Should You Borrow A Christmas Loan?

It’s hard to believe that Christmas is just a few weeks away. In the past, you may have been tempted to take on more debt than you should to cover the cost of presents, decorations, travel, clothing, and more. 

But this year, things are different, and your credit score may not be the same as it was before. Even if your credit is in tip-top shape, you should rethink if going all-out is the right move for your finances. 

You may be tempted to apply for a Christmas loan, which is nothing more than a personal loan meant for borrowers who need (or want) extra spending money during the holidays. If your credit is good to excellent, you should think twice about these. If your score is 580 or lower, you should avoid them at all costs. The Motley Fool explains why.

Some Christmas Loans Are Actually Payday Loans

If you have bad credit, you know that getting approved for anything is difficult. Finding a legitimate lender that is willing to approve borrowers with poor credit can be a challenge. 

During the holidays, some creditors promote Christmas loans for people with bad credit, which can be payday loans in disguise. Because of how the lender calculates interest, you could get hit with an interest rate of 400% — or higher.

Even Loans From Reputable Lenders Are Costly

Suppose you do find a reputable creditor that offers loans to consumers with bad credit. That’s great, but the downside is that you have to pay an annual APR of 35.99%. Imagine you want to travel this season and also spoil your loved ones. You take out a $2,000 loan with a 24-month term. 

In this scenario, you pay $113 each month, plus $712 in total interest, meaning the original $2,000 loan is actually $2,712. Additionally, with a 24-month term, you would be paying off the same loan for the next two Christmases.  

Extra Fees Will Trim Your Budget

It doesn’t matter whether you receive a Christmas loan from a bank, a credit union, or a payday loan lender. All of these institutions will probably charge you costly fees that take money away from your Christmas budget.

You Risk Hurting Your Credit Score

If you’re considering borrowing a Christmas loan, ask yourself whether it’s worth a possible hit to your credit score. If you miss a payment, your score will tumble, and you’ll have even more trouble getting approved down the road.

You’re Taking On More Debt

Taking a Christmas loan means taking on more debt. Is that how you want to start the next year? If you’re already dealing with financial obstacles, the last thing you want is the added stress of paying back an expensive loan.

Options Besides Christmas Loans

Rather than applying for a Christmas loan, The Motley Fool offers a few other options worth considering:


Figure out how many paychecks you’ll get before Christmas and determine how much you can realistically save for holiday expenses. Start by recording what you can afford and divide those purchases by the number of remaining paychecks to find how much you can take out of your upcoming wages. You might not have as much money as you did in previous years, but you’ll still be able to cover your holiday expenses without digging yourself into a financial hole.

Consider A Side Gig

The holidays may be the busiest time of the year, but if you can manage, you might consider a side hustle to pad your budget. Market your skills to make some extra cash, drive for a rideshare company, nanny, dogsit, shovel snow, or string Christmas lights. Look for job opportunities on freelance sites like Fiverr or Upwork and local Facebook groups for your community.

Ask A Family Member For Help

If you absolutely need the money, you should consider asking a family member for help instead of borrowing a Christmas loan. Only ask for what you know you can return in a reasonable time frame and work out a payment plan with your relative. Make sure you get everything in writing and that you both understand the terms of the agreement. Keep in mind that anyone who lends you this cash is risking a lot. You don’t want to break their trust by failing to pay them back.


  • George, Dana. “Poor Credit? Don’t Fall for a Christmas Loan.” The Motley Fool, 18 Nov. 2020,
Ian Schindler