A Christmas loan is one way to pay for expenses this time of year, but compare financing options to find the most affordable one.
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With the holidays approaching, you may be wondering how you’re going to pay for gifts and other seasonal expenses. Holiday spending is expected to reach a record high in 2024 — about $900 per person — spread across gifts, decorations, food and more, according to the National Retail Federation.
Christmas loans (also called holidays loans) are one way to help cover these costs, but there may be cheaper options.
Learn about Christmas loans and compare alternatives before you borrow.
What is a Christmas loan?
A Christmas loan, or holiday loan, is an unsecured personal loan that can help cover holiday expenses, including gifts, trips or even parties. These loans range from $1,000 to $100,000 and have annual percentage rates from about 6% to 36%. They can get you cash quickly, too — some lenders can approve and fund a loan the same day 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.
Online lenders offer Christmas loans to consumers with all types of credit scores, and they can fund a loan within a day or two after you apply. Loans from online lenders have APRs up to 36% and repayment terms from 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 9%, but you need good to excellent credit (a score of 690 or higher) to qualify for the lowest rates.
Borrowers with fair or bad credit (scores below 690) can expect rates at the higher end of an online lender’s range, which means you'll pay more in interest. For example, a $1,000 loan, due in two years at an APR of 20.99%, will cost $233 in interest. The same loan with an APR of 35.99% will cost $417 in interest.
If an online loan is your best option, pre-qualify with multiple lenders to find the best rate, and make a plan to pay off your loan as soon as possible.
Christmas loans from banks
Bank loans can have attractive rates and perks for existing customers, and most offer online applications. A personal loan from a bank can be a good idea if you have good or excellent credit and are an existing account holder. Not all banks offer personal loans, though, and some may only lend to existing customers.
Citibank provides loans to non-customers, but includes perks for existing account holders, like faster funding, while Wells Fargo offers a relationship discount to customers with qualifying checking accounts.
Credit union loans typically offer flexible terms, smaller loan amounts and lower average rates. Borrowers with fair or bad credit may find attractive rates compared with other lenders, as credit unions may consider factors beyond credit scores. However, only credit union members can apply for personal loans.
To become a member, you must meet the requirements and possibly open a bank account at the credit union with a small deposit (often as low as $5). This is usually a quick process you can complete online.
One of your best bets for getting a Christmas loan with bad credit is to apply with an online lender that accepts borrowers with lower credit scores. These loans fund quickly — sometimes the same day you’re approved — and loan amounts start as low as $1,000.
But make sure to look for a reputable lender that checks your credit as part of the application. Many websites promising "Christmas loans" are actually offering payday loans in festive disguise. These lenders don’t check your credit, and 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 391% – typical of payday loans.
With this type of loan, you’ll also have to pay back all the money, plus interest, in a few weeks or months. You may even have to let the lender access your bank account to collect payments, which leaves you vulnerable to overdrafts.
Avoid Christmas payday loans and stick to loans with a max APR of 36%.
More ways to pay for Christmas
Here are other options to help cover expenses during the holidays.
Buy now, pay later for the holidays
As you shop online or in stores this holiday season, you may see the option to “buy now, pay later” with providers like Affirm or Klarna. BNPL payment plans vary, but most offer “pay-in-four” plans that divide your purchase into four equal installments, each due two weeks apart, with the first payment due at checkout. These plans don’t charge interest.
Some BNPL providers also offer monthly payment plans with rates ranging from 0% to 36% and repayment periods from three months to five years.
While you may not pay interest with BNPL, many providers charge fees, including late fees.
BNPL financing is convenient, especially when it's a simple checkout option at online stores, but it can easily lead to overspending, so keep an eye on your budget.
If you have good or excellent credit, you may qualify for a 0% APR credit card. You won’t be charged interest if you pay the balance within the card’s introductory period, typically 15 to 21 months.
A 0% credit card can be cheaper in the short term, but if you carry a balance after the promotional period, you'll pay interest on the amount going forward. If you miss a payment or pay late during the introductory period, the credit card issuer can cancel your 0% rate and charge the ongoing rate on the balance.
Loan apps like Earnin offer cash advances from your paycheck with no mandatory fees or interest. Most apps request an optional tip and charge fees for fast funding.
The amounts available from loan apps can be from about $10 to $750. The apps will automatically withdraw repayment from your bank account on your next payday. Typical funding time is one to five days, though some apps will deposit funds immediately for a fee.
Between fees and the optional tip, borrowing even $100 can equate to an APR of over 300% on an advance, so it's best to consider cheaper options if possible.
To avoid having to borrow to cover holiday expenses, start planning early and use a budget (we recommend the 50/30/20 model) to get the most out of your paycheck. Saving even a small amount each payday throughout the year can be enough to give yourself the best gift: a debt-free holiday.
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