Should you take out lending to finance Christmas spending?

The festive season is practically upon us, and some may be thinking about taking out a loan to help finance Christmas shopping – but you should think twice.

It’s a completely understandable impulse to want to celebrate the Christmas season in style; there’s a reason they call it ‘the festive season’ after all, and if you’re unable to exchange gifts or attend Christmas parties due to being low on funds, this can leave you feeling rather low at a time when everyone and everything is encouraging you to be merry. However, taking out short term loans to finance your Christmas spending is an absolutely terrible idea, as you may have a Merry Christmas but your New Year is going to be anything but happy if you’ve got payday advance lending due to be repaid.

merry days today for Tears tomorrow

Payday lenders are notorious for offering wonderful things right up front while downplaying the consequences of repayment of one of their ‘instant cash loans.’ In fact, the industry leader, Wonga, likes to downplay the fact that a typical payday loan from them will cost a borrower as much as 4,214 per cent in annualised interest, and that’s before taking into account whether or not the borrower repays the loan in time – if you miss your repayment deadline by even a day, Wonga can and will charge you exorbitant late fees and may even ‘roll over’ your loan for another month, leading to extortionate compounding interest.

The truth is many borrowers do end up not repaying their payday loans on time, simply because they lack the ability to do so for the same reason they needed to take the loan out in the first place: not enough cash flow. It’s one thing if you’re a week away from your next pay cheque and your washing machine develops a fault – in fact, payday loans are actually somewhat useful when it comes to emergency financial situations – but taking out a loan for what is essentially frivolous spending is just asking for trouble.

Spend responsibly and have a happy new year

It’s not easy to resist the temptation of taking out payday lending in order to have a happy Christmas season, especially if you’ve been bombarded with adverts online or on television for just such a short term loan. However, you should know that it’s actually illegal for lenders or their affiliates to advertise their services as ideal for Christmas spending, and it also violates several regulations to market lending to low income earners that may be in financial distress during the festive season.

So do yourself and your finances a favour: live within your means for the next five or six weeks, even if it may be a difficult task. It will make for a very happy New Year if you can start 2013 without hundreds of pounds in payday loan debt hanging over your head.

Image: Christmas Paint by cassie_bedfordgolf