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Holiday Loans: What They Are and Alternatives
A holiday loan is one way to pay for expenses this time of year, but compare financing options to find the most affordable one.
Chanell Alexander Writer, Personal Loans | Junior Achievement, SREB, Founders Marketing, Atlanta Small Business Network
Chanell Alexander is a former personal loans writer for NerdWallet. Prior to that, she managed a financial literacy program for middle school students at Junior Achievement and operated a freelance writing company. Her work has been featured by the Atlanta Small Business Network and CBT News, among others. Chanell has a degree in public policy from Georgia State University and a Master of Business Administration from the University of Georgia.
Ronita Choudhuri-Wade Lead Writer | Personal finance, Personal loans
Ronita Choudhuri-Wade covers personal loans for NerdWallet. Before joining NerdWallet, Ronita was a freelance writer for the fintech company Wise (formerly TransferWise) on global money transfers and banking internationally. She was previously a senior internal wholesaler at MainStay Investments, holding her Series 6, 65, 63 and 7 licenses. Ronita graduated from New York University and has a master’s degree in globalization and development from the University of Manchester in the United Kingdom. Ronita currently lives in Tulsa, Oklahoma.
Kim Lowe is a lead assigning editor on NerdWallet's loans team. She covers consumer borrowing, including topics like personal loans, buy now, pay later and cash advance apps. She joined NerdWallet in 2016 after 15 years at MSN.com, where she held various content roles including editor-in-chief of the health and food sections. Kim started her career as a writer for print and web publications that covered the mortgage, supermarket and restaurant industries. Kim earned a bachelor's degree in journalism from the University of Iowa and a Master of Business Administration from the University of Washington. She works from her home near Portland, Oregon.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
With the holidays approaching, you may be worried about how you’re going to pay for gifts and other seasonal expenses. Holiday loans can help cover those purchases, but you may have cheaper options.
Learn about holiday loans and compare alternatives before you borrow.
What is a holiday loan?
A holiday loan is an unsecured personal loan that can cover cash shortfalls and holiday expenses, including gifts, trips or even parties. These loans are from $1,000 to $100,000 and have annual percentage rates from 6% to 36%. They can get you cash quickly, too — some lenders are able to fund a loan the day after you apply.
But because they typically have terms between one and seven years, you could still be paying for this season’s expenses when the holidays roll around next year — and possibly the year after.
Where can I get a holiday loan?
Banks
Bank loans can have low rates and perks for existing customers, and many offer online applications. Borrowers with excellent credit are most likely to qualify for the best rates at a bank.
A personal loan from a bank can be a good idea if you have good or excellent credit (a score of 690 or higher) and are an existing account holder. PNC provides loans to non-customers, but includes perks for account holders. Wells Fargo offers a relationship discount to customers with qualifying checking accounts.
Not all banks offer personal loans, and some may require you to apply in person.
Credit unions
Credit union loans typically offer flexible terms, low starting amounts and maximum rates at or below 27%. Borrowers with fair or bad credit (scores below 690) may find attractive rates compared with other lenders, as credit unions can consider factors beyond a credit score. However, only credit union members can apply.
To become a member, you must meet the credit union’s requirements and typically pay the one-time membership fee.
Online lenders
Online lenders offer holiday loans to consumers with all types of credit scores, and they can typically fund a loan within a day or two after you apply. Loans from online lenders have APRs up to 36% and repayment terms of typically two to seven years. The rate you qualify for depends on your credit score, credit history, debt-to-income ratio and cash flow.
Personal loan rates from online lenders like LendingClub and SoFi can start around 8%, but you need good to excellent credit to qualify for the lowest rates.
Fair- or bad-credit borrowers can expect rates at the higher end of a lender’s range, resulting in high interest costs. For example, a $1,000 loan, due in two years at an APR of 20%, will cost about $222 in interest.
Still, if you get a loan, pre-qualify with multiple lenders to find the best rate and make a plan to pay off your loan.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and responsible lending practices.
Here are other options to help cover expenses during the holidays.
Buy now, pay later
As you shop online or in stores this holiday season, you may see the option to purchase an item now and pay in installments, known as “buy now, pay later.” BNPL companies like Affirm and Klarna have rates ranging from 0% to 30% and offer repayment periods from six weeks to two years.
The rate you get can depend on your credit, and you may have to pay fees if you miss a payment. Buy now, pay later is designed for smaller buys. Large purchases could require a down payment.
Buy now, pay later financing is convenient, especially when it's a simple checkout option at online stores, but it can lead to overspending.
If you have good or excellent credit, you may qualify for a 0% APR credit card. If you pay the balance back within the card’s introductory period, typically between 15 and 21 months, no interest is charged.
A 0% credit card can be cheaper in the short term, but if you carry a balance beyond the promotional period, you'll have to pay interest on the amount going forward. If you miss a payment or are late on a payment during the introductory period, a credit card issuer can cancel your 0% rate and leave you paying interest on the balance.
If you're looking to make a large purchase for the holidays and will need time to pay it off, a credit card with a lengthy 0% APR introductory period is your best bet.
Loan apps can seem like a good option for those with bad credit or no credit history because they usually don’t require a credit check. Apps like Earnin can offer a small cash advance on your paycheck with no fees or interest, which could help cover last-minute gifts. But most apps ask for an optional tip, which is like adding interest to your interest-free advance.
Loan apps offer advances of $5-$500 and schedule automatic repayment for your next payday from your bank account. A loan app can deposit funds immediately for a fee, which makes them helpful in a pinch, but it’s best to avoid using them regularly.
Between fees and the optional tip, borrowing even $100 can land you an APR of over 100% on an advance, so it's best to consider cheaper options if possible.
15- to 21-month promotional period to avoid interest.
Pro: 0% interest during promotional period.
Con: Typically available only to good- and excellent-credit borrowers.
Loan apps
Typically up to $10 in fees, plus an optional tip.
Next payday.
Pro: Can receive funds instantly or same-day.
Con: Likely charges a fee for instant access.
Credit union loans
6% to 27% APR.
Typically 1 to 7 years.
Pro: Flexible terms and lower rates.
Con: Must be a member.
Avoid payday loans disguised as 'Christmas loans'
An online search for "Christmas loans" could return websites offering you fast cash. But many Christmas loans are payday loans in festive disguise. These lenders typically don’t check your credit and promise to send you money within 24 hours.
The catch? Your interest rate will be well into the triple digits. For example, a $500 loan due in two weeks that costs $15 for every $100 borrowed equals an APR of 390%, typical of payday loans.
You’ll have to pay back all the money, plus interest, in a few weeks or months. You may also have to let the lender access your bank account to collect payments, leaving you vulnerable to costly overdraft fees if you don’t have the funds in your account.
If possible, avoid Christmas payday loans to pay for holiday expenses.
Start budgeting for next year
You don’t have to borrow to cover your holiday expenses. Start planning for next year, and use a budget (we recommend the 50/30/20 model) to get the most out of your paycheck. Saving at least 20% each payday throughout the year can yield the necessary funds to give yourself the best gift: a debt-free holiday.
