Holiday Expenses Can Be Expensive

by Guest on November 27, 2012

With the December holidays almost upon us, many people will find themselves under financial strain as they struggle to afford all the extra costs that seem to mount up at this time of year. Could a short-term loan be the right solution for you?

Even if you’ve paced your spending and purchased some of your gifts ahead of time, there never seems to be quite enough. Maybe you have extra gifts to get for unexpected visitors; or maybe you splurged a little too much early on and now find that the last few presents are straining your finances. Food and drink can also be a major expense, especially if you’re hosting the festivities this year. If you’re travelling or helping your loved ones to get home for the holidays, this can also create extra costs – especially if air travel or a long distance trip is involved.

A short-term loan is defined as any loan that must be repaid or refinanced within a year. Typically, short-term loans are intended to cover a temporary expense, with the intent that you’ll be paying them back fairly quickly. Obviously it’s a good idea to avoid borrowing unless you really need it. If you’re absolutely certain that you’ll have the money to pay back the loan inside a few months or weeks and it’s just a question of a small amount of money, however, a short-term loan may be ideal for you.

A short-term loan may be a better idea than a credit card, as it is finite in nature; you aren’t taking on a new, long-term financial commitment as you are with a credit card. Your payment schedule will typically be agreed in advance and won’t change from month to month. The temptation to put off major repayments in favour of only paying the minimum is removed – as is the temptation to spend a bit more and get further into debt. For this reason, a short-term loan can actually save you money in the longer term and helps you to manage your borrowing more effectively.

When taking out any loan, it’s vital that you know exactly what you’re getting into. Only borrow the minimum amount that you need; work out exactly what you need to buy and how soon you will be able to pay it back. Short-term loans can sometimes come with an alarmingly high interest rate, something that’s not always obvious when you glance over the terms and conditions. Be careful to work out exactly how much you’ll need to pay back each month and factor it into your budget.

Most importantly, do not borrow more than you can comfortably pay back. Note “comfortably” – don’t calculate the amount you can afford based on the assumption that you’ll dramatically cut back your spending. Short-term loans can become a major financial burden if you fall behind on your payments. This can often result in your loan being “rolled over” into a new, less favourable loan that costs significantly more. Borrow wisely; that way you can enjoy a happy holiday and a happy New Year.

About The Author

Darren Bechard is an independent finance researcher. He has been following consumer trends with regards to short term finance and reporting his findings on various personal finance blogs. Find out more about short term loans.

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