As the days get shorter and the nights get colder, we may start to think about holiday things. Christmas is coming up, which should be a reason to be happy and look forward to good times with family. However, for many of us, this time of year brings to mind something less pleasant. Every year, the holidays cost more and more, and if money is already tight, we might worry about how we'll pay for everything.
People often use credit cards to pay for gifts, food, drinks, and socialising, with the plan to pay them off in the new year. However, this kind of credit can be pretty expensive, especially if your plans to pay off early don't work out and you end up carrying the debt for a long time.
You could also use an overdraft at the bank and go "into the red" during the holiday season. This is a convenient choice, but it doesn't come cheap. An overdraft is often expensive to keep up because you have to pay both a monthly fee and interest. Because of this, an overdraft can become almost as expensive as a credit card.
There's also the risk that if you take out a lot of money from your account and get close to the limit, you won't have much money left over if something unexpected comes up in January. Also, once you have an overdraft, it can be hard to get out of it, especially if your normal budget doesn't leave you with much extra cash each month.
So, how can this be fixed? Are we doomed to spend Christmas alone and miserable on bread and water? Well, maybe the answer is a personal loan. Taking out a loan can give you the money you need to get through the holidays without leaving you broke for the rest of the year if you do it carefully and with a clear goal in mind.
First of all, you can take advantage of the fierce competition between loan providers by shopping around. If you do this, you should be able to get credit at a rate that is much, much lower than what you would pay with a credit card or an overdraft. This means that your monthly payments can be less, or you can pay off the debt much faster.
Second, most loans are set up with a fixed rate, so you'll know exactly how much you need to pay back each month. This is different from credit card and overdraft rates, which can change from month to month and make it hard to plan your budget.
Lastly, most personal loans are paid back over a certain amount of time, after which your debt is gone. When you have a credit card, it can be tempting to only make the minimum payments, which don't even cover the interest charges and leave the bulk of your debt unpaid. This is a sure way to make the credit card company rich while keeping the weight of your debt on your shoulders.
So, is a personal loan the answer you need? You should never take out credit without thinking about how it will affect your finances in the future. If possible, you should also try to live within your means. But if you decide that getting credit is the best way to go, a personal loan is often the best and cheapest choice.
