Financial Education Resources

We all know how holiday spending adds up. All those decorations and gift-wrapped boxes under the tree come with a large price tag. Last year Americans on average spent nearly $1,000 each on gifts, parties, season's eatings, decorations, and other holiday expenses.

Small personal loans don’t jump immediately to mind as a classic holiday item, but they might be your best bet to offset holiday expenses this year. A seasonal shopping personal loan is a clean-cut way to cover the gift list for heavy-duty holiday shoppers. And remember that your shopping list this time of year is often a lot longer than you imagine. Hosting Christmas dinner? Stalking online deals? It can get pricey, and a bit overwhelming!

Keep reading to better understand the benefits of using a personal loan for the holidays, what to consider when shopping for a holiday loan, and why it might save you money in the long run.

Benefits of using a personal loan for holiday shopping

Naturally, a lot of us rely on our credit card (or cards, more likely), to spread around the holiday spending and avoid thinking about it too much until later. On the plus side, this is practically effortless, and as long as you pay your bills on time, this may improve your credit score. On the flip side, you are basically paying for the holidays with credit card debt, which often means you'll pay more money overall.

With a holiday loan from a lender at your local bank, you’ll get a better interest rate and a clearer path to debt-free status. You’ll also save money in the long run. And just like paying down your credit card bill on time, regularly hitting your holiday loan repayments will benefit your credit score and contribute positively to your credit history file.

When you take out a personal loan, the money you have available to spend is limited. Once your loan is approved, it’s deposited in a savings account or checking account, from which you can happily do your holiday shopping. Using a loan instead of your credit card can be considered a safeguard against accidentally overspending. 

Cost of a personal loan for holiday shopping

You might not think about it like this, but a personal loan is a product. Like any product, it costs money. It just doesn’t have an obvious price tag on it.

What is the typical amount of a personal loan for holiday shopping? What is the typical interest rate on a personal loan for holiday shopping, and how long would you have to pay it off? Well, that all depends, but let’s take a simple example.

Above we saw that the average American dropped about a thousand bucks last holiday season. But your best friend just had twins, your college roommate just got married, and your spouse is strongly hinting that they want a puppy for Christmas. Better make it $2,000 — a little more than you can comfortably take out of your savings account or run through your debit card.

Rather than putting a matching pair of diamond earrings, a fancy multi-cooker, and a down payment for Fido on a credit card, you opt to borrow smarter by taking out a short-term loan for $2,000. You’re confident you can pay it off in a year or less. Your desired repayment term (12 months), along with an interest rate determined by your credit history, will decide what your monthly payment is.

But the important point to keep in mind is that the interest rate you’ll get on a personal loan will probably be a lot better than the interest rate on your credit card saving you money.

If you are considering a personal loan to help with your holiday expenses, stop by one of our Centennial Bank locations. We offer personal loans with competitive rates and repayment terms to fit your needs. To learn more or to apply online, visit our website, https://www.mycentennial.bank/loans-credit/personal-loans

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