Is It Ever A Good Idea To Pay Off Your Holiday Debts Using A Personal Loan?

Holidays are generally extremely stressful due to the social interactions that you may have, along with the lack of time to take care of everything that needs to get done. Things get considerably more complicated if you also factor in the fact that you will feel a lot of financial stress once you buy presents, food, and pay all of your expenses. This is the point where some may consider that they should take out a personal loan to pay off their credit card debts.

Making this financial move does have several advantages, one of the most important ones being the fact that taking out a personal loan may be less expensive than the interest that you would pay for your used credit. However, there are also disadvantages that you need to take into account or you may end up having to pay considerably more than what you initially calculated. Here is what you need to know when looking to make things a bit easier for you during the holidays:

Advantages of using a personal loan to cover your holiday debt

  • You may get a lower interest rate

Personal loans are great ways to consolidate debt due to the fact that most lenders offer interest rates that are considerably lower than that of other types of loans. If you’re close to maxing out your credit cards and want to pay them off to avoid the large expenses that come with them, a personal loan will be extremely useful. Simply look for a lender that offers a loan with a lower interest rate than what you would have to pay on your credit card.

  • Prevent your credit score from dropping

The amount of credit that you use will have an immediate impact on your credit score, lowering it. Using a personal loan to pay off your credit cards will lower your credit utilization ratio, preventing your credit score from being affected. The personal loan itself will not affect your credit score unless you miss your monthly payments.

  • It can be used in order to pay for your debt faster

Using a personal loan to consolidate your debts can be a great way to avoid long payment plans that could keep you committed for several months. This having been said, you will have to look at the terms of the agreement and ensure that the shorter monthly payment for the personal loan will not increase its total cost.

  • It can make it easier to pay your bills

If you have several credit cards you will have to constantly worry about paying each of them so that the debt will not have a bigger impact on your credit score. Using a personal loan to pay at least some of them off can save you a lot of trouble. In the best-case scenario, you will be able to pay off all of your credit card debt and only have to worry about the monthly payments for the loan.

Disadvantages of taking out a personal loan

  • Your interest rates may not be lower than that of your credit card debt

It is important to keep in mind that interest rates fluctuate and some lenders offer very little flexibility in this respect. Generally speaking, if the interest rate offered for a personal loan is relatively close to the one that you have to pay on your credit cards, there won’t be much use in consolidating your debt.

  • Having more money at your disposal can be tempting

Using a personal loan to pay off your credit cards may tempt you in using them again before you get the chance to repay the money that you’ve borrowed from the bank. While you should be able to take out another personal loan and repeat the process, the cost of all the money that you borrow will add up and you may end up having to pay considerably more than what you expect;

  • There are loan fees to consider

Most lenders will charge you origination fees that usually equivalate to anything from 1% to 8% of the total amount of money that you borrow. This may not seem like much if you borrow $5000 you may have to pay a $400-$450 fee right from the start.


Using a personal loan to pay off your holiday debt is usually a great idea, but you have to be smart about it. There are many companies that offer personal loans, making it easy to shop around until you find one that offers advantageous terms and conditions.

Furthermore, keep in mind that a personal loan can help you keep your credit score intact, however, it can also cause it to drop if you are late with your monthly payments.

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