Borrowing money for the holidays is never ideal, but sometimes life happens, and you run out of options. So, if you’re considering a holiday loan, it’s important to be smart about it. Try to avoid short-term loans with high interest rates, such as payday loans and cash advances.
Check what rates you qualify for with a personal loan. You may be surprised by the rates you get. It won’t hurt your credit, and it only takes a couple of minutes to find out.
Loans with competitive rates are available, even if your credit is not great. Here is our list of the best holiday loans available in 2022.
According to the National Retail Federation’s latest survey, the average consumer will spend $1,007 during the holiday season. About $506 will be spent on gifts for the family. Many households can’t afford to spend that kind of money. Getting a loan to cover these expenses is tempting, but only consider a loan if you can afford the payments, and compare rates and terms before choosing a lender.
The average person will spend more than $1,000 during the holiday season.
What to consider before getting a bad credit holiday loan
It’s best to avoid a bad credit loan unless you are in a real emergency. A high-interest loan might be justified for emergency health care, food, shelter, or a legal expense with dire consequences, and even those reasons should be carefully evaluated.
Try these options before taking out a holiday loan:
- Credit card. If you already have a credit card with room on it to spend, use it before applying for a holiday loan. While credit cards tend to charge high interest rates, they’re significantly lower than what you’ll get with most of these lenders.
- Family member or friend. It can be embarrassing to ask someone close to you for financial help. But with this type of loan, you can typically set it up with a low-interest rate or no interest at all. Just be sure you pay it back in full—and preferably early— to avoid hurting your relationship.
- Ask for help. While there aren’t many community organizations that offer holiday spending money, you may be able to get help with some of your necessary expenses like groceries, rent, and utilities. If you’re eligible, the assistance can free up some money to provide your family with a good holiday.
FAQ on Christmas Loans for Bad Credit
What is a Christmas loan?
A holiday loan is simply a personal loan issued by a financial institution, like an online lender, bank, or credit union. While these loans are intended to cover holiday expenses, they are not the same as other short-term loans such as payday or cash advance loans.
How do holiday loans work?
Holiday loans are primarily taken in the form of an unsecured loan. This means you won’t have to provide any collateral for the loan. Lenders will check your credit to determine how much you can borrow and how much interest you’ll pay.
What does it take to qualify for the holiday loan?
Typical minimum requirements for a personal loan include being a U.S. citizen or permanent resident, being at least 18 years of age, and having a low debt-to-income ratio. Your credit score may also impact your ability to get a personal loan. While it’s possible to get a personal loan with a FICO score of 500 or above, the best loan rates and terms go to those with good or excellent credit.
Will applying for a holiday loan show on my credit report?
Yes. Every time you submit a formal loan application, it will appear on your credit report and may lower your credit score slightly.
What to consider before borrowing a holiday loan?
Some lenders — especially short-term lenders — charge exorbitant rates that can make repaying your loan next to impossible. Before you borrow, make sure you know how much you owe and if you can afford to make payments. Otherwise, you may risk default — which can mean more fees and a hit to your credit score.
The bottom line
Borrowing money should be your last resort for Christmas shopping. But if you’ve exhausted all of your other options, it’s important to know where you can go that won’t charge you as much as a payday loan.
Consider the lenders listed here, as well as other top personal loan companies.
You can even use SuperMoney’s loan engine to get pre-qualified with a soft credit check for multiple lenders at once. The more time and energy you put into finding the best loan option for you, the more you’ll save.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.