Holiday Personal Loans: Smart Solution or Debt Trap?

Before You Borrow: Holiday Loan Pros and Cons

Year-end in the United States comes with a surge in shopping, travel, gifts, family events, and intense financial pressure.

It’s no surprise that this period also drives a spike in the demand for holiday personal loans: personal loans designed to ease seasonal expenses.

But the big question remains relevant: Is a holiday personal loan a smart solution or an open door to debt?

Why do Americans turn to holiday personal loans?

• Higher prices for flights and accommodations
• Cultural pressure to give gifts to friends and family
• Corporate and family events that require travel
• Promotions that encourage impulse buying
• The need to plan trips before winter extreme weather

It’s normal for a monthly budget not to absorb these expense spikes. As a result, many people look for personal loans.

Advantages: When a holiday loan can be a smart solution

Potentially lower rates than credit cards

In the United States, the average credit card APR surpassed 20% in 2025. A personal loan can offer lower rates—especially for borrowers with good credit.

For consumers with a credit score above 690, competitive APRs are common.

Fixed and predictable payments

Unlike credit cards—where debt grows if you only pay the minimum—a personal loan offers a clear schedule, with equal payments and a defined end date.

For anyone seeking organization, this reduces financial stress at the start of the year.

One lump sum for specific costs

For families who need to cover specific expenses, the loan provides a single amount that can be managed more easily.

Simple and fully digital process

In the U.S., platforms like SoFi, Upstart, Discover, LendingClub, and traditional banks offer fully online applications, often with pre-qualification that doesn’t impact your credit score.

Disadvantages: When a holiday loan becomes a risk

High interest rates for fair or poor credit

Here’s the reality: if your FICO score is average or low, your rates may approach—or even exceed—credit card rates.

In extreme cases, APRs can surpass 30%, making the loan difficult to sustain.

Encouragement of overspending

Fast access to credit can fuel impulse spending, gifts beyond your budget, extra trips, and overall overspending. In other words, credit can amplify pre-existing financial issues.

Accumulated debt at the beginning of the year

January and February are traditionally tight months for Americans.

During this time, people face higher household bills, heating costs, the start of credit card payments, and annual insurance fees.

Adding a personal loan on top of that may create a cycle of financial stress that’s hard to break.

Impact on your credit score

If you miss payments or pay late, your score may drop significantly—affecting future opportunities such as refinances, auto loans, or mortgages.

How to evaluate whether a holiday loan makes sense for you

1. Examine your true need

Ask yourself:

• Is this an unavoidable expense?
• Can I cover part of it with my current budget?
• Have I exhausted cheaper alternatives?
• Can I adjust travel plans to reduce costs?

If the loan only maintains a certain consumption pattern, it may be time to reassess priorities.

2. Compare APRs across lenders

Never accept the first offer. Compare traditional banks, credit unions, online platforms, fintechs, and digital banks.

A difference of 3–4 percentage points in APR can mean hundreds—or thousands—of dollars saved.

3. Choose realistic terms, not overly long ones

Longer terms lower monthly payments but increase the total cost. The ideal is to balance comfortable installments with a reasonable final cost.

4. Check for extra fees

Some loans include origination fees, late fees, and prepayment penalties. Choose lenders with full transparency and no hidden costs.

5. Evaluate your cash flow from January to June

Before taking a loan, simulate your budget for the first half of the year. If the installments will strain your finances, reconsider.

Alternatives to a holiday loan

• Adjust your November and December budget
• Sell items you rarely use, such as electronics or sports gear
• Use accumulated miles and reward points
• Make purchases before or after peak season
• Seek temporary support from a credit union, which often offers lower rates

These alternatives may reduce the need to take on debt.

Written by

Gabriel Gonçalves