What to consider when taking out a personal loan this Christmas

Despite the festive cheer, the holiday season can cause a lot of financial strain for many people.

If you’re looking for some extra funds to make ends meet, a personal loan for Christmas might be exactly what you need (as long as you use it responsibly).

There are a variety of different types of loans to choose from based on what you need and what you’re eligible for, so it’s worth knowing what products and features are out there.

Short term loans

Short term loans are suitable for those who need less than $2,000 and are capable of repaying the loan within a few months.  Savings Bank 919859 1920

If you don’t have the best credit, short term loan lenders may still provide fast approval.

Though these loans are a quick and easy way to ensure that you can afford your Christmas shopping, the costs involved can be steep.

Generally, you will have to pay 20% of the borrowed amount as an establishment fee, as well as an added 4% of the borrowed amount each month.

It’s important to establish how much you actually need ahead of time to ensure that you don’t have to pay back a tonne in interest and fees.

If you’re unsure of whether you’ll be able to service the loan, speak to a financial adviser.

Unsecured personal loans 

Whether you’re taking your family overseas for Christmas or you’re hosting a festive lunch, you might need to borrow $3,000 or more.

An unsecured personal loan is suitable for those who have good credit and can pay back the loan in between one and seven years.

Unsecured loans can fund your Christmas spending with no security required.

There will typically be an application fee and monthly service fees that you will have to pay alongside interest.

However, the rates are typically lower compared to those of a short term loan.

A line of credit

Another option that can help you cover the costs of Christmas is a line of credit loan. bank-reserve-interest-rate-save-money-finance-loan

This type of personal loan allows you to withdraw funds based on a predetermined credit limit.

A line of credit is similar to a credit card but will usually allow you a higher limit.

Rates are relatively low and you only have to pay interest on what you owe rather than on the entire credit limit.

If you take out a $5,000 unsecured loan, you’ll be required to pay interest on the entire amount even if you only decide to spend $2,000.

Furthermore, once you repay what you owe, you can use the funds again.

Features to consider

With so many different types of personal loans and so many different lenders for each, it’s important to compare different personal loans using a calculator to see how the rates, fees and repayments line up against one another.

Aside from interest rates and fees, two features that are worth keeping an eye on are flexibility and eligibility.


The flexibility of loan is important, especially if you know that you’ll have more than enough money to pay back the loan before the end of the term.

Find a lender that will allow you to pay off your loan ahead of time without having to pay a penalty.

You’ll also want to consider how long the approval process is and if you’ll receive the loan in time for when you need it.


Click through the lender’s site to confirm the details of the loan and to see if you’re eligible to apply for it.  Credit-Score

For instance, you’ll need to be aged 18 years or over and you may need to be earning a certain amount in order to qualify for the loan.

Make sure to look for any hidden fees before you accept the terms and conditions.

To apply, you’ll need to supply your employment/Centrelink, financial, banking and personal information (although this may vary slightly from lender to lender).

The festive season should be about celebrating with your loved ones.

If you’re thinking about taking out a personal loan to make ends meet, make sure you’re comfortable with the costs involved and ensure that you’re borrowing within your means.

A personal loan should be a helping hand over the Christmas period, and it shouldn’t create more financial stress for you once the new year rolls in.

About the author: Bessie Hassan is a money expert at finder.com.au


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