Borrowing for Christmas – your options explained

The festive season is upon us, and amidst all the merriment there are many additional costs that crop up as we each celebrate the holidays in our own way.

According to a 2019 YouGov poll, the average Brit spends around £1,116 on Christmas, with £381.60 going towards presents alone. That’s undeniably a lot of money, but things don’t look set to change this year with people more eager than ever to put 2020 behind them and celebrate in style. It won’t come easy this time, though, as many have been forced to tighten the purse strings owing to a lack of work and tough times brought on by the Coronavirus pandemic.

If you’re trying to prop up your finances in time for Christmas, there are lots of options available to you. Here are some of the best and most popular choices.

1.  Arrange an overdraft

Arranging an overdraft for your existing bank account might be among the most convenient ways to access a little extra money, but it could also be one of the most expensive.

Whilst certain bank accounts offer 0% interest on overdrafts under a certain limit, the majority apply some form of interest or charge to both planned and unplanned borrowing. It was only in April of 2020 that the Financial Conduct Authority (FCA) prohibited banks from charging higher interest rates for unarranged overdrafts than for those that are agreed in advice, but some providers have already responded by raising their interest rates.

Ultimately, an arranged overdraft could help you to buy Christmas presents in a pinch – but don’t expect the borrowing to come cheap.

2.  Apply for a credit card

There are quite literally hundreds of credit cards on offer to UK consumers, and many people use this form of borrowing to support increased spending for events including birthdays and Christmas.

One of the most significant advantages of taking out a credit card is that doing so can make it easier to shop online safely. Credit cards are a good form of protection for consumers simply because they offer a good standard of protection against fraud. If the worst happens and your card details are compromised, you won’t be liable for unauthorised charges and can dispute any spurious transactions. Whilst the same dispute process is available to debit card users, you could be temporarily left out of pocket as the bank investigate the ins and outs of your claim.

Putting fraud concerns to one side, credit cards are relatively easy to apply for and some even come with an interest free period for the first few months. That being said, they are more of a long-term solution (since you’ll be setting up a permanent line of credit) meaning that this may not be the ideal option if you are just looking to top up your Christmas spending fund.

3.  Take out a short-term loan

Falling somewhere between the convenience of a bank overdraft and the broad selection of credit cards, taking out a short-term loan could help you to cover the costs of Christmas without tying yourself into a long-term credit agreement.

A handy way to access extra cash in a pinch, personal loans are offered by a huge number of direct lenders at competitive rates. To make it even easier to access a loan to pay for Christmas, online credit brokers such as Little Loans make it simple to find the direct lender most likely to approve your application. This means that you won’t have to fill out application after application with no indication of whether you’re heading in the right financial direction.

Covering the costs of Christmas

All in all, UK consumers have quite a bit of choice when it comes to borrowing money. With Christmas just around the corner, taking out a short-term personal loan or agreeing to a bank overdraft could help you to handle the extra costs that come with this season. Just remember not to leave your shopping to the last minute!

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.