal line of credit
Personal lines of credit offer the benefit of paying interest only on the amount drawn against your credit line. After the draw period, you’ll have to repay what’s owed against your credit line or extend the credit line.
One caveat: Personal lines of credit typically have variable interest rates. Read your loan documents carefully before signing to establish how often and by how much a variable interest rate can increase at each adjustment.
Credit cards are a convenient way to cover your holiday expenses. They let you borrow money without putting up collateral, and they’re accepted at most retailers.
However, it’s easy to overspend when you have a high credit limit. Remember that you’ll have to pay interest on any purchases that aren’t paid off by the time the statement balance is due.
Borrowers with good credit could consider searching for a card with a 0% APR introductory offer, which can give you time to pay off your holiday spending without interest as long as the balance is paid in full by the time the promotional period is over.
Buy now, pay later
Instead of getting a long-term personal loan, you can use a BNPL app to cover the cost of gifts or decorations.
Most BNPL sites offer pay-in-4 plans, which typically come with zero interest. These plans involve splitting the cost of your purchase into four payments across a period of six weeks. You’ll make the first payment immediately, and every two weeks thereafter, you’ll make a payment on your loan until it’s paid off.