Borrowing money for Christmas: Golden Rules

There’s many easy ways to fall in to debt over Christmas, from getting loans, overspending on credit cards, going into overdrafts and taking out store cards. If you know you are going to need to take out some form of credit – some are better than others. Make sure you know the common terminology used with borrowing money what you’re getting into first.

• Know the APR
• Understand Income insurance
• Find the best loan or credit card
• Seek debt advice first

Know the APR

APR stands for Annual Percentage rate and is the method you can use to compare what credit option will be the cheapest. Always find out the APR before you enter into a credit agreement

Understand Income insurance

Most loans will try to sell you optional insurance protection, which covers you if you become unable to work or lose your job. These can increase the cost of your loan so do be careful and remember that you don’t have to get your insurance from the same place you get your loan from, should you find better or cheaper insurance elsewhere. Before you agree to any insurance, know exactly what you are covered for and what is excluded.

Find the best loan or credit card

Always shop around for the best deal when looking for a loan or credit card. Interest and other fees vary greatly between lenders and the only way to find the best deal is to look around.

If you are looking for a loan, calculate what the loan will end up costing you by the end of the loan period, for example, one loan that specifies in it’s terms you must pay it back over a years period but has a fairly low interest may end up costing you more than a higher interest loan that you can pay off within a few months.

Seek Debt Advice First

If you’re already in debt, pursuing another line of credit may not be the best idea. Consult with a debt counsellor first. They can recommend the best path of action for you and advise you on potential debt solutions so you don’t end up paying off Christmas for the rest of the new year.

Read our advice on avoiding debt at Christmas and Christmas debt traps for more debt advice, or contact the Debt Advice Trust.