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.
Ronita Choudhuri-Wade
Chanell Alexander
By Chanell Alexander and  Ronita Choudhuri-Wade 
Updated
Edited by Kim Lowe

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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 loans can help cover those purchases, but there may be 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 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.

Where can I get a holiday loan?

Online lenders

Online lenders offer holiday 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 have a total interest cost of $233. The same loan with an APR of 35.99% will cost about $417 in interest.

If an online loan is your best option, pre-qualify with multiple lenders to find the best rate and terms, and make a plan to pay off your loan.

See if you pre-qualify for a personal loan – without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.

on NerdWallet

Banks

Bank loans can have attractive rates and perks for existing customers, and many 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, and some may require you to apply in person.

PNC provides loans to non-customers, but includes perks for account holders, while Wells Fargo offers a relationship discount to customers with qualifying checking accounts.

Credit unions

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.

Personal loans from our partners

SoFi logo
Check Rate

on SoFi

SoFi

5.0

NerdWallet rating 
SoFi logo

5.0

NerdWallet rating 
APR 

8.99-29.99%

Loan amount 

$5,000 - $100,000

Check Rate

on SoFi

Lightstream logo
Check Rate

on LightStream

LightStream

4.5

NerdWallet rating 
Lightstream logo

4.5

NerdWallet rating 
APR 

7.99-25.49%

Loan amount 

$5,000 - $100,000

Check Rate

on LightStream

OneMain logo
Check Rate

on OneMain Financial

OneMain Financial

3.5

NerdWallet rating 
OneMain logo

3.5

NerdWallet rating 
APR 

18.0-35.99%

Loan amount 

$1,500 - $20,000

Check Rate

on OneMain Financial

Upstart logo
Check Rate

on Upstart

Upstart

4.5

NerdWallet rating 
Upstart logo

4.5

NerdWallet rating 
APR 

7.8-35.99%

Loan amount 

$1,000 - $50,000

Check Rate

on Upstart

Avant logo
Check Rate

on Avant

Avant

4.0

NerdWallet rating 
Avant logo

4.0

NerdWallet rating 
APR 

9.95-35.99%

Loan amount 

$2,000 - $35,000

Check Rate

on Avant

Discover logo
Check Rate

on Discover

Discover

5.0

NerdWallet rating 
Discover logo

5.0

NerdWallet rating 
APR 

7.99-24.99%

Loan amount 

$2,500 - $40,000

Check Rate

on Discover

Other holiday financing options

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 payment plans vary by provider, but most offer zero-interest “pay-in-four” plans that divide your purchase into four equal installments, each due two weeks apart, with the first payment due immediately.

Some BNPL companies, including Affirm and Klarna, 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 companies charge fees, including late or missed payment fees.

Buy now, pay later financing is convenient, especially when it's a simple checkout option at online stores, but it can easily lead to overspending.

0% APR credit card

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 or 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

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.

Compare holiday financing options

Option

Cost

Repayment term

Pros and cons

6% to 36% APR.

Typically 2 to 7 years.

  • Pro: Fast funding.

  • Con: APRs can be high for bad-credit borrowers.

0% to 36% APR.

Varies from 3 months to 5 years.

  • Pro: Pay-in-four plans are interest-free.

  • Con: Potential for late fees and overspending.

17% to 30% after a 0% APR introductory period.

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.

Optional fees for fast funding and tips vary.

Next payday.

  • Pro: Can receive funds instantly or same-day.

  • Con: Charges a fee for instant access.

7% to 30% 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 391%, 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

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 yield the necessary funds to give yourself the best gift: a debt-free holiday.

See if you pre-qualify for a personal loan – without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.

on NerdWallet

Comparing options? See if you pre-qualify for a personal loan - without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.

on NerdWallet

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