Holiday Loans

A holiday loan is simply a personal loan that’s used to cover holiday expenses, like plane tickets or Christmas gifts. Traditional holiday loans are unsecured, meaning they don’t require any collateral. LendingTree’s online loan marketplace lets you shop for competitive rates and terms for loans of up to $50,000.  

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Holiday loans are simply personal loans

Holiday loans are personal loans that you can use to cover any holiday-related expenses. These loans can bridge the gap between your gift list and your bank account. They are issued by financial institutions like banks, credit unions and online lenders and come with fixed monthly payments over a set period of time, typically 12 to 60 months.

Holiday loan APRs are fixed, meaning that you lock in your interest rate when you take out the loan. This is advantageous over credit cards and personal lines of credit, which have variable interest rates that can fluctuate unexpectedly.

Holiday loans are typically unsecured, meaning they don’t require collateral. Because of this, financial institutions rely heavily on factors like your credit score, income and debt-to-income ratio to determine your eligibility.

Beware predatory lenders around the holiday season

A holiday loan is not a payday loan. Payday loan lenders prey on consumers who need quick holiday money with no credit check, then trap them in an expensive cycle of borrowing with short repayment terms and extremely high APRs. When shopping for holiday finance options online, verify that lenders are offering loans at affordable rates and that any fees are reasonable for your financial situation.

Should you get a holiday loan?

While the holidays are a joyous time of year, they also can cause a great deal of financial strain. In fact, 61% of Americans dread the holidays due to spending, a 2019 LendingTree survey found. From special meals to gifts for family and friends to holiday travel, there are always additional expenses around the holidays that can wreak havoc on even the best budgets.

Before you rush to take out a holiday loan, consider the pros and cons:

Borrowing money to pay for holiday expenses
Pros Cons
Better terms than credit cards, typically. Good-credit borrowers will likely be able to secure a lower APR than with a credit card. Interest on top of holiday expenses. The cost of borrowing makes holiday purchases more expensive.
Fixed APR and monthly payments. You can break up holiday expenses into predictable monthly payments. Increased debt load. It’s not advisable to take out debt for and pay interest on unnecessary expenses.
Quick money when it’s needed. Holiday loans can offer fast funding, sometimes as soon as the same business day. Years-long repayment terms. You may be making payments long after the holiday season ends — and the next one begins.
Funds can be used for many reasons. You can use a holiday loan to pay for anything from travel expenses to Christmas gifts. Loan minimums. Holiday loans online typically start at $1,000. You may find smaller loans at banks and credit unions.
No collateral required, typically. Unsecured holiday loans don’t require collateral, so you don’t risk losing any assets. Potential fees. Many holiday loans have an origination fee, ranging from 1%-8% of the total cost of the loan.
Could improve your credit. Credit score issuers like to see a variety of credit types on your profile, as well as healthy payment history. Some borrowers may not qualify. Poor-credit borrowers may end up with high APRs, if they qualify at all.

Cost of a holiday loan

The biggest drawback of taking out a holiday loan is the cost of borrowing. While good-credit borrowers may secure more favorable terms and lower APRs than they would on credit cards, it’s still not advised to take out debt for unnecessary expenses and assets that won’t appreciate in value.

Holiday loan APRs typically range from about 10% to 25%, but poor-credit borrowers may get loan offers with much higher APRs. Consider the total cost of borrowing before seeking holiday loan help.

Here’s an example that compares a $5,000 holiday loan with an APR of 10% with one with an APR of 25%. Note how interest charges more than double with the higher APR. The monthly payment on the loan is higher, as well.

Holiday loans: The cost of borrowing
Loan amount $5,000 $5,000
Loan duration 36 months 36 months
APR 10% 25%
Monthly payment $161 $199
Total cost of the loan $5,808 $7,157
Total interest paid $808 $2,157

Before borrowing a holiday loan, use our personal loan calculator to estimate your monthly payment and long-term interest charges. By crunching the numbers now, you can determine if a holiday loan is worth the costs.

How to apply for a holiday loan

Take these steps before applying for a holiday loan.

Holiday loans are typically unsecured, so lenders rely heavily on factors like your credit score and debt-to-income ratio to determine eligibility.

Get Your Credit Score Now

LendingTree lets you prequalify with lenders in our network. You’ll just need to input basic financial information and consent to a soft credit check, which will not affect your credit score.

Applicants may get holiday loan offers from up to five lenders. Choose the best offer, typically the loan with the lowest APR, and formally apply through the lender.

Get Offers Now

Each lender has its own application process, but you can expect to provide employment and income information, proof of identification and bank statements. If approved, you could receive your funds as soon as the same business day.

Other options for holiday spending

Holiday loans aren’t the only way to finance your Christmas expenses. Consider the alternatives below, such as credit cards and personal lines of credit (PLOC), to decide what makes the most sense for your unique financial situation.

3 alternative options for a holiday loan
Pros Cons
Budgeting in advance and paying with cash
  • You won’t pay interest or take out debt unnecessarily.
  • When the holidays are over, you won’t be stuck with bills for months after.
  • By the time the holidays come around, it may be too late to start a budget.
  • There might not be room in your budget to save for holiday expenses.
Opening a personal line of credit
  • You only pay interest on the money you borrow.
  • You can borrow only the money you need.
  • Interest rates may be lower compared with credit cards.
  • Interest rates are often variable, meaning they can rise unexpectedly.
  • You’ll have to transfer the money from your PLOC to a bank account to use it.
Charging a credit card
  • You only pay interest on the money you borrow that isn’t paid off by the time the balance is due.
  • You can borrow only the money you need.
  • Convenient to use and accepted at most retailers.
  • You may qualify for a card with a 0% APR introductory offer.
  • APRs tend to be higher than with other forms of financing.
  • Interest rates are often variable, meaning they can rise unexpectedly.

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 by the time cold weather hits. Follow these steps to budget for the holidays:

  1. Determine how much money you need to cover expenses. Account for things like holiday travel expenses as well as gifts. Once you’ve set your budget, do your best to stick with it.
  2. Divide that by the number of months you have left to save. For instance, if you want to save $600 for the holidays starting in September, you’ll need to save $200 per month to reach your goal in three months.
  3. 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.
Holiday Loan Tree

Personal line of credit

Personal credit lines offer the benefit of paying interest only on amounts 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 loan documents carefully before signing to establish how often and by how much a variable interest rate can increase at each adjustment.

Credit card

Credit cards are convenient. 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.