A Personal Loan to Cover Christmas Shopping: Is That a Good Idea?

Even if summer is in full flow, it’s never too early to start planning for the holidays, particularly your budget. The National Retail Federation estimates that Americans spent more than $658 billion during the holiday season in 2016, an increase of 4% from the previous year.

Budgeting is an excellent strategy to control your spending, but having money does not equate to having a budget. How are holiday gifts paid for? When Credit Sesame surveyed holiday consumers last year, 43% of them stated they would pay with cash. Fourteen percent indicated they’d charge their buying to a credit card and pay it off over time, or use a credit card to pay for products they couldn’t afford.

An alternative to using plastic during the holidays if you’re concerned about running out of money is to take out a personal loan. Consider the benefits and drawbacks of borrowing before starting your loan search.

Personal loan vs. credit card for holiday shopping

There are several benefits to using credit cards.

  • Depending on the credit card’s rewards program, using one could result in earning points, miles, or cash back.
  • Some credit cards include extended warranty protection, price protection, and purchase protection for the goods you purchase with the card.
  • Internet shopping portals provide excellent discounts. For instance, to get the greatest offers on Black Friday, browse your card’s private mall from the comfort of your home.
  • If you’re applying for a new credit card, you might be able to locate one with a 0% introductory APR on purchases to enable you make a large purchase and pay it off over time without incurring interest costs.
  • Last but not least, keep in mind the bonus points and miles that many credit cards provide to new clients. The holidays might be a perfect time to meet the minimum spending criteria for the incentive.

Personal loans might be a better option if you’re attempting to control your spending because they don’t come with rewards or access to an online mall.

  • If you use several credit cards when you purchase, it’s simple to lose track of your expenditures and go over your spending limit. You only have access to the lump sum of money you get as part of a loan.
  • Although personal loans normally don’t have 0% APRs, if you have strong credit, you might be able to get one with a low rate (and likely lower than the regular APR that kicks in on the credit card after the intro period ends).
  • For many individuals, paying down a loan is less difficult. During a predetermined time period, you will be compelled to pay a predetermined sum each month. Too many people develop the bad habit of only paying the minimal amount due on their credit cards, or they charge the balance back up each time they pay it off. Credit card debt can last much longer than a loan, costing much more in interest, unless you are very disciplined with your payoff strategy.

Get the best personal loan for holiday shopping using Credit Sesame.

Use Credit Sesame to weigh your options if you decide a personal loan is the best course of action. When you log in, the home screen will display your free credit report card and credit score.

Your credit report card provides you with an overview of your credit situation as well as your chances of being approved for personal loans and other credit products. You can obtain advice for enhancing your credit health if your grades aren’t as good as you’d like them to be. For instance, you might be advised to open a new credit card account if your credit utilization percentage is high.

Checking your credit score is the first step; the next is figuring out how much you might be able to borrow. An estimate based on your credit profile can be shown by selecting the Borrowing Power option.

Your own common sense and financial preparation will come in handy at this point.

You shouldn’t borrow $10,000, $20,000, or more just because you can. Remember, you have to pay back a debt. If you’re in a terrific position to receive the financing you need, congratulate yourself, and then carefully analyze your spending plan and payout strategy. To establish how much you require, consult your shopping list; do not request a larger loan.

Examine your loan alternatives right now. You’ll find a tab labeled Loans, and clicking it will display your suggested personal loans. Based on the amount you wish to borrow, use this tool to reduce the number of options.

These suggestions are based on the particular credit profile you have. To apply for a loan, you must click through different offers. The terms of your loan will be set by the lender, and approval isn’t guaranteed.

Always be cautious when borrowing.

You could need a personal loan to get you through the holidays, but it will also have an impact on your finances in the coming months. Adding another payment to the mix will strain your finances harder if you already make payments on student loans, a car loan, a mortgage, or other debts.

You still have time to establish a gift-savings account. However, if you’re feeling overwhelmed by the number of people on your list, think about trimming it down. You might perform a Secret Santa swap to have fewer people on your list for whom you need to buy gifts, or you could simply set a lesser budget for each gift. And as your mother always said, giving something homemade is always appreciated, a terrific way to save money, and a great way to avoid Christmas debt hangover.