The holiday season is upon us, and one thing is for sure: we always forget how pricey these events can be until they’re here. Between the gifts, decorations, parties, and travel, your budget will be put to the test. And with prices continuing to stay high, preparation is crucial.

By now, you’re likely starting to see offers for holiday loans. But what exactly are these financial tools, and how do they compare to other options, such as credit cards? You might be surprised to learn that aside from paying cash, holiday loans are one of the best ways to deck the halls affordably.

What is a Holiday Loan? 

A holiday loan is a signature loan wrapped with special incentives for the holidays. Financial institutions generally tie promotional rates or terms to the loan to give it that festive spirit. 

Signature loans, commonly called personal loans, are unsecured loans that provide a specific amount of money with a set repayment plan. These loans can be used for anything from car repairs and medical bills to debt consolidation and vacations. However, during the winter months, they are packaged to help spread holiday cheer.

Unwrap the Perks of a Holiday Loan

Credit cards from big banks and sponsored by retailers may lure you in with the promise of enticing rewards. However, these cards are anything but rewarding when your bill comes due in January. Nothing is worse than starting the new year with high-interest credit card debt. It can set a challenging tone for the rest of the year.

Instead, let’s explore what makes holiday loans more enticing than even the most incredible sale.

Lower Interest Rates:

While holiday loans are still unsecured debt like credit cards, they typically have much lower interest rates, especially when compared to store-sponsored cards. So, every purchase you make with a holiday loan will save you money in the coming year.

Fixed Interest Rates:

Nearly all credit cards today utilize variable rates. That means the rate can fluctuate with the economy. Lately, interest rates continue to rise, which means purchases today could cost even more in the coming months. 

Holiday loans generally offer fixed rates, meaning the rate will remain the same throughout the loan. It’s a vital benefit that many tend to overlook.

Set Dollar Amount:

It’s easy to get carried away during the holidays and overspend. And the convenience of credit cards allows you to make impromptu purchases without a second thought. 

On the other hand, you receive a specific dollar amount with a holiday loan. This feature makes budgeting much easier because once the money is spent, it’s gone. Many use this strategy to ensure substantial holiday debt doesn’t follow them into the new year.

Predetermined Repayment Plan:

Holiday loans have a defined term and repayment plan. Just like a car loan, you’ll make monthly payments until your debt is paid off. The terms are usually 12 months, with the option to pay the loan off early. The goal here is to help you eliminate the balance quickly and prevent long-term debt. 

With credit cards, you’re only required to make minimum monthly payments. That means this year’s holiday expenses could potentially cost you interest for years to come.

Tips to Keep Holiday Spirits High

Holiday loans present a unique way to spread cheer without high-interest payments and long-term debt. But before you start crossing items off your holiday lists, review the following tips:

Create a Holiday Budget.

Borrowing a set dollar amount with a holiday loan makes budgeting easier; however, if you don’t have a shopping plan, you could also start relying on credit cards. Spend time organizing your purchases into categories, such as gifts, travel, entertainment, food, and decorations.

Track Your Spending.

Keep all your receipts or track your expenses with the help of Online and Mobile Banking. When spirits are high, it’s easy to get carried away and splurge on frivolous items that eat into your holiday budget.

Plan for Surprises.

Surprises are one of the best parts of the holidays – unless it involves unexpectedly spending money. Whether you’re invited to a party you didn’t plan for or forgot to purchase a gift for someone, you want to be prepared for the unexpected. Keep some of your holiday loan funds separate to ensure you’re ready for any unplanned costs.

Create a Repayment Plan.

While holiday loans already have a set repayment plan, most people like to pay these loans off early. First, check with your lender to ensure there are no prepayment penalties. Then, work to pay a little extra each month to eliminate the debt quicker. 

The holiday season is one of the most joyous times of the year. It’s also one of the most expensive. If you want to keep your spending organized and head into the new year on top of your finances, consider a holiday loan.

With a sleigh full of financial perks, holiday loans are guaranteed to keep spirits high. If you’re interested in learning more about holiday loans, we’re ready to help. Please stop by any of our convenient branch locations or call 248-322-9800 extension 5 to speak with a team member today.

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