Holiday loans are advertised as a solution to holiday budgeting shortfalls, but they could cause more problems than they solve. That’s because holiday loans are really just personal loans marketed specifically for holiday shoppers. The reality is, these loans come with APRs ranging from 5.99% to 35% APR, and monthly payments that can last for years.
Not having the cash you need for holiday gifts is a downer for sure, but paying a high APR on holiday debt for years to come sounds a whole lot worse. For that reason, you should probably steer clear of holiday loans if you can figure out a way to avoid them. Here are some alternatives you can consider. (See also: Here Are the Right Ways (And the Wrong Ways) to Use a Personal Loan)
1. See if you can trim your holiday budget
Taking the time to figure out who you really need to buy for can solve a lot of problems if you’re short on cash this year. It’s possible you could cut out gifts for co-workers or distant friends, and it may be time to drop any gift exchanges you typically participate in.
Also, figure out if you can spend a little less on everyone who does make your list. If you can lower per-person spending to $20 from $30 for 10 people, for example, you’d see a savings of $100 right away.
The holiday season isn’t about gifts anyway — it’s about faith and family. Your family and friends may not notice if you spend a little less this year, and they probably wouldn’t take it personally if they did. (See also: 6 Steps to Avoiding Credit Card Debt Over the Holidays)
2. Sell your unwanted items
If you really need more money to spend this holiday season, taking stock of items you own and no longer want could help you bridge the gap. Find some stuff you can sell and you could be well on your way to covering everyone on your shopping list.
The internet makes it easy to market and sell stuff you no longer want — items like clothing, exercise gear, electronics, and home decor. Try selling items on eBay, Facebook marketplace groups, or even Craigslist. If you have extremely nice clothing and accessories to sell, you can also try ThredUp and Poshmark — both of which make it easy to sell used clothing, shoes, and more to buyers nationwide.
3. Hustle on the side
While finding part-time or temporary work isn’t possible for everyone, finding a way to hustle on the side for a few weeks can help you get more cash for the holidays. If you’re able to pick up more hours or shifts at work, that’s a good place to start. If not, you’ll want to look for easy ways to earn money on the side.
Consider walking dogs or pet-sitting with Rover.com, completing simple tasks with TaskRabbit, or even driving for Uber or Lyft. You could shop for groceries with Instacart or Shipt, or you could take online surveys from home to earn gift cards, Paypal cash, and more. (See also: 15 Lucrative Side Hustles for City Dwellers)
4. Cash in any rewards you have
If you have any rewards built up on a cash back credit card or rewards credit card, now may be the perfect time to cash them in. Many cash back cards let you redeem points for merchandise through a portal, creating the perfect way to shop for free. You can also cash in rewards from many cards for gift cards you could give as gifts or for holiday shopping.
Keep in mind that you should try not to use rewards or cash back cards for holiday gifts unless you have the cash to pay your balance in full. Where personal loan rates start around 5.99% APR, the average credit card interest rate is well over 17%. That makes carrying a balance on your credit card an expensive burden and one you should avoid.
5. Consider a 0% APR credit card instead
There’s one exception where it might make sense to use a credit card for holiday shopping instead of a personal loan or other options on this list. Some balance transfer credit cards, also called 0% APR credit cards, let you access a line of credit without interest for a limited time. For this strategy to work, however, you would need to find a 0% APR card that lets you avoid interest on purchases and not just balance transfers.
There are a lot of risks that come with this strategy, and it all starts with the fact that these offers only last for a limited time. Most 0% APR credit cards let you avoid interest for up to 15 months, although a few have longer offers. Either way, your interest rate will reset to the card’s regular rate after the introductory offer ends, and those rates tend to be high.
The best cards that offer 0% APR on purchases come with the longest introductory offer possible and no annual fee. Some even offer rewards and a sign-up bonus you can earn within the first few months.
Just remember that you’ll wind up paying off debt at a high interest rate if you don’t pay your balance in full before your offer ends. To avoid long-term debt, only charge holiday purchases you know you can pay off before your card’s offer ends.
The bottom line
The holidays are supposed to be about family and friends, but the holiday shopping season can make feeling hopeful and happy an impossible feat. And when you’re short on cash, it’s easy to feel guilt over not being able to afford many gifts.
Ideally you’ll be able to find some middle ground that lets you be generous to those you love without going into debt. Spending less this year can go a long way toward making the holidays more bearable, but hopefully you can find a way to earn more, too. If you can do both, it’s possible you’ll get through the holiday season without ruining your finances.