How to avoid the gift of financial debt this festive season
Christmas is the season for giving.
But, you should also be reminded not to gift yourself a debt as a result of the season. It can be very tempting to overspend on gifts and groceries during this time.
We’ve put together some handy financial tips to make sure you see out the holidays on the nice list, not the naughty one.
Firstly, there is always helpful, supportive financial counselling available if you are, or, find yourself in debt worry. Financial counselling is free and offered by not-for-profit organisations such as The Salvation Army.
Here at Ink Financial Solutions, we pride ourselves on offering non-judgemental financial support and advice to all our clients, regardless of their financial journey.
Don’t get trapped into thinking a Christmas loan is a special loan with special interest rates – they are not. Bank and lender marketing gimmicks aside, put simply, a ‘Christmas loan’ is a personal loan and works the same way as a regular personal loan – with interest rates, fees and terms and conditions. So beware and always read agreements.
Before taking out a Christmas loan consider the following:
- Budget and plan – how much income do you have left after regular expenses? This should be your maximum amount to spend.
- Make a list of presents that you would like to purchase and compare prices online and in-store – there can be large savings to be made, simply by shopping around. Buying online might save the temptation of impulse buying too.
- Get creative with Christmas gifts and wrapping – look for local gifts, create an experience, and make it yourself.
- Work out the repayments before you apply for a loan and ask yourself, ‘Can I afford the loan repayments?’
- If you already have debt, why worsen your financial situation with another loan?
If after working through all of the above, you decide additional funds for Christmas are required, the following is a list of lending options with pros and cons to consider. This is general advice only and you should consider your own financial position and other factors before deciding what is best for you.
Can be a quick and easy option for small amounts – up to $2000. Usually, no interest fees apply, however, there will be ridiculously high fees. Be aware of loan terms as well, which can range from as short as 16 days up to one year.
Standard personal loan
Flexible lending and a wide range of terms and repayment timeframes (from three months to seven years). Beware of high-interest rates, large lending limits – don’t borrow more than you need, even if approved for a larger amount than you apply for – and possible early exit fees.
Should not be treated any differently than any other time of year. If applying for a new credit card at Christmas you may be able to take advantage of a zero per cent introductory interest period – conditions will apply, so read the fine print first. If you have existing credit cards, investigate if you have any cashback or rewards accrued throughout the year you can use to cover costs at Christmas.
Buy now, pay later services
A short-term financing option where you take the item home now and pay for it over regular instalments – as short as six weeks. Many in-store financial options usually seen at large retailers (such as Harvey Norman) also align with buy now, pay later services and have special zero per cent promotions for big-ticket items, especially at Christmas. Keep in mind with these options, that while interest is not charged, you will be charged fees. A lot of buy now, pay later services make their money on late fees.
Centrelink cash advance
If you receive a Centrelink benefit, you can request an advance payment which is interest and fee-free. As you are accessing your own money, this is a safer option than searching for loans if you’re unemployed. However, keep in mind you will have less disposable income in your next pay or pay.