Are Loans around the Holidays a Good or Bad Idea?
It is best not to take out a loan to pay for your holiday travel. Holiday travel just gives you a short period of enjoyment. When you come back, you will have to carry the burden of paying back the loan over a few years. If possible, you should try to budget and save throughout the year to come up with the money needed for paying the year end holiday trip. You can put the savings for your year end holiday in a different bank account than your personal bank account.
Sometimes, you just have to travel in the holiday because of the circumstances. For example, you need to return home to see your dying father. If you don’t have enough savings, applying for the loan will be the most worthwhile investment that you have made. It is important that you do research on 3 to 5 lenders when shopping for a loan during the holiday.
Applying for the loan online is the best because you can obtain quotes from multiple lenders for comparison purposes. Many online lenders offer soft inquiry so your FICO score will not hurt when you submit the application. If you have a good FICO score and low debt to income ratio, you should be able to easily get approved for a loan with a cheaper interest rate.
A personal loan has a fixed interest rate and you know exactly how much you must pay each month. The fixed monthly amount makes it easier for you to pay off the loan. It is not like a credit card where you can pay a minimum amount every month and keep rolling over the balance to the following month so that you don’t know when you will pay off the debt.
Prior to applying for the holiday loan, you must make sure that you are borrowing because you really need the funds for the holiday expenses. You must be confident that you can pay back the loan in the agreed loan term. It is important to know the complete details of the loan including interest rate, fees, monthly amount and loan term so that you know whether you can afford it.
As a rule of thumb, you should avoid getting a loan to buy expensive stuff that you can’t afford with your income. You must be conscientious about spending within your means and not wasting money on expensive stuff. The holiday season is the time when people easily exceed their budget so you must keep yourself alert on your spending during this season. Borrowing more than your means can cause you to be trapped in debt for many years. Borrowing more also means you have to pay back more interest so it is wise to only borrow the amount that you need.