Watching Your Wallet: Should you take out a loan for holiday shopping?

Watching Your Wallet: Taking a loan out for the holidays
Published: Nov. 29, 2021 at 6:51 PM EST
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(WILX) - The holiday season is just around the corner and you might be in a panic mode when it comes to your finances.

Experts said the best scenario is to pay cash for things or to give gifts that don’t cost money, but if that’s not possible, should you use a credit card or take out a loan?

The first step is to look at your credit cards and figure out exactly how much you’d be charged in interest. Compare that with the interest rate of personal loans that are available to you.

Cherry Dale, a financial coach with the Virginia Credit Union, said you want to consider all your options before you decide which way to pay.

“Also look to see if you have points. A lot of us have points that we’ve accumulated that we can use for things like gift cards or purchases in stores before you actually utilize that credit card,” Dale said.

If you decide to take out a personal loan -- you can do loans like that for just $500 -- but the interest rate is usually higher because it’s unsecured.

“What that will give you is a set amount of time and a set interest rate to pay that personal loan back and a monthly payment that you know you’re going to get,” Dale said.

Which also might help you pay it back quicker because often with a credit card, people only pay the minimum, which means they are taking longer to pay it back and losing more money to interest.

Dale said your best course of action would be to pay off your holiday debt this year as soon as possible, and then start saving a little extra money throughout 2022 for your holiday shopping next year.

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