Christmas comes but once a year and so do all the bills associated with it. Did you know that, according to Go Compare, the insurance comparison website, we spend for every man, woman, and child in the UK £753 each Christmas on presents, parties, decorations, food, drink, and more?
For millions of Brits, the joy of Christmas and spending time with the ones we love is accompanied by worry before and after the festive season about how we’re going to pay for it all. Is a payday loan the answer? No – and, in this article, Oyster Loan will show you why and suggest approaches to borrowing that might work better for you.
We’ll look at:
- what a payday loan is and why it’s not the right type of finance to pay for Christmas
- guarantor loans
- logbook loans
- using your bank overdraft
- using a credit card
- using a short term instalment loan
- what help a broker like Oyster Loan can be
What is a payday loan?
If there are four of you in your household then, according to Go Compare, you’re looking at a total bill for Christmas of nearly £3,000. Let’s say that you already have £2,000 of that saved up and, to make that perfect Christmas, you just need to find an extra £1,000.
You can borrow between £50 and £1,500 with a payday loan. However, that amountis not always guaranteed. Generally, payday loan companies may only want to lend you £300 or £400 as a first time borrower. They may transfer up to £1,500 to you once you’ve borrowed from them a few times and paid them their money back on time and in full.
By approaching a payday loan company, you may not be offered all that you need to pay for Christmas. That means you’d have to find more money from another lender elsewhere. This is all beginning to get expensive and complicated.
But what if you can borrow £1,000 on a payday loan? Remember that there’s only one repayment with a payday loan – you have to pay the full amount back plus the interest within 30 days or on your next payday.
If money is tight in the run-up to Christmas, you may find it impossible to pay the loan back on full on the date you’ve agreed to do so. It’s better for you if you find a financial solution which does not put as much pressure on you and your family finances. But what’s available?
Christmas guarantor loans
You may be tempted by adverts you see on the TV and online for guarantor loans. With a guarantor loan, you can borrow up to £20,000 for over 5 years. The catch is that you have to find someone who will agree to pay off your loan if you find that you can’t in the future. Your guarantor has to have a really good credit rating or it is highly likely your application won’t be accepted.
If your guarantor is forced to pay off your loan, this could make any future relationship between you and the guarantor difficult and sometimes even impossible. If your guarantor is a parent, a brother, a sister, a cousin, or a friend whose company you really value, is it really worth putting that at risk for a loan? Remember that money is one of the main reasons that friends fall out and couples split up.
Guarantor loans are not cheap and they have come in for a lot of criticism in the press and by politicians lately because of the high interest rate charged on guarantor loans and the behaviour of some of the lenders towards borrowers who get into difficulty.
Christmas logbook loans
As with guarantor loans, logbook loans have been very controversial in the last few years because of the high cost of the loans and the way that lenders chase borrowers hard who have fallen behind on their repayments.
With a logbook loan, you can borrow up to 75% of the value of your car but, although you still have use of the car, you have to sign over “title” (ownership) of the car over to the lender before you receive your money. If you don’t keep up with repayments and you default on your loan, you will never see your car again – it will be taken away from you permanently. In fact, you only become the owner of the car when you’ve paid off the loan in full.
If you rely on your car for work or you need the car for your family, it’s not worth putting your job or the comfort and convenience of your family at risk to pay for Christmas.
Christmas bank overdrafts
Many people use their bank overdrafts to pay for Christmas but there are dangers. A bank overdraft can be called in at any time and this could put you at real hardship. On the other hand, a bank may decide to extend your overdraft limit but that means you’re going to have work harder and spend less to get out of your overdraft after Christmas.
If you spend past your overdraft limit, you will go into something called “unauthorised overdraft”. Just like with logbook loans and guarantor loans, unauthorised overdraft charges have come under the spotlight of regulators lately who are aiming to crack down on them because of the costs. Consumer champion Which? discovered that it can cost you more to borrow money with an unauthorised overdraft than it can with a payday loan.
A short term Christmas loan
If you really do need to borrow money for Christmas, you might want to consider a short term instalment loan. With a Christmas loan like this, you can borrow between £100 and £2,500 over a period of two to twelve months. This means that your monthly repayments are a lot lower although the amount of interest you’ll pay over the term of the loan is more than if you took out a payday loan.
You should be absolutely sure that you can afford the repayments to a short term Christmas loan. You should also consider whether you really need the money before taking a Christmas short term loan out. If you take out a short term loan and you end up not being able to pay it back, it will make obtaining other sources of finance in the future very difficult.
Can Oyster Loan help?
A short-term loan might not be the right answer for you. However, Oyster Loan can help you decide.
We work with a panel of lenders meaning that, even if you’ve got bad credit, the chances are that we can find a loan for you to tide you over Christmas. Simply enter your details onto our application form and we’ll approach all suitable lenders on your behalf. Within seconds, we’ll come back with the very best deal we’ve found including how much your monthly repayments would be together with any other associated charges from the lender.
You don’t have to say “yes” to the deal we find you. Our service is free of charge whether you take out the loan or not. If you do take out the loan, a separate agreement will be formed between you and your lender. We receive a “thank you” payment for every loan that’s successfully taken out from the lender – you never pay us a penny.
To start your application, please click here.