Loans for holiday spending – or Christmas loans – are a tempting proposition, especially on tight South African budgets. But should you borrow to shop for the festive season?
Our answer isn’t a definitive “no”. However, be certain of what you’re getting into and make an informed decision, based on your circumstances.
A way of thinking about holiday loans
Financially speaking, it’s not a good idea to take on debt to fund unnecessary, luxury purchases, like holiday or Christmas expenses. That said, life is short.
Financial security may be desirable, but, sometimes, doing what we love doing best, like spending time with family and friends, is more important than rands and cents.
The key is to find a balance between fiscal stability and quality of life. That may mean sacrificing monetary goals for some well-deserved Christmas cheer.
Ways to reduce Christmas spending without spoiling the fun
Christmas may be about giving, but there’s no need to max out the credit card or blow the monthly budget to create a holiday vibe.
Easy ways to cap costs include making your own presents or opting for a fun family outing instead.
Reusing last year’s Christmas decorations, and recycling newspapers and magazines as gift wrap, saves time, money and the environment.
Accessorising with ribbons, bows and metallic silver and red spray paint creates the perfect Christmas ambience.
Rather than slaving over a hot stove, serve quick, easy and affordable dishes like Coronation chicken, pulled pork sliders and boerewors rolls with mustard, relish and watercress.
Ideally, you want to set a Christmas budget well ahead of time, keeping a tight rein on holiday spending.
Taking the time to do simple things, like comparing gift and grocery costs, can make the difference between a bleak and happy new year.
Arguments against getting a loan for Christmas spending
When you borrow money to cover discretionary expenses, like buying Christmas gifts and expensive cuts of meat, you’re taking on bad debt.
The loan is used to pay for what you want, not what you need. Once the funds are exhausted, that’s it. For most South Africans, that means getting deeper into debt.
This type of debt has a knock-on effect.
Irresponsible Christmas spending can impact your credit score. That makes it more difficult – and expensive – to get vehicle finance, a personal bank loan or mortgage bond in the future.
On the other hand, using a loan to start a viable business or buy property is good debt. It has the potential to increase long-term wealth.
Depending on your situation, the risks associated with getting a Christmas loan may far outweigh the perceived benefits.
Why getting a Christmas loan might make sense for you
Decisions are seldom only about what makes the most financial sense. We all have other goals.
You may want to take your family on a once-in-a-lifetime holiday or spend Christmas with their grandparents overseas.
Perhaps it’s your turn to host the family for a seasonal spread. Maybe you simply want to live it up a little after the challenges of the pandemic.
These are the times when taking on debt to fund non-essential holiday spending may make sense.
Christmas loans: what to bear in mind
Christmas loans, as with all loans, have to be paid back. If you can’t afford the repayments, borrowing money is not an option.
If you decide to go ahead, make sure you’re dealing with a reputable finance provider. Always read the fine print.
Some lenders impose early or late settlement penalties, and are not transparent about their fee structure. That can escalate the cost of Christmas by a quantum leap.
At Lamna, we offer fast, discreet loans against the value of a wide range of assets, from luxury watches and jewellery to vehicles and artwork. You can leverage your assets to have a festive holiday season.
Contact us on 086 111 2866 for more information about whether you should borrow to shop and get a Christmas loan with Lamna. Alternatively, apply for a short-term, asset-based loan online.
ILLUSTRATIVE EXAMPLE
Client borrows R10,000 for 90 days.
Loan Amount | Repayment Period | Monthly Interest | Total Cost of Loan | Initiation Fee | Monthly Fee | APR |
---|---|---|---|---|---|---|
R10 000 | 3 months | R500.00 | R2 914.50 | R1 207.50 | R569.00 | 60% |
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.
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