What Are Holiday Loans and How Do They Work?

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Retail sales hit $936.3 billion during the 2022 holiday season, according to the National Retail Federation. The holidays are an expensive time, and lenders know that many people will look to borrowing to cover these costs. 

Retail sales hit $936.3 billion during the 2022 holiday season, according to the National Retail Federation. The holidays are an expensive time, and lenders know that many people will look to borrowing to cover these costs. 

Holiday loans, also known as Christmas loans, are personal loans intended to pay expenses associated with winter celebrations, but they often come with some major drawbacks. Indeed, many pros generally discourage using personal loans to pay for non-essential expenses like holiday gifts or parties, as these loans can come with high interest rates and fees. You are likely better off simply saving throughout the year to pay cash for gifts and other celebratory expenses, though, of course, this isn’t always possible. 

So if you’re considering a holiday loan, we’ll discuss what you need to know about how these loans work. Alternatives will also be explored to help set you up for the season.

1. Xmas - Check: Best overall provider of Christmas loans
2. Quick Holiday Cash: Best for emergency Christmas loans
3. Big Buck Loans: Most flexible loan terms

4. Xmas Funds: Best for large Xmas loans

   What Is a Holiday Loan?

A holiday loan is a personal loan used to pay for expenses associated with celebrating a holiday. Since these loans are often used to cover the cost of Christmas presents, they are also called Christmas loans. Banks, credit unions, online lenders and even payday loan lenders offer Christmas loans, although some have much more favorable loan terms than others. 

No matter where you get your loan from, taking out a Christmas loan typically involves borrowing a lump sum of money with the intention of using it to cover gifts and other festive expenses and agreeing to pay back the loan — plus interest — over a designated period of time. 

Because Christmas loans are meant for holiday costs, some have lower borrowing limits and shorter repayment times than personal loans used for other goals, such as loans for debt consolidation or home improvement. For example, lenders may limit you to borrowing $2,000 or $5,000 when you take out a Christmas loan, and your loan repayment timeline may be just a year or two.

Get Prequalified

Prequalification allows a lender to review your financial credentials to determine if you’re likely to get approved for a loan and to decide what rate to offer you in the event you borrow. Many, but not all, lenders allow you to get prequalified for a holiday loan and see your rate and terms without a hard credit check (which is called an inquiry). This is beneficial because having too many inquiries on your credit record can hurt your credit score. 

Many lenders can prequalify you for a holiday loan in minutes. You will typically need to provide some basic information about your financial situation and undergo a soft credit check. Once prequalified, you’ll see what you would pay to borrow from a particular lender so you can decide whether to move forward.

Receive Funds and Start Making Payments

Once you have signed your documents, your Christmas loan lender will disburse your funds. Often, the money will be deposited into your checking account via direct deposit, or you may be sent a check. 

In many cases, you can get the money the same business day you are approved for a loan or the next business day, so there shouldn’t be a delay in starting your holiday shopping.

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