For many people, a lavishly spent Christmas is sure-shot sign of the New Year being tumultuous; at least until the debts have been fully repaid. A study undertaken after the Christmas of 2004 showed that one out of every five people would continue to be in debt, i.e. not be able to clear debt loan in the same month.
Rather than carry the debt burden over to the next year, it will be much easier to carry it through Christmas loans. It is misleading if you thought that Christmas loans simply replace the debt burden incurred during this period. There are a number of advantages that result of the use of Christmas loans. Some of them have been explained below:
A Christmas loan that is drawn for making the expenses as and when they come will force the borrower to spend within limits. Borrower has the necessary cash and he himself decides how much to spend on what item. Just as he would do with his personal resources, the borrower would assign priorities to the different expenses to be made through Christmas loans.
When the borrower has the necessary cash to expend, he is in a better position to bargain. Thus, Christmas loans also help in reducing the cost of Christmas festivities.
A Christmas loan drawn after the expenses have been made offers an alternative repayment method. The expenses have been made on credit, and through a Christmas loan, the debtor intends to repay the debts.
It is on the borrower to decide the timing of the Christmas loans. Many of them will prefer to take Christmas loans after the expenses have been made. A majority of the people comprising this group are not sure whether they will need the loan. Nevertheless, when the expenses increase their expected limits, they have to resort to this method. This method is good in the sense that the borrower does not make an injudicious use of the loan. Only the amount in excess of ones own capability is drawn.
Drawbacks do follow this method also. The expenses have been made on credit and a certain stipulated time period is promised for repayment. When the processing of Christmas loans starts after incurring the expenses, there is a greater probability of the loans being approved later than the time due for payment of expenses. The situation can be dangerous because creditors will demand payment and the Christmas loan is still in the half processed state.
Thus, the best time to apply for the Christmas loan will be before you plan to spend. Just when you are about to spend, you have the necessary cash ready with you to facilitate the purchase.
The time that lenders take to approve Christmas loans differs a lot with the type of loan taken, customs of the region or place the lender is in, individual case statistics etc. Therefore, it will be wiser to apply beforehand, even where borrower intends to spend first and pay later. The borrower can predict more accurately the time by which he will be in possession of the Christmas loans, and promise the time for payment accordingly.
Borrowers in the UK draw more of Christmas loans than what they intend to spend. A Christmas loan need not be spent wholly on Christmas festivities. Borrowers can use the proceeds to diverse ends. For this, the excess of Christmas loan will be very useful. Christmas loans available at inexpensive rates of interest will lessen the cost; whatever is the purpose the loan proceeds are used in.
Rate of interest is an important search criterion. The best method to compare interest rates of various banks and financial institutions is through Christmas loan calculator. The major banks and financial institutions have their interest rates listed in the calculator. Differentiations have also been made on the basis of secured or unsecured, bad credit etc. This is good to get a basic idea of the interest rate that the borrower is more likely to receive.
Security or collateral is an important question concerning Christmas loans. A secured Christmas loan, where the borrower has agreed to back repayment of loan with a lien on certain asset/ assets will be cheaper. Interest rate in a secured loan is lower than on unsecured Christmas loans.
Whatever form of does one take Christmas loan he/she will find it very useful. Nevertheless, the basic precautions that one takes in order to safeguard ones financial position needs to be in place in Christmas loans too, just as in the regular loans.