The festive season can be a challenging time financially, particularly for parents. Having a growing family is a blessing, but it also means there is more pressure on you to make Christmas a magical time for everyone – especially since the average family spends a staggering £740 on Santa duties.
Regardless of your personal stance on gift-giving, overpriced Christmas turkeys and meeting with every distant relative and friend "just because it is that time of the year", you may need a crutch to get you through this more expensive season and help you with any unexpected expenses.
If you are looking to borrow money with a Christmas loan in the UK, this guide will walk you through how to safely do so.
What Is a Payday Loan and How Does it Work?
A payday loan is a type of personal loan that you can use to cover a temporary gap in your finances. You normally borrow a small sum of money and repay it over a short period. Traditionally, such loans required a single, lump-sum repayment on your next payday, but now the payments are often spread across a few months.
You can also find bad credit xmas loans, meaning you still have options if you have a poor credit history or your credit report doesn't have much to show for it.
When Might a Christmas Loan Make Sense?
One of the most important things to keep in mind is that payday loans typically have short repayment terms. So, the ideal borrowing situation is when you need to cover an unexpected cost over the Christmas period and you have income due to land in your bank account shortly.
As the name suggests, the repayment of a short-term payday loan should fit comfortably within your next few paydays. You could use this kind of loan for any kind of Christmas spending need, but it should be for essential purchases (or covering a non-Christmas-related cost if you are facing financial difficulty) rather than unnecessary borrowing (for example, non-essentials like your Christmas shopping).
Credit Unions vs Payday Lenders
People can often look at credit union loans and payday loans as two options for Christmas borrowing.
We won't get into the nitty-gritty here, but the key difference between the two is the product itself. Credit union loans generally have much lower interest rates, but tend to be longer term and for bigger amounts, while payday lenders offer short-term loans at higher interest rates, with the loans typically required to be paid quickly, often within 3 to 6 months.
Both charge interest rates, unlike typical credit cards (where you can usually avoid paying interest if you pay off your balance in full at the end of the month).
How to Safely Use a Christmas Loan
Safely using a Christmas loan comes down to responsible borrowing. Only take out what you need – don't be tempted to borrow more or you will find a way to spend it, then have more to repay and face a tighter few months as a result.
Don’t let your loan repayments slip off your priority list, so you can avoid getting charged for missed payments. And most importantly, only borrow what you know you will be able to pay off across your loan term.
In terms of the lender itself, make sure you choose a company that is regulated by the Financial Conduct Authority (FCA), like us at CashASAP. That way, if anything does go wrong or you have a complaint, you will be able to get tailored support from a regulated lender.
How to Avoid Christmas Borrowing Next Year
Christmas can cause enough financial stress without the added pressure of taking out a loan. If you want to avoid borrowing next Christmas, the trick is to plan ahead – way ahead.
Even if you start saving just £30 a month from January, you will have £360 by next December. That might not cover all your Christmas expenses, but it will at least offer a good starting point and hopefully prevent you from having to borrow again.
Want to learn more? Check out our guide on how to save for Christmas.
