With the average UK household spending between £500 to £800 on Christmas this year, around 20% will consider some form of borrowing to tide them over the holidays.
The result of spending on Christmas gifts, decorations, food and family outings can put pressure on a family’s finance and many will look to borrow £200 upwards with the flexibility to repay in January or February.
The ideal scenario is to start saving as early as September, putting aside £100 each month ahead of the festive season. Where possible, try think ahead by making the most of Black Friday sales in November and also buying things like costumes and decorations which you can use for future holiday seasons too.
However, if you have to borrow money, here are some of the most sensible options.
Borrowing from family and friends
Borrowing from parents and siblings is the most common form of borrowing in the UK, and is not only used for buying your first property or car. The security of borrowing from a family member means that there will not be any credit checking, interest repayments or late fees – which can give you a lot of peace of mind during a financially stretched period.
Your family will usually want to help you and always trust that you will repay. Money Advice Service recommends creating clear terms for when you plan to repay and whether any interest will be included. They explain that this is essential to avoid conflict.
If you work in the public sector such as teacher, nurse, street worker or volunteer, you may be eligible to borrow up to £1,000 from your local credit union. These refer to non-profit organisations set up in local communities to assist local residents – they typically charge very low fees with just 26% representative APR.
All credit histories are considered and there are no default or late fees, since it is a financial product to assist people rather than usury.
The only downside is that funding can take around 1-2 weeks since they are not savvy banks or online lenders, but still it can assist you if you time it appropriately.
Selling unwanted items
Rather than trying to borrow £100 or £200, you may find that you can obtain this kind of money by selling unwanted items around the house.
It is remarkable how much we accumulate over the years and there are people who looking to buy our unwanted items including CDS, DVDs, video games, clothes and artwork. Whether it is through a car boot sale or using a mobile phone app, you may be able to come up with the necessary funds for your Christmas in just a few days.
Short term loans
In the event that you do have to borrow money, consider using a comparison website so that you can compare multiple short term loans in one place and get the best deal for you.
If you have good credit history, you are likely going to be able to borrow money at 3% to 6% interest in the form of a personal loan.
Similarly, with good credit, you can look at using a zero percent interest credit card which is part of an introductory offer. You will receive a loan interest free provided that you clear the account in full after the 30 days. Depending on your income and affordability, your credit limit could be a few hundred or thousand pounds.
If you have bad credit, you can consider other options to borrow money such as using a guarantor to back up your loan agreement or using something valuable you own such as collateral such as your vehicle or property that you live.
The risk is that you cannot repay your loan, your car or home may be repossessed by the lender – hence this is used for much larger purchases.
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