If your credit score is poor, get creative for the holidays.

We are weeks away from Christmas, and if you’ve watched any holiday movies, you know the world expects that your home should look a certain way, that your Christmas dinner must be perfect, and yes, that you’re supposed to go overboard, fulfilling the dreams of your loved ones by purchasing extravagant gifts.

I’m here to confirm what you probably already know: those spending messages bombarding us around the holidays are garbage.

Five reasons to avoid a Christmas loan

If your credit score is good to excellent and you need to borrow money, weigh whether going into debt for a Hallmark-perfect Christmas is the right move (it probably isn’t). If your score is low (580 or below), here are five reasons a Christmas loan is a terrible idea.

1. They are sometimes a payday loan in disguise

It can be tough to land a loan with a reputable lender when your credit score is low. Many Christmas loans marketed to consumers with poor credit are nothing more than a payday loan in Christmas wrapping. Because of how the interest rate is calculated, you may end up paying 400% interest or more.

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2. Even a “legit” loan can be expensive

Let’s say you find a lender who loans to people with low credit scores. However, the lender charges an annual APR of 35.99% (this is not uncommon when your credit score is low). You’re traveling for the holidays and want to spoil the kids, so you borrow $2,000 for 24 months. Your monthly payment is $113, and you’ll pay $712 in interest. That means your $2,000 loan will end up costing you $2,712. And remember, by the time you’ve paid it back, two more Christmases have come and gone.

3. Fees will cost you

Whether you borrow from a bank, credit union, online lender, or payday loan lender, you’re likely to pay expensive fees that eat into your Christmas fund.

4. Late payments damage your credit score

Are you willing to risk your credit score to create a Christmas fantasy? Late payments can wreak havoc on your credit score, and that can wreak havoc on your ability to land a great interest rate when you need it.

5. You’ll add to your debt load

Borrowing typically means going into the new year with more debt. Do you need the added financial anxiety?

Alternatives to Christmas loans

Instead of falling for a Christmas loan, consider one of these alternatives.


Count how many paydays until Christmas, and decide how much you can afford to take from each check to pay for Christmas. Make a list of everything you can afford to buy, and divide the list by the number of paychecks you have left. That’s how much you can spend each time you’re paid. You may not spend enough to leave your loved ones in shock and awe, but you will be able to give gifts to the people you love — and do it without risking your financial future.

Take on a side hustle

We don’t have much time before the holidays, but market your skills. Can you paint a straight line like a pro? Go online to your neighborhood message board, and offer to paint rooms in your neighbor’s houses. Can you create unique gifts (like wooden toys, handmade clothes, or festive tablecloths)? Offer your services. Maybe you can help hang Christmas lights, put up Christmas trees, or babysit while parents are out shopping. Now is the time to take on a side hustle, and let people know that you’re available. Use any money you bring in to pay for gifts.

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Borrow from family

If you must travel for the holidays and need money to get on the road, it is better to take a holiday loan from a relative than to borrow from a predatory lender. Do not borrow more than you can afford to repay in the next few months, and set up a repayment plan with whoever loans the money. Remember, the reason you can’t land a low-interest loan from a traditional lender is that you have bad credit. No matter how that bad credit came to be (even if it’s through no fault of your own), anyone who loans you money is going out on a limb, and trusts you to repay the funds. Do not let them down.

Bottom line

You’ve heard it before: It’s not the price of a gift that counts. I recognize how trite that sounds, but the truth is that the best gifts I’ve ever received were either handmade or purchased by my husband during the years we barely had two nickels to rub together. After all these Christmases, my prized possessions are still handprints in clay and a wonky-shaped clay bowl my sons made for me.

Why not be honest with the people you love? If you’ve been out of work, or if business has been slow due to COVID-19, lay it out. Even if you’re doing fine financially, why go into debt to fulfill someone else’s version of what Christmas is supposed to be?

Buy only what you can afford (if anything), and plan a special evening with the people you love. That may mean a drive through a neighborhood covered in Christmas lights, then home for a board game. It could mean ice skating on a pond, followed by hot chocolate. You might even have a family slumber party in the living room with popcorn and movies.

Years from now, the people you care about are going to remember their time with you. Focus on the memories that matter.

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