A holiday loan is one of the types of personal loans taken for seasonal spending. Spending the holidays with family and friends makes the holiday extra special, but sometimes, it can be financially demanding. For this reason, holiday loans are rendered. This loan can be a way to cover up your budget gaps. Just like other personal loans, this loan allows you to quickly borrow money without providing collateral.
But this loan differs from the other kinds of personal loans. This loan has lower limits, and you cannot get them before or after the holiday season is done. Banks and credit unions offer holiday loans in the range of $500 to $2,500, and some are willing to lend out $5,000. Most holiday loans have a short repayment term, i.e., you will be given between a few months and a year to pay back your debt.
What Can I Use A Holiday Loan for?
Holiday loans are given not just for spending on gifts. They are given for any short-term expenses during the holiday season. There are a lot of things you can use your holiday loan for; most lenders do not place restrictions on your loan or determine what you should do with your money. However, below are some of the things you can do with your loan.
- Purchasing of gifts: In a case where you don’t have the money to get a gift for everyone for the holiday, you cover that up using the holiday loan.
- Travel: During the holiday season, traveling is one of the best holiday moments. Holiday loans can always cover bigger travel expenses such as hotels, plane tickets, and so on.
- Other expenses: Besides travel and gifts, you can use holiday loans to cover other expenses.
Factors To Consider When Taking a Holiday Loan
Before applying for a holiday loan, you should always confirm the lender’s range of rates, repayments, and fees before proceeding with the application. When acquiring a holiday loan, consider the following factors to select the best lender:
Interest rates
Interest rates represent the borrowing cost, with higher rates requiring more payments and lower rates reducing payments. Taking this into account aids in choosing the best and most convenient lender for you. Personal loans tend to have lower interest rates than those of credit cards.
Fees
Lenders charge a common origination fee each time a borrower is made. You could have to pay additional expenses, such prepayment penalties and late payment fees. Origination fee is a percentage of the loan amount added to the balance after funding. Late fee is charged for late payments, potentially leading to additional expenses. Prepayment penalty is charged for additional payments or loan repayments ahead of agreed time.
Repayment term
This is the time it will take to pay back your loan if the minimum payment schedule is followed. Most holiday loans have a loan term between 6 and 12 months. The duration of repayment for a loan significantly impacts the total cost, as the longer the repayment period, the higher the interest rate will accrue.
How to get a holiday loan
There are quite several things to be considered when taking out a holiday loan. To get this loan, you need to follow the below steps:
Research and compare lenders
We are aware that many lenders offer holiday loans. Before putting a loan into consideration, you need to first compare and research the best lender to get your loan from. A variety of lenders, from payday loan lenders to credit unions, online lenders, and even banks, offer holiday loans. It is best to borrow from a lender that offers favorable terms and gives good customer service. To identify them, you need to compare lenders and their financing options.
Check eligibility and get together the necessary documents
Each time we need to acquire a loan, we need to confirm that we are eligible; there’s no difference in that in holiday loans. Every lender has a different eligibility requirement for holiday loans. You need to make sure you are eligible for these loans before applying for them, especially when you have a bad credit history. Aside from being eligible, you need to be prepared to provide any document the lender may request. Some of the documents that may be requested include
- Pay stubs.
- Tax returns.
- Proof of identity.
- Bank statements.
- Proof of address (mortgage statement or utility bill).
Some lenders will take a look at your credit history to know if you have a good or poor credit history.
Get prequalified
Getting prequalified allows the lender to check out your financial credentials to decide if you will be getting approved for the loan or not as well as to consider what rate to offer you. Not every lender will allow you to get a prequalification for a holiday loan; this is beneficial to you because having too many inquiries on your credit history can hurt your credit score.
Review loan terms
After you have been prequalified for a holiday loan, the lender will give you different borrowing options to choose from. Some of the factors to check out when researching your loan options include the loan’s repayment timeline, repayment speed, monthly payments, loan fees, annual percentage rate, loan amount, and interest rate are all important details.
Apply for a loan
After comparing these loan offers, you need to move to the next step of applying for a loan from the lender with the best rates. This means that you have accepted one of the loan offers by a lender, and you will have to complete their application process.
Receive funds and start making payments
After signing the required document, your holiday loan will be added to your funds. The money will often be deposited into your bank account through direct deposit, or you will be given a check. However, sometimes you can get the money the same business day or the next after your loan was approved.
