Holiday Loans

How to use personal loans to finance your holiday spending

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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
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Where to find holiday financing

Written by Amanda Push | Edited by Katie Lowery | Reviewed August 29, 2023
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
LenderUser ratingsAPR rangeLoan termsLoan amountsMinimum credit score
Achieve logo
(5,134)
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8.99% - 35.99%24 to 60 months$5,000 - $50,000620
Avant logo
(2,682)
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9.95% - 35.99%12 to 60 months$2,000 - $35,000580
Best Egg logo
(2,494)
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8.99% - 35.99%36 to 60 months$2,000 - $50,000600
Discover logo
(1,593)
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7.99% - 24.99%36 to 84 months$2,500 - $40,000720
LendingClub logo
(6,817)
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9.57% - 35.99%24 to 60 months$1,000 - $40,000600
(1,952)
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7.99% - 35.99%24 to 72 months$2,000 - $36,500660
LightStream logo
(273)
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7.49% - 25.49% (with autopay)24 to 144 months$5,000 - $100,000Not specified
PenFed logo
(14)
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7.99% - 17.99%12 to 60 months$600 - $50,000760
(3,639)
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8.99% - 35.99%24 to 60 months$2,000 - $50,000560
SoFi logo
(97)
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8.99% - 29.99% (with discounts)*24 to 84 months$5,000 - $100,000680
Upgrade logo
(2,200)
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8.49% - 35.99% (with autopay)24 to 84 months$1,000 - $50,000580
Upstart logo
(16,384)
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7.80% - 35.99%36 and 60 months$1,000 - $50,000300

What is a holiday loan?

In 2022, 35% of Americans took on more than $1,500 worth of additional debt during the holiday season, according to a LendingTree study. And if you want to bridge the gap between your gift list and your bank account, you may be looking for a way to finance your purchases.

Holiday loans are personal loans that you can use to cover holiday-related expenses. These loans come with fixed APRs (annual percentage rates) and fixed monthly payments over a predetermined period of time, commonly 12 to 60 months.

Holiday loans are typically unsecured loans, meaning they won’t require collateral. Because of this, lenders rely heavily on factors like your credit score, income, payment history and debt-to-income (DTI) ratio to determine your personal loan eligibility.

What can you use a holiday loan for?

Because holiday loans are a form of personal loans, they’re flexible in their use. However, you’ll have to disclose your personal loan purpose to your lender, as some lenders have restrictions on how funds can and can’t be used.

Some common purposes you may use a Christmas loan for include:

  • Purchasing Christmas gifts for loved ones
  • Traveling for the holidays
  • Buying holiday decorations
  • Throwing a holiday party
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Should you get a holiday loan?

Whether you should get a holiday loan depends on a variety of factors, including your credit score, income and DTI ratio. For instance, if you have bad credit, a high DTI ratio and don’t have a consistent income, a Christmas loan may not be a good fit for you. If you can’t afford to repay the debt and miss loan payments, it can bring down your credit score.

On the other hand, if you have a good credit score, a consistent income, a healthy DTI ratio and can afford to repay the debt, a holiday loan could be a good way to finance Christmas expenses while boosting your credit score with on-time payments.

Pros and cons of a holiday loan

ProsCons

 Set terms let you know when the loan will be paid off. Unlike credit cards, you’ll know when your Christmas loan will be paid off.

 Fixed rates and monthly payments. You can break up holiday expenses into predictable monthly loan payments.

 Quick money when it’s needed. Holiday loans can offer fast funding, sometimes as soon as the same business day.

 Funds can be used for many purposes. You can use a holiday loan to pay for almost anything, from travel expenses to gifts.

 No collateral required. Unsecured loans don’t require collateral, so you don’t risk losing assets.

 Could improve your credit. Credit score issuers like to see a variety of credit types on your profile, as well as healthy payment history.

 Interest on top of holiday expenses. The cost of borrowing makes holiday purchases more expensive.

 Increased debt load. It’s not advisable to take out debt for and pay interest on unnecessary expenses.

 Years-long repayment terms. You may be making payments long after the holiday season ends — and the next one begins.

 Loan minimums. Holiday loans typically start at $1,000 with online lenders, though some lenders only offer $5,000 and up. You may find smaller loans at banks and credit unions.

 Potential fees. Many holiday loans have an origination fee, ranging from 1.00% - 12.00% of the total cost of the loan.

 Some borrowers may not qualify. Since holiday loans are unsecured, bad-credit borrowers may end up with high APRs, if they qualify at all.

Cost of a holiday loan

When you take out a holiday loan, the lender will charge you interest rates and fees. The higher your credit score, the lower the interest rates and fees lenders will offer you. On the other hand, a bad credit score will land you higher interest rates and fees, which can make a holiday loan unaffordable for some people.

If you find yourself with a less-than-ideal credit score and want to take out a holiday loan, take time to improve your credit score beforehand. This can not only boost your chances for approval, but also save you money in the long run.

Holiday loans: The cost of borrowing

According to personal loan statistics based on LendingTree’s first quarter user data on closed personal loans, this is how much a $5,000 may cost you based on your credit score:

Credit score720660
Loan amount$5,000$5,000
Average APR14.34%32.30%
Loan term36 months36 months
Monthly payment$171.71$218.61
Total cost of the loan$6,181.74$7,869.80
Total interest paid$1,181.74$2,869.80

As you can see, you can expect to pay more than $1,000 in interest charges even if you have a strong credit score, substantially adding to the cost of your holiday celebrations. Be sure to assess whether the added debt is worth it based on your financial goals.

Where to get a holiday loan

If you’re short on cash for the holidays, need to break up your expenses into affordable payments or want to increase your credit score, consider these options to get a Christmas loan:

  • Banks: Banks tend to have stricter borrowing standards, but you may have an easier time qualifying for a loan if you have good credit and are already a customer of the financial institution.
  • Credit unions: With a federally capped 18% APR, credit union loans are among the most affordable — typically, though, you’ll need to become a member and have good credit to qualify. Check with your local credit union to see what features they offer.
  • Online lenders: If you’re looking for a bad credit personal loan, an online personal loan lender may be your best bet, as they tend to have more flexible borrower criteria. However, keep in mind that if you don’t have great credit, these lenders may offer you APRs as high as 36%.
  • Loved ones: In some instances, you may be able to get a family loan from a loved one to cover holiday festivities. To help avoid financial tension, draw up a personal loan contract ahead of time and commit to a repayment schedule in writing.

Beware of predatory lenders around the holiday season

As you shop for gifts and holiday loans, be on the lookout for predatory lenders that offer products like payday loans. If a lender doesn’t run credit checks, and has short repayment terms and extremely high interest rates and fees, it’s best to steer clear. Predatory loans can trap borrowers in a cycle of debt, as many often need to take on more debt to cover their original loan.

How to apply for a holiday loan

Each holiday loan application process will look a little different based on the lender, but these are the general steps you may have to take:

  • Check your credit score. Personal loan lenders tend to take your credit score very seriously when considering your loan application. Knowing your credit score ahead of time can help you determine which lenders may be a good fit and what kind of rates you may get.
  • Get prequalified. Getting prequalified for a personal loan can give you an idea of the rates, terms and amounts a lender may be willing to offer you. A prequalification isn’t an official offer, but it can give you an idea of what to expect. This process also involves a soft credit pull, which won’t impact your credit score.
  • Verify your information. After you fill out a loan application, the lender will want to make sure the information you provided is accurate. Specifically, they’ll want you to confirm your identity and income. You may have to provide a copy of a government-issued form of ID and recent pay stubs or bank statements.
  • Close on your holiday loan. During the final stages of this process, you’ll have to submit to a hard credit pull and sign your loan contract. Once you’ve closed on your loan, your lender will disperse your funds within a few days.

Alternatives to holiday loans

Holiday loans can help break up your Christmas spending into affordable increments, but they aren’t for everyone.  Consider the following alternatives:

Pay in cash

Unlike a mortgage or small business loan, borrowing money for holiday expenses may qualify as “bad debt,” debt that doesn’t benefit you financially. If you don’t want to take on new debt this holiday season, the best strategy is to create a budget and save in advance for your holiday purchases.

Here are some steps you can take to pay cash for your holiday spending:

  • Set a budget. Make a list of all the purchases you plan to make and research the cost. Be sure to include gifts, travel expenses, decorations and food.
  • Divide that by the number of months you have left to save. For example, if you need to save $600 for holiday spending and you’re starting in August, you need to save $150 each month to meet your goal by Dec. 1.
  • Stick to your budget. It can be tempting to get swept up in the holiday spirit and overspend, but try your best to stay within the amount you saved up. By sticking to your budget, you can avoid paying for your holiday festivities well into the new year.

Credit card

Since a credit card is a revolving line of credit instead of a lump sum of cash, this may be a better fit for consumers who aren’t sure how much financing they’ll need. Credit cards are repaid monthly, but unlike holiday loans, they typically have variable rates, so your payments may be different each month.

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.

If you want to save money and have strong enough credit to qualify, consider applying for a 0% APR credit card, which won’t charge you interest during the card’s introductory period (commonly 12 to 21 months). After that, you’ll be responsible for paying interest on any remaining balance.

Buy now, pay later

A popular financing option for online shoppers are buy now, pay later apps (BNPL) to finance purchases. Typically, BNPL apps break up your purchase into four equal payments, due every other week.

BNPL companies typically don’t charge interest or fees for these short-term loans, but some companies offer longer financing options that do come with interest. To use a BNPL service, look for the financing option during the checkout process.

Personal line of credit

A personal line of credit (PLOC) works similarly to a credit card but comes with an initial draw period and a repayment period. You’ll be able to borrow up to a predetermined amount and will only be charged interest on what you use. Lenders typically offer variable interest rates on PLOCs.

Since this is a less-common form of financing, you may have to do some research to find a lender that offers PLOCs. It may help your approval odds if you already have an established, trusted relationship with the lender.

Frequently asked questions

A holiday loan isn’t a good fit for everyone and there can be risks to personal loans. However, if you have a good credit score and have sufficient income to repay the loan, a holiday loan can be a good solution for those who can’t afford the purchases upfront and want to build credit. Be sure to shop around and compare rates, fees, amounts and terms to get a holiday loan that best fits your circumstances.

Yes — getting a holiday loan with bad credit is possible, though it may be challenging to qualify with some lenders. Other lenders are willing to work with poor-credit borrowers, though you may get stuck with higher interest rates.

Before applying for a loan, consider improving your credit score so you can boost your creditworthiness in the eyes of lenders.

It can be hard to get a holiday loan if you don’t have good credit or much experience with debt. However, personal loan requirements vary from lender to lender and some companies are willing to work with bad-credit borrowers or consumers who are new to credit.

*Pricing Disclosure:
Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-7%, which will be deducted from any loan proceeds you receive. Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi. Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.