The holidays are here and with them comes the need to get presents. In this article, you’ll learn about different ways to fund your purchases. Once you get a Christmas loan, you’ll also learn how to pay off the holiday loan a little quicker so that you’re not left in debt after all the presents have been opened.
Secured Personal Loans
You’ll need collateral to get these types of loans. The creditor can take the collateral if you fail to repay the loan on time. Some credit unions, banks, and online lenders provide what are known as secured personal loans. With these loans, you can borrow against your savings, car, or another type of personal asset. The rates on these loans may be lower than for unsecured personal loans with the reason being that lenders consider these types of loans less risky.
Unsecured Personal Loans
These loans are not backed by collateral like secured loans. As a result, these loans are riskier, and the lender must charge a higher APR (annual percentage rate). Whether you get approved, as well as the APR you get, will largely depend on your credit score.
The interest rate that you get on a variable-rate loan is tied to a rate set by the national banks. Your loan’s rate, as well as your interest and monthly payments, can go up or down depending on the benchmark rate set by the banks.
A benefit from these types of loans is that they may have lower rates. You might see that a variable-rate loan will make sense for your holiday loan situation if it has a short repayment period.
Most loans have fixed rates that come with them. This means that your monthly payments and rates will stay the same throughout the entirety of the loan. If you want a loan for Christmas, fixed-rate loans will work if you need consistent payments every month and you worry about rising rates on longer-term loans. When you have a fixed-rate loan, this makes things easier on you as you can make a budget that stays the same every month.
Personal Line of Credit
A personal line of credit is what is known as revolving credit. Revolving credit more resembles a credit card than a personal loan. Instead of getting a certain amount of cash, you’ll get a credit line from which you can borrow whenever you need to do so. You only pay interest on the money that you use.
Personal lines of credit tend to work best for ongoing expenses. You can use them as a way to get cash for the holidays. If you take this route, ensure that you take steps to pay back the money you spend as soon as possible.
Payday loans operate as unsecured loans. They work a bit differently in that they are repaid on the borrower’s next payday. Loan amounts are smaller, usually around $200 to $600. For this reason, payday loans work really well as a loan for Christmas. Payday loans are used for short-term and risky-lending situations. You can request for a payday loan online from turbo payday loans
Credit Card Cash Advance
If you have a credit card, you can use it to get a Christmas loan from an ATM or a bank. While it’s an easy way to get money for Christmas, it’s also an expensive method. The interest rates on credit card cash advances tend to be higher than they are for purchases. You will also pay cash advance fees, which will come to either a dollar amount or about five percent of the money borrowed.
Pawnshop loans are basically secured personal loans. You take your asset to the pawn shop and borrow against it. If you don’t repay the money loaned to you, the pawnshop can then sell your asset. Pawnshop loan rates can run very high, going up to 200 percent APR. However, the rates tend to run lower than payday loans. Plus, you may not ruin your credit and have debt collectors calling on you if you don’t repay the pawnshop loan. All that will happen is that you will lose rights to the property.
Paying Off Your Christmas Loans Early
If you plan on taking out loans for the holiday season, make plans now to pay them off early. Here are some tactics for paying down these loans so that you have less debt after the Christmas holidays.
Round up your payments: By rounding up your payments, you can pay extra and knock a few months off the terms of the loan (e.g., pay an extra $12 on a $488 loan payment, for a total of $500 even). You can go a step further by paying an extra $50 or $100. You’ll save a lot of money on interest and shorten the repayment period of the loan.
Make bi-weekly payments: See if your lender will let you submit half the payment of the loan every two weeks. You’ll end up paying less interest, and you can shave off several months of your repayment term depending on how much you pay each time. But talk with your lender before you do this as some banks have early payment penalties for those who pay off their loans early.
Make at least one extra payment: You might not be able to make bi-weekly payments or round up your monthly payments. If this is the case, take the opportunity to make at least one extra payment a year on your loan. For example, use the money from your tax refund or a bonus that you got at work to make that one payment. You’ll find that it can make a big difference over the life of the loan.
If you can avoid getting into debt for the holiday season, please do so. The interest on the loans that you take out can get out of hand pretty quickly. If you must take out a loan, follow some of the tips provided in this article to offset your debt burden. Lastly, read all of the terms on the loan contract before you sign on the dotted line.