1. What is a Holiday Loan?
Holiday loans, also called Christmas loans, are another form of personal loans. A personal loan is a form of credit that allows the borrower to make purchases that they cannot make due to lack of available cash, or that they choose not to make with existing cash in savings, or with credit cards. Personal loans can be used for practically any reason and can either be secured or unsecured loans. They are often used for home improvements, emergency issues or to finance vacations, but they can also be used to fund your holiday purchases.
2. What are the advantages of Christmas loans?
There are several advantages of using a personal loan for holiday purchases
1. Better Interest Rate — Personal loans for Christmas money will typically be offered at a lower interest rate than credit cards. As a result, financing your holiday shopping with a personal loan will cost you less money over time due to the lower interest rate. OCCU is offering competitive rates for unsecured loans at this time.
2. Easy Application — The application process for personal loans at OCCU is relatively simple. You can apply online, stop by an OCCU branch, or call 918.664.6000 to speak with a representative.
3. No collateral — Depending on your needs, you may not need to use any collateral for your loan. You may have the option of either a secured or an unsecured loan.
4. Improve your Credit Score — Depending on your credit history, adding a personal line of credit to your profile may increase your credit score as long as you make timely payments on the loan.
3. What are the disadvantages of Christmas loans?
With any loan product there are disadvantages as well. If you are considering a loan for Christmas money you should weigh these factors before making a final decision:
1. Cost of the Loan — Borrowing money for gifts increases the total cost of holiday purchases. Every loan incurs a cost. That cost is represented by an interest rate and sometimes fees associated with the loan. The longer you maintain a balance on the loan, the more you will pay in interest. Additionally, if you have a lower credit score or some issues with your personal credit history, you may have a higher interest rate. You will have to weigh your holiday cash needs with your ability to maintain the loan payments over time.
2. Higher Debt-to-Income Ratio — If you are planning other large purchases shortly after the holiday season, using a personal loan will affect your debt-to-income ratio (DTI). The same thing will occur with holiday gifts purchased with a credit card as well. This impact on your DTI may affect the financing of your future purchases.
3. Damage to Credit Score — Christmas loans can be a great resource, but they are still loans. So your payment history on the loan will be reported to credit bureaus. Routine late payments or defaulting on the loan will have a negative impact on your credit score.
4. Qualification Requirements — Like any loan product, you must qualify and be approved for a personal loan. If your credit score is too low, a personal loan may not be an available option for you.
If you are considering a personal loan for Christmas money this year, make sure you understand the loan product. You should understand the term of the loan and understand what an annual percentage rate is and how it works. You should also know what the loan requirements are, including the minimum loan amount, required credit scored and if there are any collateral requirements. Christmas loans may be a great resource to help you ease the financial burden of the holiday season. Contact the team at Oklahoma Central Credit Union to discuss your loan options for Christmas cash today.