Should You Take Out a Personal Loan for the Holidays?
’Tis the season to maximize your holiday budget!
Perhaps your holiday plans including flying to somewhere special to meet with friends and family, or maybe you’re planning to host a party for those you love. No matter how and where you’ll celebrate the season, you’ll want to decorate, create memorable meals, and buy exactly the right presents.
The problem, as you know, is that this can get expensive.
Some years you’ve saved up enough money to pay holiday-related expenses without going into debt. Other years, unanticipated expenses cause challenges. Still other years, you want to buy the present of a lifetime and that costs extra money—whether that’s a cruise, an engagement ring, or something else entirely.
To help, we’ll share ways to get extra value for your dollars during this special time of year. Here are two initial planning tips: First, don’t try to create a budget that’s so tight it isn’t doable. Next, don’t forget to include smaller items, whether that’s charitable giving (though that could be a bigger-ticket item, too!) or cookie exchanges.
Now, here are more seasonal planning tips, including when holiday loans might make good sense.
Creating a Holiday Season Budget
Perhaps you already know how you want to celebrate this particular holiday season, including the types of gifts you want to buy. If so, then it really comes down to totaling up your anticipated costs and comparing that to the money you have set aside or anticipate will come between now and then.
Is there a gap? If so, what is the estimated amount of that gap?
To close this gap, options include:
• Eliminating or reducing some items on your list (that’s especially hard to do when you want to surprise a loved one, but it’s definitely an option)
• Shopping around for better prices for what’s on your list (this might allow you to keep everything on the list)
• Using your credit cards to make up the difference
• Taking out a holiday personal loan
As something to consider for next holiday season, take what you plan on spending this holiday season, then divide it by 40 (for the 40 weeks of the year before holiday shopping). You could then make weekly deposits to a savings account or even a cash management account like SoFi Money. By the time you start thinking about how to celebrate next year, you could have the money you need to celebrate without worrying as much about the cost.
Trimming the List (or at Least the Cost)
If you can cut out or reduce the number of items on your list without significantly affecting your plans to celebrate the holiday season, that will almost certainly lower the costs. From there, it may make sense to try to trim the costs of your remaining list whenever possible.
First, you can start shopping early so you can take advantage of sales and promotions like Black Friday or Cyber Week, keeping in mind that just because a retailer calls something a sale doesn’t always mean it’s the best price you can get (in other words, keep an eye out for sales and discounts throughout the holiday season).
You may also consider using a price comparison app that allows you to see what various retailers are charging for the same product. These types of apps typically give you a list of retailers carrying what you want, along with the current prices.
If you’re in a store and are wondering if the item would be cheaper on Amazon or another online retailer, there’s an app for that , too. As another strategy, type “holiday coupon codes” into Google and explore what shows up in the search results.
Check thrift shops, too, as many of them get overages of certain items from the previous season, such as decorations and gift wrap. And always remember that even the best “deal” could still be costing your money, so here are a few tips to help you stay on top of your holiday spending:
• Stick to your budget
• Write down what you spend
• Mark when you went over your budget on a particular item
• Figure out where you can trim the budget elsewhere to make up that amount
• Avoid extras, perhaps frilly bows, paying for a photo with Santa when you could do something equally as good yourself, personalized cards and so forth
• Know when to stop shopping
To save even more for next year, plan to shop after the end of this holiday season to pick up bargains that may be 75%, even 90% off. Put these gifts, decorations, wrapping, cards and more away into safe storage so you’ve got a great start for next season.
You may also want to explore less expensive alternatives to your annual traditions. For example, instead of preparing an elegant (expensive!) meal for your neighborhood’s holiday get-together, consider suggesting a new tradition where everyone brings a dish that reminds them of their childhood celebrations.
Sure, you might need to work out the kinks the first time so that you end up with a balanced meal (rather than eight cranberry salads, but no main dish!), but that’s easy enough to do and can become a cherished tradition.
Get a new white tablecloth each year and have attendees sign their names in green, red, and gold markers and draw holiday-themed images. And, if you’re tired of your own holiday decorations, ask each party attendee to bring some, then swap.
You can find even more ways to keep your bank account merry and bright with 25 holiday money-saving suggestions including:
• DIY with caution: Yes, making your own gifts can save you money, but costs of materials can run higher than you expected.
• Give of your time: What parents on your list would love free babysitting services? What pet owners would appreciate dog walking services? Are you a photographer? An experienced cook?
• Watch for attractive buy one/get one free offers.
• If ordering presents, look for ones with free shipping .
• Cart abandon! Sometimes, if you put items in your online shopping cart but don’t complete the purchase, you can receive coupons to encourage you to finish the purchase. You’ll probably need to register with whatever site for that to be possible.
• Enjoy free events in your community, easily found through Google searches. Go snow sledding, if possible, and drive around to see holiday lights on homes, in parks, and so forth. Take family photos as you enjoy these free events and make hot chocolate for when you return home. Play your favorite holiday songs while you sip and snack.
Finally, check to see if you’ve accumulated reward points on credit cards or if you have gift cards that have a remaining balance—you may have some extra holiday cash you weren’t expecting!
Short on Cash During the Holiday Season?
If, after reviewing these tips, you realize you’ll still be short on cash to celebrate the holiday season, consider how short. If, for example, you know that you can pay off a balance in January because of your end-of-the-year bonus, then using your credit cards in December could be a smart short-term strategy.
Or maybe you’re taking advantage of a zero-interest credit card to make a large purchase, but you have the cash to pay off the balance before any credit card interest applies and this purchase fits into your overall budget. Again, that is a logical strategy.
If, however, purchases that you’ll put on your credit cards will just add to the consumer debt you already have, and it doesn’t seem likely that you’ll be able to pay off the balances any time soon, then it might make sense to consider another strategy: a personal loan for holiday cash.
Holiday Loans at SoFi
There are numerous reasons why it can make better sense to use a low interest rate personal loan for holiday purchases, rather than high interest credit cards—including potentially reducing the amount of interest you’ll pay back over the life of the loan. To estimate what you can save, you can use a tool like our personal loan calculator.
Other benefits of personal loans at SoFi include:
• No origination fees.
• No prepayment penalties, so you can pay off the loan early, saving even more money in interest.
• Helping you break the vicious credit card cycle, if you need to do so.
As an online lender, we can provide benefits you typically won’t get at old-school banks. If, for example, you lose your job, our Career Team can help you to find a new one, temporarily pausing your SoFi personal loan payments during your search. If you’re hesitant to put holiday gifts on a credit card this year, keep in mind that there are other options out there—like SoFi personal loans.
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