Holiday Loans: What Are and Alternatives
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Holiday Loans: What They are and what alternatives
A holiday loan is one way to pay for costs this time of year However, you must compare the alternatives to finance to determine the most affordable one.
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Last updated on Nov 9 2022
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Table of Contents
Table of Contents
With the holidays approaching You may be concerned about how you’ll pay for gifts or other holiday expenses. Christmas loans will help you pay for those expenses, but you may have more affordable options.
Find out more about holiday loans and compare alternatives before you take out a loan.
How do I get a vacation loan?
A Christmas loan is an unsecure loan that can cover cash shortfalls and holiday expenses, such as gifts, travel, or even celebrations. These loans range from $1000 to $100,000 and have annual percentage rates that range from 36% to 6%. They can get you cash quickly, too — some lenders are able to fund a loan within the same day you make an application.
They typically have terms between one and 7 years in length, it’s possible that you might have to cover the season’s expenses at the time of the holidays next year, or even the year following.
Where can I find the holiday loan?
Banks
Bank loans are often low-cost and offers for existing customers as well as online applications. Borrowers with excellent credit are most likely to be eligible for highest rates offered by banks.
A personal loan from a bank can be a good idea if you have excellent or excellent credit (a score of 690 or higher) and already have an account. The bank offers loans for non-customers, however also offers benefits for customers with accounts. provides a relationship discount to customers who have qualifying checking accounts.
There aren’t many banks that offer personal loans however some banks may require you to apply in person.
Credit unions
Credit union loans typically , low starting amounts, with rates as low as or below 27 percent. For those with fair or poor credit (scores below 690) might find rates that are attractive compared with other lenders, because credit unions are able to look at other factors that are not reflected in a credit score. However only members of credit unions are eligible to apply.
To become a member, you must meet the credit union’s requirements and typically pay a one-time membership fee.
Online lender
Online lenders provide holiday loans for people who have all kinds of credit scores, and they usually approve a loan within one or two days following you have applied. Online lenders offer loans with APRs up to 36% and repayment terms of generally between two and seven years. The rate you can qualify for is based on your credit score, credit history and cash flow.
Personal loan rates from online lenders such as and can start around 8%, but you’ll need excellent credit score to qualify for most affordable rates.
People with good or poor credit are likely to pay rates that are at the upper end of a lender’s range, resulting in high cost of interest. For example an $1,000 loan due in two years, with an interest rate of 20 percent, will cost about 222 dollars in interest.
Still, if you get a loan and you are eligible, make sure to pre-qualify with several lenders to determine the most favorable rate, and then create a plan to .
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5.0 NerdWallet’s ratings are determined by our editorial team. The scoring algorithm takes into consideration aspects we consider to be consumer-friendly, including the impact on credit score rate and fees, the customer experience and responsible lending practices.
5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring formula takes into account aspects we believe are beneficial to the consumer, such as impact on credit score, fees and rates as well as the customer’s experience and responsible lending practices.
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5.0 NerdWallet’s ratings are compiled by our editorial team. The scoring formula is based on aspects we believe are consumer-friendly, including impact to credit score, rates and fees customers’ experience, and ethical lending practices.
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4.0 NerdWallet’s ratings are determined by the editorial staff. The scoring algorithm takes into consideration aspects we consider to be beneficial to consumers, including the impact on credit score rate and fees, customer experience and ethical lending practices.
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5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring algorithm takes into consideration the factors we believe to be consumer-friendly, including impact to credit score rates and fees, customer experience and ethical lending practices.
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5.0 NerdWallet’s ratings are compiled by our editorial staff. The scoring formula is based on the factors we believe to be consumer-friendly, including impact to credit score, rates and fees, the customer experience and responsible lending practices.
5.0 NerdWallet’s ratings are determined by our editorial staff. The scoring algorithm takes into consideration factors we consider to be consumer-friendly, including impact to credit score, rates and fees as well as the customer’s experience and ethical lending practices.
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4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring formula considers the factors we believe to be a good choice for consumers, such as impact on credit score, fees and rates customers’ experience, and ethical lending practices.
4.5 NerdWallet’s ratings were determined by our editorial team. The scoring formula takes into account aspects we consider to be beneficial to consumers, including impact on credit score, rates and fees as well as the customer’s experience and responsible lending practices.
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4.0 NerdWallet’s ratings are compiled through our team of editors. The scoring formula takes into account aspects we believe are friendly to consumers, such as the impact on credit score, rates and fees as well as the customer’s experience and responsible lending practices.
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4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring formula takes into account the factors we believe to be consumer-friendly, including impact to credit score, fees and rates as well as the customer’s experience and responsible lending practices.
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4.0 NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be a good choice for consumers, such as impact on credit score, rates and fees as well as the customer’s experience and responsible lending practices.
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4.5 NerdWallet’s ratings were determined by our editorial team. The scoring algorithm takes into consideration aspects we consider to be a good choice for consumers, such as the impact on credit scores rate and fees customers’ experience, and responsible lending practices.
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4.5 NerdWallet’s ratings were determined by our editorial staff. The scoring formula considers factors we consider to be consumer-friendly, including impact to credit score, rates and fees as well as the customer’s experience and responsible lending practices.
4.5 NerdWallet’s ratings are determined by our editorial staff. The scoring formula considers the factors we believe to be a good choice for consumers, such as the impact on credit score, fees and rates customers’ experience, and ethical lending practices.
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The amount of the loan is $1,000.
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Other financing options for the holidays
There are many other options available to help cover expenses during the holiday season.
Buy nowand pay later
As you shop online or in stores this season of giving You may be offered the option to purchase an item right now and pay over time, known as ” .” BNPL companies like and have rates ranging from 0% to 30%, and provide terms of repayment ranging from six weeks to two years.
The price you pay will depend on your credit, and you may be required to pay fees when you fail to make a payment. Buy nowand pay later is designed for purchases that are smaller in size. Large purchases may require the payment of a down.
Buy now, pay later financing is convenient, especially when it’s a straightforward payment option for online retailers however it can lead to an overspending.
>> MORE:
Credit card with 0% APR
If you have excellent or good credit, you could be eligible for a . If you pay back the balance during the initial period of the card, typically between 15 and 21 months, no interest will be charged.
A credit card that is 0% will be less expensive in the short-term however, if you carry an unpaid balance after the promotional period, you’ll have to pay interest on that amount going forward. If you don’t make the payment deadline or fall behind on a payment during the initial period, a credit card company can cancel your 0% rate and leave you paying interest on the balance.
If you’re looking to make a large purchase during the holiday season and require some time to pay for it, a credit card with long 0% APR introductory period is the best choice.
>> MORE:
Loan apps
The loan apps are the best option for those who have bad credit, or with no history of credit because they don’t usually require a credit check. Apps like can offer small cash advances on your paycheck that is free of interest or charges and can help pay for last-minute gifts. However, most apps require an additional fee, which is like making interest on the interest-free loan.
Loan apps provide loans of between $5 and $500. They also make automatic repayments to your next payday from the bank account. You can transfer funds instantly for a fee, which makes them helpful when you need them, but it’s best to avoid using these apps regularly.
Between the fees and the possible tip, borrowing even $100 could result in an APR of more than 100 percent on an advance, so it’s best to consider cheaper options , if it’s possible.
>> MORE:
Compare holiday financing options
Option
Cost
Repayment time
Pros and cons
Personal loan
6 to 36% APR.
Typically 1 to 7 years.
Pros: Fast funding.
Con: APRs are high for poor-credit borrowers.
Buy nowand pay later
Up to 30 percent APR.
Vary from 6 weeks to 2 years.
Advantage: Certain plans have no interest.
Pro: The possibility of late fees and overspending.
Credit card with 0% APR
16% to 28% in the course of an introductory 0% APR period.
15- to 21-month promotion period to keep out charges.
Pro: 0% interest during promotional period.
Con: Usually available only to good- and excellent-credit borrowers.
Loan apps
Typically , it is up to $10 in fees, plus the option of a tip.
The next payday.
Pro: Can receive funds instantly or same-day.
Pro: Probably charges for instant access.
Credit union loans
6% to 27% APR.
Most often, 1-7 years.
Pro: Flexible terms and lower rates.
Con: You must be a member.
Beware of payday loans disguised as ‘Christmas loans’
An online search on “Christmas loans” could return websites that offer quick cash. But the majority of Christmas loans are disguised as festive. These lenders typically don’t check your credit and promise to pay you within 24 hours.
The problem? Your interest rate will be at or near the triple digits. For example, a 500-dollar loan due in two weeks that costs $15 per $100 borrowed equals 390% APR, the typical rate for payday loans.
You’ll be required to pay back all of the loan, plus interest, over a period of weeks or months. It could also be necessary allow the lender access to your bank account to make payments, leaving you vulnerable to expensive overdraft charges if you don’t have the cash in your bank account.
If you can, avoid any Christmas payday loans to pay for Christmas expenses.
Start planning your budget for next year
You don’t have to borrow to cover your holiday expenses. Begin planning for the year ahead and create a budget (we recommend the ) to get the most out of your earnings. Aiming to save at least 20% every payday throughout the year will allow you to have the funds to purchase the ultimate gift: a debt-free holiday.
The authors’ bios: Chanell Alexander is a former personal loans author for NerdWallet.
Ronita Choudhuri-Wade is the individual loans for NerdWallet.
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