Christmas loans are not a specific kind of loan product. They are rather personal loans employed to meet Christmas-related expenses. Whether you need money for a vacation or decoration, you can apply for these loans from a direct lender. As long as you have a repaying capacity, your application will be easily approved.

Various lenders are out there who provide these loans, but they charge different interest rates. Some might charge higher rates than others, and that is because of how risky they perceive you. High interest rates will be charged if they find you a risky borrower.

Christmas loans are short-term loans. The maximum amount you can borrow is up to £3,000. However, people do not need this much of a loan as they are aimed at funding a gap in their savings. Normally, the borrowing amount is less than £1,000, and hence these loans are required to be discharged in one fell swoop. The repayment length is not more than a month, but if you tend to borrow a large amount of money, you will be required to settle the debt in fixed instalments.

In spite of the fact that Christmas is not an unexpected expenditure, many people find themselves short of their Christmas budget. As a result, they tend to borrow money from a direct lender, but loans from lenders carry high interest rates, and if your credit rating is already worse, interest rates will be even higher.

Ways to find affordable Christmas loans

Christmas loans can be a bit challenging to apply for at affordable interest rates. These loans are quite small and carry very high interest rates. Since these loans are paid back in full on the due date, they can be a bit risky. Most of the people fall behind on payments as they get short of cash to meet other essential expenses. Therefore, it becomes crucial to choose affordable interest rates. Here is how you can find Christmas loans at lower interest rates:

• Determine affordability

Maybe you need about £1,500, but before you borrow this much money, you should try to check your affordability. Do not forget that you have to pay interest on top of what you borrow. Paying this much money out of your pocket might cause you difficulty with meeting other essential expenses.

The first thing you need to do is to check your budget. Unless you have a repayment capacity, you should never borrow money. It is likely that your budget does not have wiggle room to repay this much money. If not, try to borrow less money. Borrowing more than your affordability might throw you in an ongoing cycle of debt.

Therefore, it is recommended that you carefully determine your repayment capacity. Make sure that you will be able to meet all your essential expenses without compromising on your budget.

• Have a decent credit rating

If you are looking to take out a personal loan in order to meet your Christmas-related expenses, you should try to have a decent credit report. A good credit score will help you borrow money at lower interest rates. You should carefully compare interest rates offered by different lenders and choose the one that offers you the best possible interest rate.

It is vital that you do not owe any other amount of money at the time of taking out a personal loan. This will increase your chances of getting approval for these loans. However, it does not mean that you cannot get approval for Christmas loans for bad credit in the UK

• Explore credit unions

Credit unions are more affordable than personal loans. If your credit history is not so perfect, and you may not be able to find the most affordable personal loan, you should consider borrowing money from a credit union. They can let you borrow money to meet Christmas-related expenses. They generally offer lower interest rates. The APR from credit unions is generally lower than the APR from personal loan lenders.

However, your borrowing decision should not be made based only on the APR. You should carefully analyse your repayment capacity. Credit unions offer guaranteed loans for bad credit in the UK, too, but interest rates will be slightly higher. If your credit rating is not up to scratch, you should compare loan deals from credit unions and direct lenders.

• Consider 0% interest credit cards

If you have a decent credit rating, you can purchase a 0% credit card. With the help of these cards, you can meet small emergency expenses without worrying about interest payments. In fact, if you make a large purchase, these cards will let you spread the cost over a few months.

If your credit score is not stellar, you will not be able to purchase a 0% interest card, but if you already own a card, you can use it to meet the small Christmas expenses. Make sure that you will not struggle to pay off the balance in full because you will be required to pay interest on top of what you borrow.

Loans that you must avoid

Here are the loans that you must avoid to meet Christmas-related expenses:

• Payday loans

Payday loans are very expensive loans. They should be avoided, no matter how much you need money. This is because these loans charge very high interest rates. The APR of these loans could be up to 1500%. If you still want to apply for these loans, make sure that you will not fall behind in your repayment capacity.

• Buy now, pay later

Some stores offer Buy Now Pay Later schemes, but they are expensive too. They charge fees in addition to high interest rates. If these schemes include a promotional period, you will be charged high interest rates after its end.

The bottom line

The first priority should be to have enough savings to meet Christmas expenses. If somehow your budget has fallen short of cash, you can consider a personal loan or a credit union loan. Make sure you do not borrow more than you can afford.