If you’re like most people, you may not have money saved this year for the holidays. Likewise, you may be tempted to rely on credit cards for this year’s holiday expenses. However, this can do more damage to your finances in the long run. Not to mention, if you already have outstanding balances on your credit cards, adding new expenses to them can result in more financial challenges. A Christmas Loan is your best bet this year.
As your credit union, our goal is to help you make the best financial decisions possible. That’s why we put together four reasons a personal holiday loan for your holiday shopping might be a better choice than credit cards.
Lower, Fixed Rates
Interest rates on personal loans are typically much lower than rates on credit cards, particularly when compared to high-interest bank and store-sponsored credit cards. Plus, personal loan interest rates are usually fixed, whereas credit card rates tend to be variable. Variable rates mean the rates can suddenly increase with market fluctuations. When you have a fixed rate personal loan, the rate will never change.
Only Spend What You Borrow
With a holiday loan, you receive the full loan amount in one lump sum. This means, you know the total amount of money you have available for holiday shopping ahead of time. By limiting your spending only to this borrowed amount, you’re likely to reduce your overall holiday spending versus relying on credit cards.
With credit cards, your finances can quickly spin out of control. The limit on just one credit card could be much higher than the amount of a personal loan, leading to you spend more than you realize. Further, with higher interest rates on credit cards, it can take much longer for you to pay off the balance and cause you to pay significantly more in interest.
Christmas loans have a set repayment period. That means you know exactly when your debt will be paid in full. You can even use a loan calculator to see what your monthly payment would be. With credit cards, it can take years to pay off the balance, particularly if you can only make the minimum payments. By making set monthly payments, you eliminate your debt quicker and help improve your credit score.
The joy and excitement of the holiday season can easily cause you to spend more than you anticipated. This is especially true with credit cards that allow you to borrow more money continuously. With a holiday loan, you receive the borrowed amount upfront. This is a great advantage.
When you get the proceeds from your holiday loan, make a deal with yourself to keep your holiday spending within this limit. Create your holiday budget based off your borrowed amount and restrain yourself from spending any extra money.
It’s important to remember that surprises will pop up, so keep some money aside in your budget for unexpected holiday expenses.
We’re Here to Help!
With the holidays comes fun family traditions, gifts, travel…and expenses. Plan ahead this year with a Christmas loan from the Credit Union. We can help you avoid long-term debt, pay less interest vs. high-interest credit cards, and stick to your holiday budget.
To get started, call or chat with us Monday-Friday 9am-4pm!
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.