Should You Use a Personal Loan for Holiday Shopping?

A woman pushing a shopping cart full of gifts

The holiday season is a time for giving, but the costs can add up quickly. Whether it's buying gifts for loved ones, hosting a big holiday dinner, or taking a trip to visit family, you might find yourself needing extra money. One option to consider is using a personal loan. But is it the right choice for you?

Pros of Using a Personal Loan for Holiday Shopping

  1. Fast Access to Money: If you need money quickly, personal loans can be a great option. You might find lenders who transfer the funds directly to your bank account, maybe even within a day or two after you're approved. Some lending platforms, such as Personify Financial, transfer the funds directly to your bank account in as little as 24 hours. This quick funding allows you to start shopping right away, making it a convenient option for those who need fast cash.
  2. You May Be Able to Borrow Smaller Amounts: You may be able to find lower minimum loan amounts than other options. This means you could borrow just enough to cover your holiday costs, without taking on unnecessary debt. Just be sure to calculate how much you actually need before applying, so you’re not borrowing more than necessary.
  3. You May Find Lower Monthly Payments for Longer Terms: Some lenders allow you to choose a repayment term that suits your budget. If you need smaller monthly payments, you can opt for a longer repayment period. This can help spread out the repayment and make your payments more manageable during the holiday season, without the pressure of higher monthly payments.
  4. Predictable Payments: One of the advantages of a personal loan is the payments on a fixed rate personal loan are predictable. Since personal loans may have fixed interest rates and set monthly payments, you’ll always know exactly how much you need to pay each month. This can make budgeting easier because you won’t have to worry about fluctuating payments.
  5. Less Than Perfect Credit Score: If you have a less-than-prefect credit score, you might still qualify for a personal loan, which can be a great option for covering holiday expenses. Some lenders have different considerations for information beyond credit scores and are able to offer personal loans for people with less-than-perfect-credit. These loans can help you get the funds you need while also providing an opportunity to improve your credit when you make timely payments, if the lender you choose reports to credit agencies.
     

Cons of Using a Personal Loan for Holiday Shopping

  1. Possibly Higher Interest Rates: While the interest rates on personal loans may not be as high as other short-term credit options, they might not be the lowest option available to you. As with any financial decision, you may want to take some time to assess your options before making a decision, as sometimes there are trade-offs such as odds of approval and speed with which you can access funds.
  2. Prepayment Fees: Paying off your loan early sounds like a good idea, but some lenders charge a fee for doing so. This is called a prepayment fee, and it’s designed to make up for the interest the lender would lose if you repay the loan early. Loans found on the Personify Financial platform do not have a prepayment fee.
  3. Missing Payments Can Hurt Your Credit: Missing a payment may negatively impact your credit score, if the lender reports to credit reporting agencies. So it’s important to be sure you can make every payment on time. If you’re worried about missing a payment, it might be a good idea to set up automatic payments. Some lenders even offer a small discount if you enroll in automatic payments.
     

Bottom Line: Should You Use a Personal Loan for Holiday Shopping?
Personal loans can be a great way to get the extra money you need for holiday shopping, especially if you need quick access to cash. Before taking out a loan, make sure you only borrow what you need and that you have a solid plan to pay it back. And while there are a few things to consider, a personal loan could be a helpful tool for making your holidays brighter without financial stress.

Disclaimer: The material presented here is for informational purposes only and does not represent specific financial advice to you or your circumstances personally.
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