It’s no secret, the holidays are expensive. The average person spends more than $1,000 during this time, which if you don’t have that budgeted, can really eat into your finances. A holiday loan can ease the burden, giving you the cash you need during the holidays to buy gifts, attend events, and even travel.

How Does a Holiday Loan Work?

The holiday loan is another version of a personal loan. It’s an unsecured loan, which means you don’t need to put down collateral. Most lenders offer loans in amounts ranging from $500 – $5,000 for varying terms, but it’s typically a short-term loan.

These loans usually have fixed interest rates which are slightly higher than secured loans. If you default on the loan, the lender doesn’t have any recourse, so they make up for it with slightly higher interest rates.

Why Get a Holiday Loan

People get loans for holidays for a variety of reasons, but the most common include:

  • You live paycheck to paycheck
  • You didn’t save for the holidays throughout the year
  • You didn’t buy gifts throughout the year to spread out the spending
  • You don’t have room on your credit cards
  • You don’t want to touch your savings

Pros and Cons of the Holiday Loan

Like any loan, the holiday loan has its pros and cons.


  • You don’t have to worry about overextending your credit cards
  • You’ll likely pay lower interest rates than your credit card charges
  • You get one lump sum of money, which limits what you can buy or spend
  • You get a fixed interest rate
  • You get a fixed term


  • Holiday loans, like any loans, have fees
  • It’s an unsecured loan which has higher interest rates
  • Some lenders do require collateral, especially if you have bad credit
  • You’re spending money you don’t have

Getting the Right Holiday Loan

Like any loan, make sure you shop around to find the right lender. Banks, credit unions, and online lenders all offer holiday loans.

When you shop around look for:

  • Competitive interest rates
  • Low closing fees
  • Affordable terms

When you find the right loan, make sure you only borrow as much money as you need. It may be tempting to borrow more, but at what cost? Remember, you’ll pay interest on the money you borrow, so really think about how much you need and stick to your budget.

It’s wise to shop for the holiday loan early too. If you wait until the last minute, you’ll end up taking whatever loan is thrown your way, not paying attention to the interest rates and fees. You’ll likely overpay for the loan and therefore the gifts you buy with the money from it.

A holiday loan may be a good idea if you’d have to deplete your savings or max out your credit cards for the holiday, but exercise caution. Borrowing more than you need is just like maxing out your credit cards – use the money responsibly and it can be a great way to get through the holidays.