The average consumer was expected to spend $752 on Christmas gifts in 2016, according to Statista — and that figure will increase between 3.6 and 4 percent this holiday season, according to the National Retail Federation. If you haven’t had a chance to save enough for your holiday shopping, there’s still a way to purchase the perfect gift for each of your family members.
As the winter holidays quickly approach, create your financial strategy by first reviewing these six pointers on how to shop for and how to use a personal loan.
How to Get a Holiday Loan
What is a holiday loan? Holiday loans are personal loans you can take out to pay for holiday-related expenses, including gifts, decorations and even travel expenses to visit relatives. Banks and credit unions issue short-term holiday loans — and because the loans are unsecured, you won’t need to worry about collateral. Here are six tips to follow when seeking a personal holiday loan:
1. Shop Around
Before you begin your search for the ultimate gifts, shop around for the best holiday loan. You can shop for holiday loans online or in person. When you apply for a loan, your APR will be based on your credit rating — the better your credit the lower your interest rate. When shopping around for the right holiday loan, compare the interest rate, monthly payment amount and how long you have to repay it before making a final decision.
Not all banks and credit unions offer loans designed specifically for holiday shopping. They do, however, generally provide a personal line of credit or a personal loan you can use to purchase Christmas gifts for your family. You can also find vacation loans from lenders; no matter what they’re called, you can use personal loans for pretty much anything you want.
2. Borrow Only What You Need
Take out a holiday loan to cover your holiday expenses only. Create a budget before you apply for the loan so you know how much you need.
Next, consider the monthly financial commitment you’ll need to make to pay the loan back. If you can’t meet that commitment, borrow less — or find ways to make budget cuts. For example, you could get rid of your cable subscription for a few months or dine out less often.
3. Don’t Wait Until the Last Minute to Get a Loan
Some companies, like Time Financing Service, approve personal loans in about an hour, but others might take a few business days. Waiting until the last minute to apply and receive your Christmas loan will translate into scrambling for gifts and dealing with large crowds.
Avoid the stress by beginning your shopping before Thanksgiving. You’ll be able to stroll through the mall and take time to hunt for good sales.
4. Pay Less and Save the Difference
One way to pay your holiday loan off before it matures is to spend less on each item you buy and save the difference. Once you’ve checked all the items off your Christmas list, put your savings toward your loan to reduce the amount you owe.
Saving a little on each item can add up quickly. Take the time to do your homework — check sites like Amazon, eBay and Walmart to see if you can score that gift at a discount.
5. Think Before You Buy
One of the quickest ways to blow through your holiday finance budget is by making impulse buys. When shopping with a holiday loan, it’s essential to buy gifts thoughtfully.
Wait until the next day before making a big purchase to avoid making a bad decision. Chances are you’ll be able to come up with something just as extraordinary for a cheaper price.
6. Consider Using Your Cash-Back Rewards Card
Although you don’t want to use your credit card with its high interest rates to fund your Christmas shopping, you can use it in conjunction with your loan to earn cash back. Pay with your cash back rewards credit card so you’ll earn money, then pay off the credit card from your loan money. You can even add your cash back awards to your payment to pay your loan off faster.