It's a time of year when we all get a little carried away. Whether buying the tree with the thickest spruce or treating friends and family to special gifts, many people find themselves short on cash by the time the big day falls around.
Perhaps a little unsurprisingly, some choose to borrow extra money to cover the shortfall. Whether it comes from friends or a recognised lender, the inevitable consequence is a debt that stretches into the New Year. This is why you need to ensure that you take care when spending and borrowing during the festive season.
One of the most important things to do before you get caught up in all the excitement that Christmas brings is to set a strict budget for everything. So establish how much you have to spend on gifts, decorations, food, drink and everything else that comes with this hectic time of year. If you know you're going to come up short and your pay packet simply won't stretch as far as you need it to, then be proactive and plan ahead. Shave as much as you can from your respective budgets or see what finance options are available.
Maybe you can extend your overdraught, get some cash from a relative or even take out a short-term loan.
Beware when Borrowing
Any debt that you incur now will need to be paid off eventually, so don't get too carried away. Work out exactly how much you need, what you can afford to repay and how soon you are able to cover that cost. Only then can you establish what opportunities are available and which ones are likely to offer the most effective solution for your circumstances.
Not everyone will have friends or family who are able to offer support, particularly given the time of year. Therefore, many will turn to high street lenders and even payday loan companies. Both offer viable alternatives, but also present various risks. Take a bank loan as a good example; if you take out £1,000 over 12 months, this may leave you short later in the year, possibly causing further financial issues.
Equally, short-term loans, which are particularly popular at this time of year, can be expensive. With credit checks at a minimum and a much quicker turnaround (often applications can be completed and money deposited within hours), this popularity is easy to justify. As you will probably know though, payday loans do have a stigma attached to them. Some view them as a convenient way to get cash in dire situations, while others see them as cash cows for greedy middle men.
Interest is often 20 to 25% of the amount borrowed, and it will need to be repaid within a short timeframe - often only a month. Therefore you need to factor this in before applying, otherwise you may get stuck in a cycle of borrowing that can be difficult to break - particularly if you were to default or 'roll-over' payments. Look to use recognised lenders too and avoid middle-men wherever possible. While comparison sites traditionally help you to save money, it can be a lottery who you receive money from and what their track record is with customers. By going straight to a lender, you have a single point of contact as well as clear terms and conditions.
So make sure you enjoy your Christmas celebrations, but just take a little care with your spending. Remember, an unexpected bill or a car breakdown could derail your plans and upset any budgets, so don't cut things too fine. If you do need to borrow money, be sure to do so safely and sensibly - taking care to only apply for what you require.