Credit Union and Bank Resources

Credit Union and Bank Resources

How Holiday Loans Can Become Long Term Financial Challenges

The Holidays can be a wonderful time of year. Everyone is busy shopping and getting in the Christmas cheer. Well, that can be great if you have the money to do it. Many people today are not in a good financial situation to where they can afford to go shopping for Christmas. The holidays have really put a huge amount of pressure on people to buy gifts. Some people even dread the holidays.

shopping

Because of this huge pressure to buy gifts during the holidays, people begin to panic and search for ways to make it happen. So what do they do? They begin to search for loans. They are already in a financial bind before they get a loan or they wouldn’t need a loan. Around October loan companies conveniently start mailing and advertising loans to help pay for the holidays. They know exactly what to say to draw people into getting a loan. Who couldn’t use some extra cash at Christmas time right?

Loan companies will say things like “Looking for a little extra holiday cash? How about $3500?” They also talk about how getting the loan will take so much stress off your holiday spending. Certain companies offer different amounts. When a loan company offers $1000, $2500, etc. it’s really hard to pass up. The problem is most of these loans are short-term unsecured loans with high interest. It all looks great at the time, but when the holidays are over the payment becomes due.

Most people will jump at the loans with $1000 or more.
A lot of these loans are in the form of payday loans. Yes they are easily obtained but they have to be repaid by the next pay period. Traditional loans are also available that can have lower interest rates and they give you more time to repay the loan. So here’s the thing. Christmas has a real build up and then it’s over. Choosing a Christmas loan with a payday loan will hit you fast. By the next pay period, there it is ready for repayment. More than likely what was borrowed was more than what was needed to be spent. So here come the penalties. This is where people get in trouble. They have to borrow again to pay on the loan, and this can go on and on. With the traditional loan the interest rate was lower, but the payments continue on and on. So the bottom line is, you can be paying for Christmas a long time after the holiday is over and it’s costing more and more as time goes on. It could even go past the next Christmas.


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