How a Personal Loan Could Make Paying off Holiday Debt Easier

Don't consider borrowing for the festive season without reading this.

If you can afford to cover the cost of your holiday purchases without borrowing, this is the best option. Obviously, avoiding taking on debt makes the most sense since you won't have to worry about increasing costs due to financing charges and you won't have to worry about making payments on an ongoing basis for months or years to come.

Unfortunately, sometimes life happens and the holidays arrive before you have enough saved. If this is your situation, you'll likely want to spend as little as possible -- but you may have to spend something to avoid disappointing loved ones and to give yourself a little joy.

If you find yourself needing to borrow, a personal loan could be the best way to do it for a few key reasons.

1. You'll know the total costs upfront

A personal loan can make paying off holiday debt easier because it is much more predictable than if you take on credit card debt.

When you get a personal loan, you can opt for a fixed-rate loan so you'll know how much interest will be over the life of the loan. You'll also have a set repayment schedule so you'll know how much you have to pay each month and over time.

Since you can assess total costs before you borrow, you can make sure the debt you're taking on is both worth it to you and affordable going forward. This is a big contrast from credit cards where you are required only to make low minimum payments. That makes it so there's no guarantee of how long it will take to pay back what you're borrowing or how much you'll spend in financing charges by the end.

Having more certainty will make your life a lot easier since you'll go into borrowing fully informed and with a clear payoff plan.

2. Your repayment period will be clearly defined

As mentioned above, credit cards usually require low minimum payments. If you pay only the minimums, most of the money just goes toward interest and not bringing down your balance. As a result, you won't necessarily know exactly how long it's going to take to pay back what you borrow -- and you could end up spending decades covering the cost of this holiday's loans.

This won't happen with a personal loan. A personal loan has a set payoff time. If you take a two-year loan, for example, you will be free of it within two years as long as you make the payments on time. By sticking to a loan with this kind of set schedule, you won't commit yourself to paying for this one holiday season for years to come.

3. Your interest rate may be lower than if you used a credit card

Finally, personal loans often have a lower interest rate compared with credit cards -- and the lower the rate, the less it costs to pay off your loan in full.

For each of these three reasons, if you have to borrow for the holidays, using a personal loan to do it could end up making your future debt payoff easier and cheaper. Those are benefits you don't want to pass up.