Payday Loans for Christmas Gifts: A Good Idea?

Taking payday loans for Christmas gifts is not a sensible way to handle your money. It is true you will find many lenders willing to fund your payday loan as long as you can confirm a future paycheck. Just because the lender is willing, though, does not mean you should take the steps to go into debt.

Risks of Payday Loans

The main risk of payday loans is the high interest rate assumed by such a high risk lender. The rate can be above 20% on most loans, meaning you will end up owing a fee well over the amount you are expecting on your next paycheck. If you are like most payday borrowers, you do not have cash set aside to repay this loan.

As such, you will end up in a cycle of debt with the lender, never truly paying off the sum you owe each month. Payday lenders are well aware that a cycle of debt is the most common result of extending loans to people who do not meet basic loan criteria. While most lenders would avoid this debt cycle, payday lenders use it as a mechanism for profit, charging higher interest rates each time you are unable to repay the debt in full.

When to Take a Payday Loan

There are very few times when it is advisable to take a payday loan. Spending on unnecessary purchases, such as Christmas gifts, is not one of those times. The risks of the loan are only worth taking if you are in:

  • Default
  • Eviction
  • Without a car to get work
  • Need medical care

Even with these circumstances, it is best to first ask family and friends for assistance meeting the payment requirements. You may also consider high risk personal loans from banks and traditional lenders. If you are completely out of options, then a payday loan may provide a bump to get you through to the next month's paycheck. However, you should be constantly aware of the fact your loan will be due in a sum greater than you took out in the near future. Working a part-time job, saving money where possible and avoiding any new debt is essential to closing your payday loan successfully.

Alternatives for Purchasing Christmas Gifts

Since payday loans are not a good option to fund Christmas gifts, you will have to consider other options. Credit cards are the most common source of financing for Americans during the holiday season. You can charge your gifts now and pay them off over time throughout the year. If you are not able to secure a credit card, then it is better to avoid spending any money on Christmas gifts.

Think outside of the box and consider giving gifts like: baked cookies, cooking meals or offering other kind gestures to friends and families will allow you to still give a gift without spending money.


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