‘Tis the season to be spending. Unfortunately, you can wind up spending more than you bargained for in all the hustle and bustle.
It may even be tempting to add debt to their line of credit, use buy now, pay later financing, or take out Christmas loans to afford all the festivities. Plenty of people do.
Should you follow in their footsteps? Let’s find out.
Personal Line of Credit
A personal line of credit has a time and place in your finances. Unfortunately, that place isn’t the mall when you’re shopping for gifts. Relying on credit this way can encourage you to buy too many holiday-related expenses you can’t afford.
While this can help you tick everyone off your list, all it really does is saddle you with debt. And if you can’t pay it off by the due date, this debt compounds with added interest and finance charges for every month you carry over a balance.
Ultimately, you can wind up spending more on these fees than the original gifts and goodies.
To help you avoid extra debt, think of your line of credit as a safety net, there to catch you in a financial emergency. If your car breaks down this winter or your fridge stops working, you may apply for a CC Flow Line of Credit to see if you qualify. If approved, you can put car repairs or a new appliance on credit and pay it back later.
Buy Now, Pay Later (BNPL) Financing
If you’ve spent time debating whether you should abandon your cart or go ahead and click “buy now, pay later,” you know about BNPL financing. BNPL options let you pay for something in flexible installments rather than one lump sum like you usually do at checkout.
A cart full of gifts that comes to a total of $387.45 could work out to be four payments of $96.86, spread out over two or four months. This breakdown can come in handy this holiday, but it’s also risky.
Critics of BNPL say it can make it hard to track how much you’re really spending because the cost of each installment is lower than the total. You might feel as though you can afford to buy more, or you can even forget that you’ve tied up your money for so long and wind up spending it on something else.
The real problem is if you miss a payment. You’ll have to pay a late fine and cover interest just like a personal loan. BNPL services may even report your late payments to a credit agency.
A Christmas loan is a personal loan that you get to cover the costs of the festivities. If approved, you’ll receive a lump sum of money to use as you please. By accepting this money, you agree to pay it back by a predetermined date.
How and when you pay these loans back depends on the type of financing you apply for. A cash advance may be due back in one lump sum by your next payday. Some installment loans work like BNPL financing, in that you pay back what you owe over multiple installments.
Both options come with interest and fees, which means you’re spending more to buy your gifts this way. And if money’s already tight, you don’t need to tie up your budget with short-term personal loan payments well into the New Year.
If you can’t afford to buy Christmas goodies and gifts without tying up your money with debt, scale back your expectations and focus on experiences rather than gifts.