Updated: Mar 18, 2024

Christmas Loans: Should You Borrow to Fund Your Holiday Spending?

Find out how Christmas loans work to finance spending for the holidays, whether that may be gifts or travel. More importantly, learn about the alternatives.
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The holiday season is an exciting time of year. People get together with their families to enjoy a good meal, give gifts, and simply spend time together.

Unfortunately, celebrating the holidays can get expensive.

Traveling across the country to see family can cost hundreds of dollars and many people spend similar amounts on presents for their loved ones.

If you’re strapped for cash, you might see lenders offering Christmas loans, and feel tempted to borrow money to help cover some of the cost of celebrating.

In general, borrowing money for travel or to buy presents for people, even loved ones, isn't the best idea.

You should avoid Christmas loans whenever possible and find alternatives for celebrating the holidays.

What are Christmas Loans?

Christmas loans are typically small, short-term loans offered by banks during Christmas time.

You’ll usually see them advertised in November and December and positioned as a way to buy gifts for friends and family, even if you don’t have cash on hand to do so.

This advertising can make Christmas loans seem innocuous and tempt you into applying.

In reality:

They’re not different from other types of short-term loans, like personal loans.

Like any loan, you may be hit with expensive fees like origination fees.

You also have to pay interest on the money you borrow, leaving you owing much more than you borrowed.


Christmas loans can be highly dangerous, even if you find a good lender.

These types of loans directly encourage you to borrow money to spend on gifts and other non-essential items.

Going into debt for non-essentials

Debt isn’t necessarily a bad thing. It can be a valuable tool but borrowing money to buy non-essentials is rarely a good idea.

Come January, you’ll find yourself with a potentially high loan balance and a new monthly bill to pay.

If you didn’t have extra money in December to buy gifts, you might struggle to come up with extra cash in January to pay the bill.

Very high interest

There are also less scrupulous lenders that operate in the Christmas lending market.

These companies’ loans are more similar to payday loans than personal loans. You could wind up borrowing small amounts for incredibly short terms at obscenely high interest rates.

If you borrow from one of these lenders, you might find yourself trapped in a cycle of debt that you struggle to escape from.


While borrowing money for a non-essential purchase like travel or gifts isn’t a great idea financially, no one wants a Christmas tree with no presents under it.

If you do decide to borrow money to buy gifts or travel around the holidays, there are better ways to do it than with a Christmas loan.

Low or no interest credit cards

Borrowing money using a credit card is usually even less advisable than other forms of debt, but there are a few ways to use credit cards to your advantage.

Many credit cards offer promotions where you can get a reduced interest rate, or even pay no interest at all, for the first few months that you have the card.

With some cards, this promotional period can last nearly two years.

If you apply for one of these cards before the holiday season, you can use it to buy your Christmas gifts and pay for travel.

If you make the minimum payment each month, no interest will accrue until the promotional period ends, essentially giving you an interest-free loan.

The situation you want to avoid:

Not repaying the full balance on your card before the interest-free period ends.

If this happens, the card will revert to its normal rate.

Most cards charge incredibly high interest rates, often 20% or more, so you could wind up facing larger monthly payments than expected.

If you decide to try this method, make sure you can repay the full amount you borrow before the promotional period ends.

It’s also a good idea to set reminders for yourself so you don’t forget about your deadline.

Unsecured personal loans

Rather than applying for a loan advertised as a Christmas loan, you can apply for a generic personal loan.

One benefit of this strategy is that it will let you avoid the less scrupulous lenders that use Christmas as a way to draw in desperate customers.

It also gives you access to more lenders, because not all lenders will offer holiday-specific loans.

If you choose to borrow money this way, you should make sure to check with online lenders in addition to local banks and lenders.

Online lenders often have lower interest rates and fees than other lenders, which can save you a lot of money.

The drawback of this strategy is that unsecured loans are ideal for borrowers with good credit.

If you have poor credit, you might not be able to get a loan. If you do, you’ll likely pay a high interest rate, making this an expensive option for borrowing money.

Thrifty, creative, homemade gifts

Not every gift that you give has to be expensive.

If you want to avoid borrowing money altogether, you can consider alternatives to buying a gift.

For example, you can make a homemade gift. If you have DIY skills, try to make something for each person on your list. If you like baking, you can make baked goods like cookies and pies for people on your list.

You can also give the gift of time. Plan a special outing like a hike or a picnic with a family member or offer to help a friend with some difficult tasks, like moving.

These types of gifts can be inexpensive or even cost you nothing, while still being thoughtful and highly appreciated.

Consider alternatives to travel

Part of the holiday season is being together with family, but traveling can get very expensive, very quickly.

Modern technology has made it much easier to communicate with friends and family over long distances.

If traveling would put significant strain on your finances, you can try to take advantage of that technology instead of traveling.

Video chats aren’t the same as being in the same room with loved ones, but they give you a way to participate in the festivities. Christmas cards are also a good way to let people know you’re thinking about them.

Travel prices often spike during the holiday season because so many people want to visit home.

If you decide not to travel during the holidays, you may be able to use some of the money you planned to spend on plane tickets to take a trip during less peak times when tickets are cheaper.

That way, you still have the chance to visit with your loved ones in-person.

Financial Wellness: Give a Gift to Yourself

Christmas can be a difficult time for people who are trying to keep their finances healthy or get their finances on track.

Companies constantly advertise the latest gadgets and toys and make it feel like you have to spend large sums to have a good holiday season.

Try to tune out the noise and take some time to focus on yourself.

If you can, set aside some money to get yourself something nice or contribute to a holiday fund for the next family gathering..

Don’t let the holiday derail your finances and drive you into debt.