As the holidays draw close in the USA, everyone begins looking at their budgets. A Christmas loan for bad credit is a personal loan that is used to pay for the extra things that we often need during the Christmas season. Christmas loans provide extra cash for trips, gifts, parties, decorations, food, and much more. A low-interest loan helps to pay for the extra costs of keeping up with the holiday season. Usually, no collateral is needed, as a Christmas loan is an unsecured loan. This loan allows you to breathe easy during Christmas and take some time to enjoy the holidays and all the family reunions.
Should you get a Christmas loan for Bad Credit?
Christmas comes with additional holiday expenses that can take a toll on even the tightest budget. These extra expenses add up quickly from vacations, gifts, travel, family meals, and jewelry.
You probably think you can open a savings account and pay for the expenses out of pocket. But let’s pause for a moment and look more closely. A Christmas loan will only cost you a small amount per day to get you through the holidays without worrying about the expenses. You don’t need to stretch your budget for vacation. Christmas loans will help you enjoy spending money while you keep your savings.
First of all, Christmas loans are great for occasional shoppers in the US who make purchases on credit cards with higher interest. A fixed loan amount prevents you from accumulating unmanageable credit card debt. In addition, a fixed-term loan prevents you from paying compound and rollover interest over time. Instead of high interest rates on credit cards, there is also the additional benefit of savings from the low-interest rate of 5.99% on Christmas loans.
Whether a Christmas loan is good for you depends on several factors, including your DTI ratio, credit score, and income. For example, a Christmas loan may not be right for you if you have a high DTI, bad credit ratio, and no consistent income. If you miss a payment and default on your loan, it can lower your credit score. Even if you don’t qualify, some companies can help you get Christmas loans for bad credit.
On the other hand, if you have a stable income, a good credit score, and a healthy DTI ratio and can repay the loan, a Christmas loan can be a great way to fund your Christmas shopping while using one-time payments to increase your credit score.
What can you use a Christmas Loan for?
Christmas loans are flexible because they are a type of personal loan. However, you need to explain the purpose of your loan, as certain lenders in America have rules on how the loan can be used.
Some common reasons you can use a Christmas loan include:
- Christmas Decorations
- Shopping for Christmas gifts for the family
- Throwing a party
- Traveling for the holidays
- Christmas loan fees
The lender charges you fees and interest when you take out a holiday loan. The higher your credit score, the lower the fees your lender will offer you. A bad credit score, on the other hand, will attract higher fees and interest rates, which can make a Christmas loan expensive, and therefore will need Christmas loans for bad credit.
If you have a low credit score and want to take out a Christmas loan, you need to take the time to build up your credit score ahead of Christmas. This will increase your chances of approval and also save you money in the long run.
Where do you get Christmas loans in the USA?
If you don’t have money for the holidays, want to increase your credit score, or need to divide your expenditure into affordable payments, consider these options to get Christmas loans for bad credit:
Banks: Banks have strict loan criteria, but if you have good credit and are a customer of the bank, you can easily qualify for a loan.
Credit Unions: Credit union loans are among the most affordable due to the federally capped APR of 18%. However, you do need to have good credit or be a member to qualify. Visit any of your local
credit union to see what they can offer you.
Loved ones: To cover the holiday expenses in some cases, you can get a family loan from your loved one. To avoid financial stress, create a personal loan agreement in advance and commit to paying back with a payment plan.
Online lenders: An online lender may be your best bet if you are looking for Christmas loans for bad credit, as they have more flexible criteria. Note that these lenders can offer you an APR of up to 36% if you don’t have a good credit score.
Watch out for suspicious lenders during this Christmas season.
As you shop for Christmas loans and gifts, keep an eye out for dubious lenders that offer products such as payday loans. It’s best to steer clear if the lender has a short payment period, does not check for credit history, and charges high fees and interest rates. As many borrow to pay off the original loan, such loans can keep a borrower in a cycle of debt.
How to Apply for a Christmas Loan
Depending on the lender, each application process for a Christmas loan will be slightly different. However, these are the main steps you will need to take:
Get prequalified: Qualifying for a personal loan can give you an idea of the terms, cost, and amount that a lender might be willing to offer. Though pre-qualification is not an official offer, it can give you an idea of what to expect.
Check your credit score. When considering a loan application, personal loan providers take your credit score very seriously. Knowledge of your credit score ahead of time can help you decide what kind of rate you can get and which lenders might be a good fit.
Verify your information: A lender will want to ensure that each piece of information you provide is correct when you apply for a loan. They will verify your income and identity. You may need to provide a recent pay slip or bank statement and a copy of your government-issued ID.
Close on your loan: In the final step of this process, you must sign a loan agreement and submit a hard credit pull. Within a few days, the lender will disburse your money once you complete this step.
Alternatives to Christmas Loans for Bad Credit
Christmas loans can help in dividing Christmas expenses into affordable increments, however, they’re not for everyone. Here are some options to consider:
Spend in cash
Unlike a small business loan or mortgage, a Christmas loan can be “bad debt” that will not benefit your financial health. It is best to create a budget and save for your holiday shopping if you don’t want to accrue new debt this Christmas season.
Here are some steps you can take to pay for Christmas expenses:
Have a budget:
Draw up a list of all the expenditures and check the prices. Make sure you include food, gifts, travel expenses, and decorations. Divide the cost by the remaining months you have left to save. If you, for example need to save $900 for Christmas and you want to begin September, you need to save $300 every month to reach your goal by December 1st.
Stick to your budget:
It can be tempting to overspend when you get into the holiday spirit, but do your best to stay within your savings. Doing so will help you avoid paying for your bills months after Christmas.
Buy now, pay later:
Buy now pay later (BNPL) apps are a well-known funding option for online shoppers to pay for expenditures. Normally, BNPL apps divide your purchase into four equal installments that are paid every week.
These companies usually do not charge fees or interest on these short-term loans. However, some companies offer long-term financing options that are charged interest.
A credit card may be more convenient for consumers who are unsure of the amount of money they need since it is not a lump sum but a revolving line of credit. Credit card repayments are done monthly, but unlike vacation loans, your payment can vary from month to month as they usually have variable interest rates.
However, when you have a high credit limit, it can be tempting to overspend. Do not forget that by the time the balance statement is due, you must pay interest on all unpaid purchases.
Consider applying for a 0% APR credit card if you have enough credit to qualify and you want to save money. This will not charge interest during the introductory period of the card. After that, the accrued interest on any remaining balance will be paid by you.
Personal line of credit:
A personal line of credit (PLOC) functions the same way as a credit card. Still, it comes with a repayment period and an initial draw period. You can borrow up to a specified amount, and you will only have to pay interest on what you use.
You may need to do some research to find a lender that will offer PLOCs, as this is not a popular type of financing.