Financing the festive season

Although Christmas may seem a long way off to many of us, with the summer holidays still fresh in our minds, it is in fact only a few months before the festive season is upon us, and for many people that means looking for ways to try and fund the expense that Christmas brings with it. This is a time of year when many people spend more money than they have spent through the rest of the year, with gifts, special groceries, clothes and entertainment that all needs to be paid for.

Many experts advise consumers to start thinking about Christmas funding as soon as possible, particularly in cases where the consumer intends to take out finance to pay for purchases. Many people rely on credit cards and loans to get them through Christmas, but the longer you wait to make your application the longer it will take because of the increased level of applications that tend to flood in to lenders over the Christmas period. Therefore, if you plan to borrow money in order to pay for Christmas now is the time to apply.

A very effective solution for many people that want to borrow money to pay for purchases over Christmas is to use a credit card. However, it is important to make sure that you get the right credit card. There are two main credit cards that could suit your needs depending on how you plan to repay your Christmas spending. If you plan to pay for Christmas purchases on a credit card and then repay the balance in full when your statement comes through then you may find that a rewards based card, such as a cash back card, is the ideal solution. Abbey is currently offering a 5% cash back card, where you can earn 5% on all purchases at any major supermarket up to the first £1000.

Therefore, if you plan to purchase your Christmas groceries, clothes, and gifts from a major supermarket, and you think that you will spend close to £1000 in total, you could enjoy earning up to £50 cash back, which is impressive for a cash back card. If, however, you want to put Christmas on the plastic and spread the repayments over a longer period, as many people do in order to ease the financial strain of the festive season, then you should opt for a 0% purchase card. This will give you extra time to repay the balance without having to pay interest, and the longer the interest free period the more time you will have to repay the balance.

For some people the answer to financing Christmas is to take on a small personal loan. The interest rates on loans are far lower than with credit cards, although with 0% purchase credit cards available a loan may not be the best answer. However, the advantage of opting for a personal loan is that your repayments will be fixed, so you know exactly how much you will be paying each month and you know exactly when the loan will be cleared. It also means that you won’t be tempted to make minimum payments as your repayments will be set, and many people prefer the structured repayments that come with a loan.

For those with poor credit the choices are far more restricted, as the chances of getting a personal unsecured loan or a 0% purchase credit card are slim to none depending on how badly damaged your credit rating is. You may find that a small secured loan, if you are a homeowner, could prove useful if you have no savings that you can use towards making purchases for Christmas. However, do be wary of fees and early repayment penalties, as these can bump up the cost of borrowing.

There are bad credit credit cards available from companies such as Capital One and Vanquis, but the interest rates are high, which means that you need to be able to repay the balance either in full within the interest free period, or make large lump sum payments to clear the balance as quickly as possible to minimize on the amount of interest that you have to pay.

Whatever your plans to finance the Christmas period, retailers are already getting geared up for the season, which means that if you want to beat the Christmas rush and avoid the disappointment of retailers being out of stock of the items that you want you should get your finance prepared well in advance. By making your application early on you can also prepare yourself for the chance that your application for finance may be rejected, which will give you extra time to find alternative funding for this exciting yet expensive time of year.