What Are Christmas Loans? – Forbes Advisor

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From holiday travel to presents under the tree, Christmas costs can add up fast. If you’re feeling strapped for cash, you might be considering a loan to get you through the season.

Christmas loans are a type of personal loan designed for holiday spending. You can borrow one to pay for gifts, travel or for pretty much any other legal purpose. You’ll receive a lump sum upfront, which you’ll pay back over time—typically with fixed monthly payments.

Your loan terms will vary by lender. Borrowers with good credit will typically qualify for better rates and more favorable terms, while borrowers with bad credit may have fewer options or receive higher interest rates.

Christmas loans can be unsecured or secured with collateral. To qualify for an unsecured loan, you’ll typically need good credit and sufficient income. The requirements to get a secured loan tend to be more flexible, but you risk losing your collateral if you can’t repay what you borrowed.

How Do Christmas Loans Work?

You can typically find Christmas loans from online lenders and credit unions. Many banks also offer personal loans, even if they don’t call them Christmas loans. Every lender determines its own rates, terms and application process. Because of these differences, it’s a good idea to shop around and compare options.

Some lenders require a minimum credit score, whereas others don’t check your credit at all. Lenders that don’t require a credit check typically charge high rates, however. In fact, these no-credit-check Christmas loans are essentially payday loans with fees equivalent to interest rates of 400% or higher.

By contrast, traditional personal loans typically cap their interest rates at 36%, with some lenders offering rates as low as 4% or 5% to creditworthy borrowers. While you may be drawn to the fast funding and flexibility of a no-credit-check Christmas loan, we don’t recommend them due to the high costs of borrowing.

How to Get a Christmas Loan

If you’re interested in borrowing a Christmas loan, follow these steps:

  1. Check your credit. Before taking out a loan, it’s useful to know what your credit score is and what’s on your credit report. The stronger your credit, the better rate you’ll likely get on a loan. You can check your credit score for free through various credit monitoring services and pull your credit reports through AnnualCreditReport.com
  2. Shop around. Compare multiple options before choosing a lender so you can find the best rates and terms. You can usually find Christmas loans from online lenders and credit unions. If you want to borrow from a credit union, keep in mind that you’ll need to become a member if you are approved and want to accept the loan.
  3. Estimate your loan costs. Before borrowing, use the Forbes Advisor personal loan calculator to determine your loan costs. As mentioned, some Christmas loans are simply payday loans with sky-high interest charges. Check to see if the costs of borrowing are acceptable before you take out a loan.
  4. Check your budget. Christmas loans are typically installment loans that you pay off with fixed monthly payments. Make sure you can afford the monthly payments before you borrow so you don’t risk overdraft fees on your bank account or late payments on your loan.
  5. Submit your application. If you’ve found a loan offer you like, you can submit an application. You’ll need to provide personal information and any documentation the lender requires. The lender may or may not run a hard credit inquiry, which could temporarily ding your credit score by a few points.
  6. Keep up with payments. If you’re approved for the loan, check to see when your first payment is due. It may make sense to set up automatic payments from your bank account (if the lender hasn’t already) so you don’t fall behind; many lenders offer autopay rate discounts. Make sure you have enough cash in your account to avoid overdraft fees.

How to Get a Christmas Loan With Bad Credit

Some online lenders offer Christmas loans for bad credit. In fact, certain kinds of Christmas loans don’t require any credit check at all. As mentioned, however, these no-credit-check loans will likely be costly.

Additionally, while these loans can offer fast, easy-to-procure funding in an emergency, they don’t provide a long-term financial solution. According to the Consumer Financial Protection Bureau (CFPB), consumers who take out an unaffordable payday loan often end up taking out another one to pay it back, thereby getting stuck in a debt trap.

Pros and Cons of Christmas Loans

Before getting a Christmas loan to cover your holiday spending, consider these pros and cons:

Pros of Christmas Loans

  • Fast funding: Some Christmas loan lenders promise funding within one business day.
  • Flexible purpose: You can use a Christmas loan to cover the costs of gifts, travel or any other holiday expenses.
  • Fixed payments and interest rates: Many Christmas loans have fixed rates and monthly payments, so you don’t have to worry about your bills changing over time.

Cons of Christmas Loans

  • Potentially high interest rates: The loan might come with hefty interest charges, causing your Christmas expenses to be a lot higher over the long run than they were at the time of purchase.
  • May be a payday loan: Some online Christmas loans are simply payday loans with a different label. These loans often come with fees equivalent to annual percentage rates (APRs) of 400% or higher. Plus, a lender might require you to provide your bank account information upfront so it can make automatic withdrawals, regardless of whether you have enough in your account or not.
  • Could lose collateral: If you opt for a secured Christmas loan and can’t afford to repay it, you could lose whatever asset you pledged as collateral.

Other Options for Purchasing Holiday Gifts

Because Christmas loans can be expensive, it’s worth exploring alternative options. Here are some other types of financing to consider:

Buy Now, Pay Later

Buy now, pay later (BNPL) programs have become increasingly popular in recent years. As the name suggests, BNPL options let you purchase an item immediately, then pay it off in installments over time.

Some BNPL programs offer 0% interest. Often, they require you to pay 25% of the item’s price upfront, followed by three additional payments every two weeks. Other BNPL options offer longer repayment terms, though they may also charge interest.

You might be able to choose BNPL at checkout, or you could use a BNPL app to finance your purchases. Make sure to read over the terms and conditions of the contract before you proceed.

Credit Cards

Credit cards are another option for covering your Christmas spending. Keep in mind that credit cards can have high APRs if you don’t pay off your balance in full every month. The average APR is 15.13% as of May 2022, according to the Federal Reserve.

However, you may be able to qualify for a new credit card with a promotional period of 0% APR that spans anywhere from 12 to 24 months, depending on the card. This means you could avoid interest charges if you repay your balance before this period ends.

Keep in mind, however, that interest charges will kick in when the promotional period comes to an end. Be careful about charging more than you can afford to pay off within the specified time frame.


Perhaps the best way to afford the holiday season is to avoid taking on debt altogether. Instead of paying monthly installments on a loan after Christmas, consider setting up automatic transfers from your checking account to a separate holiday savings account in the months leading up to Christmas.

Also be sure to come up with a realistic spending plan that fits your budget. If you find yourself spending past your means, check back in with your budget as a reminder of what you can afford this year. By setting limits upfront, you may be able to make it through the holiday season without carrying debt into the new year.

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