What are Christmas credits? – Forbes Advisor

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From vacation trips to gifts under the tree, Christmas expenses can add up quickly. If you’re feeling tight on cash, maybe consider a loan to get you through the season.

Christmas loans are a type of personal loan designed for holiday spending. You can borrow one to pay for gifts, travel, or pretty much any other legal purpose. You get a lump sum upfront, which you pay back over time—usually in fixed monthly payments.

Your loan terms vary by lender. Borrowers with good credit ratings typically qualify for better interest rates and more favorable terms, while borrowers with bad credit ratings may have fewer options or receive higher interest rates.

Christmas loans can be unsecured or secured with collateral. To qualify for an unsecured loan, you usually need good credit and sufficient income. The requirements to get a secured loan are usually more flexible, but you risk losing your collateral if you are unable to repay what you borrowed.

How do Christmas credits work?

You can typically find Christmas loans from online lenders and credit unions. Many banks also offer personal loans, although they don’t call them Christmas loans. Each lender determines its own rates, terms and application process. Because of these differences, it’s a good idea to shop around and compare options.

Some lenders require a minimum credit rating, while others do not check your credit rating at all. However, lenders who do not require a credit check usually charge high interest rates. In fact, these no credit check Christmas loans are essentially payday loans with fees that match interest rates of 400% or more.

In contrast, traditional personal loans typically cap their interest rates at 36%, with some lenders offering rates as low as 4% or 5% to creditworthy borrowers. Even if you are drawn to the fast funding and flexibility of a no credit check Christmas loan, we do not recommend it due to the high cost of borrowing.

How to get a Christmas loan

If you are interested in a Christmas loan, follow these steps:

  1. Check your credit. Before you take out a loan, it is helpful to know what your credit rating is and what your credit report says. The better your credit rating, the more likely you are to get a loan. You can check your creditworthiness for free through various credit monitoring services and get your credit reports through AnnualCreditReport.com
  2. shopping spree. Compare multiple options before choosing a lender so you can find the best rates and terms. You can usually find Christmas loans from online lenders and credit unions. If you wish to borrow from a credit union, remember that you must become a member if you are approved and wish to accept the loan.
  3. Estimate your borrowing costs. Before borrowing, use the Forbes Advisor personal loan calculator to determine your borrowing costs. As mentioned earlier, some Christmas loans are simply payday loans with sky-high interest rates. Check whether the borrowing costs are affordable before taking out a loan.
  4. Check your budget. Christmas loans are usually installment loans that you pay off in fixed monthly installments. Make sure you can afford the monthly payments before you take out a loan so you don’t risk overdraft fees on your bank account or late payments on your loan.
  5. Submit your application. If you have found a suitable loan offer, you can submit an application. You must provide personal information and any documentation required by the lender. The lender may or may not issue a hard loan request, which could temporarily hurt your credit score by a few points.
  6. Stay up to date with payments. If you’re approved for the loan, check when your first payment is due. It may be a good idea to set up automatic payments from your bank account (if the lender hasn’t already done so) so you don’t default. Many lenders offer autopay installment discounts. Make sure you have enough cash in your account to avoid overdraft fees.

How to get Christmas loan with bad credit

Some online lenders offer Christmas loans for bad credit. In fact, certain types of Christmas loans do not require a credit check at all. However, as mentioned earlier, these no credit check loans are likely to be costly.

Additionally, while these loans provide quick and easy-to-obtain emergency financing, they do not provide a long-term financial solution. According to the Consumer Financial Protection Bureau (CFPB), consumers who take out an unpayable payday loan often end up taking another to pay off, thereby falling into a debt trap.

Pros and cons of Christmas loans

Before you get a Christmas loan to cover your holiday expenses, consider these pros and cons:

Benefits of Christmas Loans

  • Fast financing: Some Christmas loan lenders promise financing within 1 business day.
  • Flexible purpose: With a Christmas loan you can cover the costs of gifts, travel or other holiday expenses.
  • Fixed payments and interest: Many Christmas loans have fixed installments and monthly payments, so you don’t have to worry about your bills changing over time.

Disadvantages of Christmas loans

  • Possibly high interest rates: The loan can have high interest costs, which in the long run will make your Christmas expenses much higher than when you bought it.
  • Can be a payday loan: Some online Christmas loans are simply payday loans with a different name. These loans often come with fees equivalent to an annual percentage rate (APR) of 400% or more. Also, a lender may require you to provide your bank account information upfront so they can make automatic withdrawals whether you have enough in your account or not.
  • Could lose collateral: If you opt for a secured Christmas loan and cannot afford to pay it back, you could lose any assets you have pledged as collateral.

Other options for buying Christmas gifts

Because Christmas loans can be expensive, it pays to look for alternatives. Here are some other types of funding to consider:

Buy now, pay later

Buy now, pay later (BNPL) schemes have become increasingly popular in recent years. As the name suggests, BNPL options allow you to buy an item immediately and then pay for it in installments over time.

Some BNPL programs offer 0% interest. You often have to pay 25% of the item price upfront, followed by three additional payments every two weeks. Other BNPL options offer longer repayment terms but may also charge interest.

You may be able to select BNPL at checkout or use a BNPL app to fund your purchases. Be sure to read the terms and conditions before proceeding.

credit cards

Credit cards are another way to cover your Christmas expenses. Keep in mind that credit cards can have a high APR if you don’t pay off your balance in full each month. According to the Federal Reserve, the average APR in May 2022 is 15.13%.

However, you may be able to qualify for a new credit card with a 0% APR promotional period that extends from 12 to 24 months, depending on the card. This means that you can avoid interest costs if you repay your balance before this deadline.

Please note, however, that interest will accrue after the promotional period has expired. Be wary of charging more than you can afford within the timeframe given.


Perhaps the best way to afford the holiday season is to avoid debt altogether. Rather than paying monthly installments for a loan after Christmas, consider setting up automatic transfers from your checking account to a separate holiday savings account in the months leading up to Christmas.

Also, make sure you create a realistic spending plan that fits your budget. If you find yourself exceeding your means, review your budget as a reminder of what you can afford this year. By setting limits upfront, you may be able to get through the holiday season without carrying debt into the new year.

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