It’s that time of the year again!

While we are still on the brink of the COVID-19 pandemic, there’s no doubt that all of us are excited when Christmas is coming. All of us are busy preparing for the Christmas parties (although some will still be spending it virtually, why not?), planning special gifts to our loved ones, and ticking off our grocery list for our favorite dishes.

However, no matter how exciting this season is, we can’t deny the fact that it comes with a lot of financial pressure – how we can afford that Christmas party outfit, how we can make the people around us smile and be satisfied with those presents, and every little thing in between!

This is the main reason why some people consider borrowing money to upkeep the celebration. But are Christmas Loans really worth it?

See below and hope this can help.

What is a Christmas Loan?

A Christmas loan is simply a personal loan provided by most banks, lending institutions, and credit companies to support the borrowers’ holiday expenses. It might be called a “Christmas loan”, but how the borrower will use the money literally depends on them.

What Do You Need to Consider When Applying for a Christmas Loan?

While a loan is commonly known as detrimental to a person’s financial health status, not all loans are damaging. There are absolute instances that you will not doubt about applying for one as long as you consider the following:

Interest/ Fee

As a lending framework’s general rule, a loan’s interest rate is higher if you choose to pay your loan in a longer time. On the contrary, a loan’s interest rate is lower if you pay it in a shorter period of time.

For example, your loan amount is 10, 000 pesos with a monthly interest of 5% and 10% interest when you pay it for three months. This means that when you choose to pay it monthly, you need to pay 10, 500 pesos. However, when you select the quarterly payment, your quarterly due is 11, 000 pesos or 3, 666 monthly.

The Reasons Why You Need the Loan

List down all your possible reasons why you are thinking to apply for a loan.

Are you going to buy gifts for your family, friends, or colleagues, or will you buy a present for yourself? Are you going to splurge it for grand dishes for the Noche Buena, or will you spend it on funding a seasonal business such as selling Ham, customized holiday shirts, and home needs?

Whatever it is, make sure that you understand the deeper reasons to assess whether it’s a need or only a want?

Then, you can easily decide if it’s worth applying for the loan.

The Payment Terms

All the conditions regarding your loan are stipulated in the loan terms.

Aside from the interest rate, payment terms/duration, collateral (if any), you should also consider one of the most important things – the penalty. Make sure to check what will happen if you can’t pay for a month, two, three or a year? How much will be the accumulated interest? Will they still allow you to apply for another loan if you have some violations?

Know it, and you can indeed pay for it!

Your Capacity to Pay

Before applying for one, ask yourself if you can pay the loan.       

Review your budget. How much is your monthly income and expenses? Do you still have extra cash to pay the loan in case you go for it?

What will happen if you suddenly lose your job? Do you have a side hustle or emergency fund to support it?

You also need to consider if you still have other existing loans – how much is your balance and your accumulated debt if you apply for another one.

Should You Go for Christmas Loans Now?

While Christmas is one of the most important events of the year, it is crucial to consider the factors before going for a Christmas loan.

Consider their pros and cons and know your debt capacity whether it’s for holiday gifts, sumptuous dishes or business.

By doing so, you will fully understand how you will strategize in spending the holiday season much worthy!

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