What is the best loan to use to pay for Christmas?

Christmas is an expensive time for most people. We might start shopping early but with so many things to pay for, it can be really difficult to spread the cost and therefore we can often feel rather overwhelmed. This means that many people will turn to a loan in order to pay for it. This can be done in many ways and some of the options are discussed below.

Credit cards – a credit card is a really convenient way to pay for things. You can use them in most shops which means that you should be able to buy everything that you need using one. You can get the money instantly if you have already got a card and therefore do not have to wait for a loan to be arranged. However, a credit card can be expensive, so if you do not repay the full balance each month, you will find that the interest can really add up. The fact that you do not have regular repayments can also mean that it is easier not to repay it and therefore it becomes more and more expensive.

Store cards – a store card works in a similar way to a credit card but you are restricted in being only able to spend it in certain shops. These can be handy as they will allow you to have extra credit on top of a credit card if you already have one or allow you to get things on loan from your favourite shop. They can be more expensive than credit cards though and because you can only use them in one shop, you may be tempted to buy everything there rather than comparing prices and seeing if you can find the same things elsewhere.

Overdraft – an overdraft is taken when you spend more money from your current account than you have in there. This is done through using a debit card, paying by cheque or drawing out cash. Overdrafts can be arranged with the bank and will have a limit. It is possible to borrow more than the arranged amount though and this is called an unauthorised overdraft. An overdraft is repaid automatically when money goes into your bank account. Problems with an overdraft are that they are expensive. They tend to be dearer than most other types of lending, particularly unauthorised overdrafts which are cheaper than authorised ones. They are really designed just to be used in emergencies and so you need to be careful if you use them too often and for too long.

Catalogue shopping – many people will buy items form catalogues and then pay for them over a series of months or weeks. This can help to spread the payments and makes things ore easily affordable. Some will charge extra if you pay like this and others will not. However, if you are not charged extra, then the cost is incorporated into the price of the items. This means that they can be expensive compared to other retailers. It is wise to compare prices and see whether you feel this is a good way to buy things compared with other methods.

Savings clubs – there are some companies that run savings clubs over the year. You put away a bit of money each week or month and then when Christmas draws near you can use the money to buy things from their catalogue. This is often done with hampers and food type gifts. This does help to spread the cost, but the fact that you are only limited to buying items form their catalogue can means that you may be paying more than you would if you went to a supermarket or shop. It could be better to save regularly each month into a savings account and then use the money to buy from wherever you wish. You can check by comparing their prices and seeing what interest you could get if you kept that money in the bank.

Personal loan – a personal loan is another way that you can borrow money. You arrange these with a lender and so they may take a little longer to organise than some of the other methods mentioned. However, they can be a lot cheaper, which means they could be a better option. However, they will be for a fixed amount of money, perhaps £1,000. This means that it could be more than need. It is wise to usually not borrow more than you need as you could end up paying more in interest than necessary. However, it is worth comparing the costs to check.
So, as in all decisions you will need to compare prices and terms to see which type of loan might be best for you. It will depend on how much you need to borrow, how quickly you will be able to afford to pay it back and your credit rating.

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