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The Myth Of The Christmas Loan
By: Rachel Lane
If you think Harry Potter was going to be the most imaginative marketing plot
this Christmas, think again. Each Christmas, as consumers look at their finances
and investigate the different sources of funding to cover their Christmas
shopping, loan companies and credit card providers polish up their marketing
tactics and customer service skills.
No doubt some of you will see an advertisement for a Christmas loan over the
next few months. Unfortunately for you, it’s not provided by a jollyvaceous
(curvy and happy) bearded man in a red, furry suit. It’s more likely to be a
cunning marketing initiative by a loans company designed to exploit consumer
cash concerns over Christmas.
If you need credit over Christmas – you will probably fare better with a credit
card, but if you have to take out a loan, you’d be better off searching for a
standard personal loan, on a secured or unsecured basis. There are plenty of
sites which offer price comparison services for credit cards and loans. The most
popular ones include moneynet, moneysupermarket and lowermybills, but if you
really want the best deal – why not visit them all and cross-reference the
fairest deal.
When searching for a credit card – there are several things you need to
consider. Firstly, you may wish to transfer existing debt from your old credit
card, by taking advantage of an introductory interest free period on a new
credit card. Despite the apparent 0% interest rate on all balance transfers – do
ensure that you are genuinely being charged no interest and that once the
interest free period is over – you’re not going to be hit by an unusually high
APR (Annual Percentage Rate) – the interest rate. Also look out for additional
charges and hidden fees on the credit card and make sure you have set up your
account for minimum repayments.
Credit cards offer you greater flexibility in your repayments than personal
loans, though credit cards may be sold with higher rates of interest. You can
pay off the balance on your credit card early without a charge and as long as
you track what you’re buying on plastic and set up minimum repayments, you’re
likely to manage the debt effectively. However, do bear in mind that late
repayments and fines may affect your credit history, so don’t assume that just
because you can’t see the debt that it isn’t there.
Personal loans can be a suitable credit solution – if you need to make the
repayments over a longer period. However, you need to be realistic about the
total repayments – firstly, that you can afford them and secondly – that you’re
prepared to make all of them. For example, if you decide half-way through the
term of the loan that you could actually afford to pay it off in full, you
should be aware that there will probably be an early repayment charge which may
bring the amount to the same as the total number of repayments.
Credit is for life, not just for Christmas; what you pile on to plastic in
December may lead to a significant financial hangover in January. The best thing
you can do is plan your shopping in advance, shop around (including online) and
stick to your list of what you intend to buy – no impulse purchases!
Resources
http://www.moneynet.co.uk/loans/index.shtml Price comparison research for loans
http://www.moneynet.co.uk/personal-loan-guide/index.shtml Personal loan consumer
guide
About the Author:
Rachel writes for the personal finance blog Cashzilla – a mighty
personalfinanosaurus living in the hills around Edinburgh. http://www.cashzilla.co.uk
Contact details: Rachel Lane E-mail: rachel@positiveinterest.com Phone: 0131 5612251
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