The holidays can be an incredibly expensive time of year. It’s not just that you’re obliged to spend quite a bit on those around you, but rather that it’s a time when you may feel the most generous. If you’re short on cash, though, you might feel it tough to participate in the season. This is perhaps why so many choose to get a loan for Christmas, especially when they know they can easily make the payments later. Before you choose your holiday loan, though, you should read the information below.
What is a Christmas Loan?
Before you start your journey toward getting funded, you might want to learn a bit more about Christmas loans in general. This type of money is popular during the holiday season, but the name can make it seem like it’s a bit more of a special product than reality bears out. In fact, taking out this type of loan is no different than taking out one of the dozens of other types of personal loans.
When you take out this type of loan, what you’re really looking to do is to get more cash for the holidays. The method by which you’ll do this is taking out a personal loan. This loan can come in a few different forms, but the short version of the process is that, if approved, you’re going to borrow money from a lending institution with the goal of paying back that loan (and its accrued interest) over a period of time. There are dozens of different products that can be packaged under the label of being Christmas loans, but they generally work in the same way.
What you’re really getting involved with here is the world of personal loans. Personal loans used to be much more popular in the days of smaller banks and easy lending, but they’re a relative rarity today. Personal loans have always been meant to help individuals receive up to $40,000. They’re similar in many ways to traditional loans that you receive from the bank, albeit at higher interest rates and they typically have a somewhat more involved process of vetting the individual applicants. Personal loans are rarely available from traditional banks and are instead offered by companies that specialize in this type of loan.
When you apply for a loan of this type, you’ll likely be directed on your paperwork as to why you’re asking for a loan. The reason why this loan gets a unique name is that you’ll generally list your reason for applying as holiday spending or as being holiday-related.
The way that holiday loans differ from personal loans is not so much in how the lender views them, but rather in how the consumer uses them. As we mentioned, a holiday loan is just another name for a personal loan. However, since the borrower is using the funds for holiday-related purposes, the money might be paid back sooner than it would be for a loan used for something more long term. This is, of course, not a surety, as some borrowers will take just as long to pay back this type of funding as any other.
Sources of Funding
If you want a Christmas loan, you’re going to have to visit a personal lender. There are many types of funding that you might be able to get, so it can feel more than a little overwhelming when you first get started. Breaking down the types of lenders can help you to figure out what might be the best fit for you and, importantly, the types of lenders that might be most likely to help you get a loan when it is the most needed. Below are some of the most common sources of funding.
Traditional Personal Lenders
Traditional personal lenders operate out of brick and mortar storefronts, though an increasing number of them have online presences in the modern era. These are the big lenders that tend to work with those who have slightly-higher credit scores, but also tend to have slightly lower interest rates. If you’re looking for the type of Christmas loans that your parents might have taken out, you’re looking at a loan from one of these institutions.
It should be noted that there is a big difference between a personal lender and other types of providers. Personal lenders tend to give out more money and over more extended periods, though with the caveat that they’re going to be much more discerning about to whom they lend their money. The good news for most borrowers, though, is that they charge an interest rate that’s far closer to what you’d find on a traditional loan. Brick and mortar lenders tend to be a little slower and tend to be less forgiving than online lenders, but they are a solid choice if you have the time to spare.
Examples: OneMain Financial
Online Personal Lenders
Online personal lenders have taken the reins of the industry over from the brick and mortar lenders, not only outnumbering them by a significant factor but also radically changing the way that loans are given out. These lenders will allow you to submit all of your information online and may come back to you with an approval and a loan offer in a relatively short amount of time. The sheer number of online lenders also makes it easier to find a lender who will give you a loan even when others won’t talk to you.
The interesting thing about these online lenders is that they’re quickly becoming the norm. Not only can you get loan products from a number of companies that were born online, but several of the lenders are owned by the same major banks that no longer give out personal loans in their branches. This gives online lending a certain amount of safety that you might not expect from shopping online, coupled with the type of flexibility that you’ve probably come to cherish from those companies that exist only on the internet.
Examples: LendingTree, LightStream, Discover
Micro-Loans are a relatively new concept that was more or less born on the Internet. Instead of working through a bank or a large financial company, you’ll be working with private individuals who have come together to fund loans. The goal here is generally to get money to those who need it and to allow those who have money to put it to work in ways that are not possible through the traditional system. Micro-loans are becoming more popular for personal loans, especially among those who have the means to pay back the money but not necessarily the credit history to prove it.
Merit-based loans are a big deal in the micro-loan industry. The idea is that money should go to people who deserve to borrow, but who might be too risky for traditional institutions. Because the full amount of the loan isn’t being put up by any one person, there’s less of a risk to each investor. It does tend to take a little longer for these platforms to approve loans and they almost always require more paperwork than average, but they can be a great lifeline for those who cannot get a loan from any other source.