Christmas is that time of the year that we eagerly look forward to – to be with our loved ones, to celebrate the joy of giving and welcome a brand new year. Gifts, presents, food, decorations, and preparations – the list is endless when it comes to celebrating the season. A financial crunch may become a major blocker in the celebrations. Several lenders in the UK offer personal loans for Christmas. These loans are not any special kind of loans.

A Christmas loan is a personal loan that you can borrow to cover the shortfall in your expenses. You can make the repayment in several instalments by spreading it over months or years, depending on your financial circumstances.

The ease of accessing loans is tempting, but, borrowing a loan comes with a lot of financial responsibility. You need to be disciplined with your money to make the repayments on time, or else it may backfire.

Here are 5 things you should ask yourself before borrowing a personal loan for Christmas in the UK:

1. Can I afford to make the repayments?

This is the first and foremost question that you need to ask yourself to understand whether the amount that you are considering to borrow is affordable for you. Because if you fail to make the repayments on time and in full, your credit score will take a toll. In addition to that, you may be issued a County Court Judgement (CCJ) after you miss a series of payments. A CCJ may stay on your credit report for 6 long years. As an aftereffect of this, lenders or financial institutions may not accept your application for a new financial product that you apply for.

In short, it will gravely impact your credit score and future borrowing experience if you do not make timely repayments. Therefore, decide on the loan amount and the duration of the loan before applying to any lender.

2. How much do I have to pay as interest?

You must be aware of how much you are expected to pay at the end of your loan term. When you search for a personal loan, lenders will quote their interest rates – that is how much you have to pay for the loan that you are borrowing. The interest rate that you will be proposed depends on – your income, outgoings, debt-to-income ratio, credit score, the amount that you are planning to borrow, and the length of the loan.

Compare multiple offers from different lenders to find the best option that will work for you.

3. Does the loan have any additional fee?

There may be lenders who charge a loan origination fee, upfront fees and any other extra charges if you decide to borrow a loan from them. It is better to know beforehand about the total amount that you will be expected to pay while borrowing the loan. It will help you in streamlining your budget and also, you are more likely to stay on track.

Prepare a budget according to the monthly payments that you have to make. This way the probability of falling behind the payments is low. Read the Terms & Conditions and also, ensure that you go through the fine print before signing on the dotted line. Ask the lender about the charges, and if you do not feel comfortable with what’s being proposed – talk it out to make your decision accordingly.

4. Do I have a good credit score?

Your credit score plays an important role in the entire loan borrowing process. If you have a good credit score, you will get personal loans with low-interest rates. However, a bad credit score can spoil your chances of getting a loan at favorable terms.

Review your credit report before applying for a loan to have a clear view of your financial circumstances. Also, there are chances that your credit report may have some errors, if you find any, raise a flag to the Credit Reference Agencies (CRAs) to get it fixed.

If you have a poor credit score, work on improving your score before applying for a loan. There are various ways to build your score. Pay all your bills on time and in full, register yourself on the electoral roll and try to keep your credit utilization level low.

5. Are there any alternatives to personal loans that I can consider?

If you are unsure of the loan repayments, you can consider available alternatives. Rather than taking out a personal loan, you can use your credit card. But remember that you have to pay off the amount that you use in a lump sum. You can check for 0% APR credit cards. They have an introductory period offer that allows using the card without paying any interest on the expenses that you make for a certain period. Post that, the regular interest rate will be levied on the expenses.

Also, you can use an authorized overdraft –to manage your expenses. An authorized overdraft works as a personal loan. Interest will be levied on it and you will have to repay the amount within the specified timeline to avoid any additional fee.

Final words

You can make your Christmas merrier with a personal loan through Oyster Loan. We have partnerships with trusted lenders of the UK. You can compare multiple offers from several lenders at one place for free at real-time. However, before you borrow a personal loan, assess your financial circumstances and review your credit report. Draft a repayment plan so that you can easily make the payments on time and in full to give a boost to your credit score.