Need cash for your holiday shopping? Here are 3 ways to strategically borrow

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If you need to borrow money for the holidays, read this guide to learn more about your loan options. (iStock)

The holiday season is a time of year when Americans get together with loved ones for Thanksgiving, Hanukkah, and Christmas, to name a few. Often, however, consumers can go too far by racking up credit card debt for vacation-related expenses, which can lead to financial hardship for much of the New Year.

When you need the extra cash to cover Christmas presents, decorations, and other unforeseen expenses, it’s important to compare loan options so that you end up with manageable payments after the vacation is over.

Compare your holiday purchase financing options in the sections below, including credit cards and holiday loans. You can compare the interest rates of a wide variety of financial products on Credible without affecting your credit score.

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3 ways to borrow money for holiday shopping

The best way to pay for anything on your gift list is to save up front, but it can be difficult to plan for extra spending while on vacation. If you need to borrow money, here are some credit options:

  1. 0% APR credit cards
  2. Buy now, pay financing later
  3. Vacation loans

Compare the types of financing in the sections below.

AVERAGE INTEREST RATES ON PERSONAL LOANS FALL TO LOW LEVEL IN 2021, FED REPORTS

1.0% APR credit cards

Credit cards can be an expensive way to fund your holiday shopping list if you only plan on making the minimum payments.

However, you may be able to cover additional expenses without accumulating high interest credit card debt by taking advantage of a 0% APR introductory period. These promotions provide credit-worthy borrowers with up to 18 months of interest-free credit card spending.

Keep in mind that at the end of the promotional period, you will pay interest on the remaining balance. But if you plan accordingly, it is possible to pay off all of your vacation debt before the 0% APR period expires.

You can compare a variety of credit cards for free on Credible. Many of these credit card issuers offer interest-free offers to applicants with good credit.

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2. Buy now, pay finance later

Some large online retailers offer a third-party financing option called “buy now, pay later” (BNPL). Companies like Affirm, Afterpay, and Quadpay allow you to split your purchase into multiple installments at checkout.

The terms and conditions vary considerably from one BNPL company to another. You may be charged origination fees, late penalties, and interest rates of up to 30% APR. While some companies do not perform a credit check, others rely on credit approval.

If you decide to use BNPL financing to pay for your vacation expenses, be sure to read the agreement carefully so you don’t end up with unfavorable loan terms.

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3. Vacation loans

A vacation loan is simply a personal loan that is used to finance vacation purchases. Personal loans are lump sum loans that you pay off at a fixed interest rate in predictable monthly installments over a specified period of months or years.

Compared to credit cards, personal loans have lower interest rates. According to the Federal Reserve, the average interest rate on assessed credit card accounts was 17.14% in the third quarter of 2021. In comparison, the average rate for a two-year personal loan was 9.39% for the same period, which is close to its historic low.

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Since these loans are generally unsecured and require no collateral, personal lenders determine your interest rate and eligibility based on your creditworthiness. Borrowers with good credit will be entitled to the lowest possible rates, while those with bad credit may be offered relatively high rates.

Personal loan rates also depend on the amount and length of the loan, so it’s important to pre-qualify to check your offers before choosing a bank or lender. You can compare the rates of several lenders at once without affecting your credit score on Credible, so you can rest assured that you are getting the best possible deal for your financial situation.

CREDIT CARD INTEREST RATES RISE TO ALMOST HIGH ALL THE TIME, FED DATA SHOWS

Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.


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