Households with poor credit histories have fewer savings or safety nets. It means the additional December and Christmas spending may lead to unnecessary debt. It affects their ability to borrow or get affordable interest rates and terms.
Moreover, the combination of increased costs, reduced capacity to absorb shocks, and pressure to ensure a decent Christmas among loved ones leads to additional stress. It is the reason “some households may choose between buying gifts or food according to MoneyAdviceTrust.” However, if they choose food, the expense would still be limited. Most wish to benefit from the discount codes to keep the costs low.
Instead, they prioritise value over quantity. And thus, sticking to the budget is important. It is because the true cost of Christmas for a family of 4 would be £655.78, according to the UK debt expert. A budget would help you limit spending and high debt.
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What is a Bad Credit Loan and How Can It Help at Christmas?
A bad credit loan is a financial facility for individuals who need urgent cash despite issues such as CCJs, missed payments, bankruptcy, or loan defaults. It prioritises an individual’s affordability over credit score for approval.
Individuals struggling to fetch small cash can check bad credit loans from direct lenders in the UK. One has high possibilities of getting a loan here if they can repay it on time. However, the interest rates and terms remain competitive due to the ease of loan approval.
How does a bad credit loan differ from a personal loan?
A bad credit loan is specifically for individuals struggling with credit issues. However, a personal loan is ideal for individuals with any (good or bad credit score. Here are the clear differences between bad credit loans and personal loans:
| Feature/Factor | Bad credit loans | Personal loans |
|---|---|---|
| Chances of approval | High chances of loan approval compared to traditional loans. You may provide collateral if you lack both income and a credit score. | Individuals with bad credit history may struggle to qualify or get high interest rates. You don’t need to provide collateral. |
| Loan amount | One may get a smaller amount to meet their requirements | Personal loans provide a good lump sum to counter the needs |
| Interest rates/APR/ borrowing costs | Some bad credit loans have representative APRs of 39.9%-80.9% | The interest rates depend on the creditworthiness of individuals. One with a good credit score may get better rates. |
| Risks | High interest, tight repayment terms and missed payments increase the loan costs. Non-repayment affects the finances significantly. | Personal loans have a flexible structure compared to bad credit loans. Individuals with stable income and good credit may pay the dues easily. |
How do bad credit loans help with Christmas expenses?
Aspects like unsecured bad credit festive loans from UK direct lenders may help you meet any Christmas-related expenses, like home renovation, buying gifts, new apparel, decorating the Christmas tree, travel, hosting a dinner, etc. Precisely, bad credit loans help you spread the cost of purchase into easy and manageable instalments. It allows you to meet any of your occasion-related requirements without depending on savings alone.
Categories that a bad credit loan may help you with during Christmas
| Aspects you can fund | Details |
|---|---|
| Gifts and presents |
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| Food and Christmas Dinner costs |
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| Decoration and festive supplies |
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| Travel costs |
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How is a structured payment plan on a loan better than Credit cards?
Yes, a bad credit loan offers the ease of repaying the dues according to your convenience. One may seek flexible options for bad credit borrowing for Christmas from the UK direct lenders online. For example, you can halt the payments, pay minimum, or reschedule according to your current financial setup. It reduces the chances of defaulting on the loan.
Alternatively, credit cards are a revolving credit facility where you cannot halt or reschedule payments. Moreover, unlike bad credit loans, you don’t know the exact amount that you must pay. It thus affects the budgeting ability and pays the dues timely.
You pay more interest on credit cards in comparison to bad credit loans.
How to Borrow Responsibly During Christmas in the UK?
Around 1 in 12 individuals will struggle to afford Christmas this year, according to StepChange.org. Within that vein, around 9 out of 10 say they may borrow for Christmas due to the high cost of living.
According to Vikki Brownridge, CEO of StepChange.org,
“Christmas is the time for joy and togetherness. However, it may also bring financial pressures. It is especially true for those struggling with debt and stringent budgets. The desire to make the festive season special with gifts and spending is natural. Yet, relying on credit can lead to stress and hardship the following year.”
Therefore, it is important to ensure responsible borrowing, especially with bad credit Christmas loans in the UK online. Here are some ways to do that:
- Borrow only what you need
Understand your cash requirements and savings. Check how much you can fund using the available savings. Later, borrow the remaining amount to counter the needs. - Compare interest and repayment options
Don’t go for the first quote. Instead, compare your loan options by checking the interest rates, APR, and total loan costs. Factor in the hidden costs (if any). Pre-qualify with multiple loan providers to know your options. - Set a realistic budget
If you want to reduce the expenses, create a budget. Identify how much money you need to plan and finance Christmas expenses. Start saving early in fixed bits to allocate good savings. It would help you avoid reliance on loans and Buy Now, Pay Later schemes. It is the answer to how to borrow safely with bad credit for Christmas from a UK direct lender. - Avoid borrowing for useless things
Considering a personal loan should have a specific and important context. It must help you meet a present need or avoid a future financial disaster. Don’t borrow money for things like- upgrading your OTT plan, buying more dresses, etc. It would not be ideal from the investment perspective.
Alternatives and Complementary Strategies In the UK
Undoubtedly, managing bad credit Christmas budgets with UK direct lenders is helpful. However, depending on external finance alone is not the ideal way. Instead, check the alternative strategies:
- Use a small pot for savings/ emergency pot
Create an emergency fund by deciding on an amount that you can save per month, at least 5 months before Christmas. It will help you counter the urgent expenses without depending on Buy Now Pay Later aspects or even personal loans. Consistent savings help you build good interest and a pot over time. - Split festive costs among family
It could be a good way to save enough without burdening your budget. Identify how much each member of the family could save towards Christmas, given the income and expenses. Decide on a fixed amount and put it towards a separate savings account. It may help you save enough if done sincerely. - Plan early for next Christmas
It is always better to identify the expenses and start planning from the beginning of the next year. It may feel tiresome, but the thought of avoiding the vast interest rates may prove rewarding.
Bottom line
Thus, it is clear from the article that bad credit does not stop you from meeting your occasional dreams and expectations. It is just about identifying the right loan and using it responsibly to fund your needs. Compare interest rates, APR, and other costs to fetch the most affordable quotes. Alternatively, reduce reliance on financial products and save early to ensure a comfortable Christmas.
When someone writes about UK finance, both research and experience should be visible. Ken Stokes is a prime example of this. He is a well-experienced finance writer and author and possesses years of experience. He is currently responsible for the position of Senior Loan Executive at 24loanswales. He joined the organisation 6 months ago, but he already has enough experience to guide someone on any loan product.Ken Stokes is a PhD holder in the Business Finance stream. Therefore, he has extensive knowledge of the UK finance sector.
Being part of 24loanswales, he has already written research-based blogs for the company’s website. Start reading his blogs here before applying for any loan.
