According to a recent survey, most Americans planned to spend at least $1,000 on holiday-related purchases in 2020 for themselves and their families; however, we all know that sometimes, that number can rise. While you may have saved up the extra cash throughout the year for your anticipated expenses, it can be wise to have a backup. Don’t let unexpected holiday cheer end up tanking your savings.
A holiday loan can add financial security to your plans, but there are tips to ensuring it won’t end up adding extra stress too. If you have already budgeted and know your plan to pay it off quickly, then you’re in great hands. If you’re not careful, a holiday loan can overstretch your budget and lead to payments made long after packages are unwrapped.
What is a Holiday Loan?
A holiday loan is a personal unsecured loan used for holiday expenses and issued by financial institutions such as banks, credit unions, and online lenders. From plane tickets to gifts to ski or snowboarding trips, it can be a great way to provide for your family’s holiday bliss only without the added stress of using cash now.
Because holiday loans are unsecured, they don’t require collateral and have a low dollar amount limit. Typically, a holiday loan will range between $500-$5,000. The size of your loan and your interest rate can depend on factors such as credit score and income. Keep in mind, if you choose a local credit union like Member’s Exchange, your interest rate may be much lower. This is due to the fact that a credit union is owned by its members, for its members which means you receive fewer fees, lower interest rates, and a personalized approach to customer service.
How do Holiday Loans work?
The terms of holiday loans vary considerably, but borrowers can expect to make fixed payments over 12 to 60 months. Most lenders require a good credit score to qualify for a holiday or personal unsecured loan, especially one with a lower APR than what you’re paying on your credit cards; however, at MECU, we work with you and assess your credit history fairly to determine a plan of action that works for you. When you take out a personal loan with us, we will have agreed upon your APR, and you’ll know your monthly payment when you take out the loan.
When to Apply for a Holiday Loan?
A holiday loan can make sense if you know that you can pay off the balance quickly. As long as you can wipe out your debt within 1-3 months, it may be a good choice for you. A short-term repayment period can be an encouraging factor when considering spending the holidays gliding through icy snow or nestled up making smores with the family in a faraway cabin.
Additionally, maybe you’ll receive a holiday bonus that can be put towards your loan as soon as the money arrives. In that case, a holiday loan is a no-brainer; however, experts advise that if you won’t have the income to pay back the loan quickly enough, to have a less “commercial” holiday.
Other Options for Financing Holiday Expenses
If you’re trying to avoid paying additional interest on your holiday purchases or travel expenses, there are other alternatives to applying for a holiday loan. Instead of a loan, consider:
- Setting a budget for holiday expenses. Look at your cash flow and your savings to help you establish a reasonable spending limit.
- Saving throughout the year. Build a holiday fund early on in the year. Even $25-$50 per week can build up over time. Only use this fund when the time comes, and you’ll be happy you started this trend!
- Buying a little at a time. Start early to get the gifts and the deals you want and to spread out your purchases, reducing the effect of holiday shopping hitting your wallet all at once.
- Cashing in credit card rewards, miles, or points. If you have a rewards credit card, check your rewards balance. You might have points, miles, or cash back rewards you can redeem to help with holiday expenses.
- Earning extra holiday cash. Consider a seasonal job, side gig, or freelance work that can add to your income for the holiday season.
- Using a buy now, pay later service. You might think about this option as modern layaway. If you have a low credit score and want to pay for large purchases in installments, using services such as Affirm or Afterpay can help.
Get a Holiday Loan with Members Exchange Credit Union in Jackson, MS
With the holidays just around the corner, it’s wise to plan ahead this year with a holiday loan from Members Exchange Credit Union. We can help you stick to your budget and access the cushion you need to ring in the cheer how you want to. Avoid over-drafting on your account or drying up your savings by applying for a holiday loan today! Contact our financial representatives at MECU if you have any additional questions. We’re here to help the holidays stay happy for our members in Jackson, MS, and surrounding areas. Join today to receive the best interest rates on personal loans or personal lines of credit, HELOCs, auto loans, and more in the Greater Jackson Metro Area.