12/7/23

From holiday travel to presents under the tree, Christmas costs can add up fast. If you’re feeling strapped for cash, you might be considering 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 for pretty much any other legal purpose. You’ll receive a lump sum upfront, which you’ll pay back over time—typically with fixed monthly payments.

Your loan terms will vary by lender. Borrowers with good credit will typically qualify for better rates and more favorable terms, while borrowers with bad credit 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’ll typically need good credit and sufficient income. The requirements to get a secured loan tend to be more flexible, but you risk losing your collateral if you can’t repay what you borrowed.

How Do Christmas Loans Work?

You can typically find Christmas loans from online lenders and credit unions. Many banks also offer personal loans, even if they don’t call them Christmas loans. Every 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 score, whereas others don’t check your credit at all. Lenders that don’t require a credit check typically charge high rates, however. In fact, these no-credit-check Christmas loans are essentially payday loans with fees equivalent to interest rates of 400% or higher.

By 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. While you may be drawn to the fast funding and flexibility of a no-credit-check Christmas loan, we don’t recommend them due to the high costs of borrowing.

How to Get a Christmas Loan

If you’re interested in borrowing a Christmas loan, follow these steps:

1. Check your credit. Before taking out a loan, it’s useful to know what your credit score is and what’s on your credit report. The stronger your credit, the better rate you’ll likely get on a loan. You can check your credit score for free through various credit monitoring services and pull your credit reports through AnnualCreditReport.com
2. Shop around. 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 want to borrow from a credit union, keep in mind that you’ll need to become a member if you are approved and want to accept the loan.
3. Estimate your loan costs. Before borrowing, use the Forbes Advisor personal loan calculator to determine your loan costs. As mentioned, some Christmas loans are simply payday loans with sky-high interest charges. Check to see if the costs of borrowing are acceptable before you take out a loan.
4. Check your budget. Christmas loans are typically installment loans that you pay off with fixed monthly payments. Make sure you can afford the monthly payments before you borrow so you don’t risk overdraft fees on your bank account or late payments on your loan.
5. Submit your application. If you’ve found a loan offer you like, you can submit an application. You’ll need to provide personal information and any documentation the lender requires. The lender may or may not run a hard credit inquiry, which could temporarily ding your credit score by a few points.
6. Keep up with payments. If you’re approved for the loan, check to see when your first payment is due. It may make sense to set up automatic payments from your bank account (if the lender hasn’t already) so you don’t fall behind; many lenders offer autopay rate discounts. Make sure you have enough cash in your account to avoid overdraft fees.