Borrowing Money for Christmas? What to Consider Before Taking Out a Christmas Loan

Borrowing Money for Christmas? What to Consider Before Taking Out a Christmas Loan

StepChange’s 2025 YouGov polling found that 27% of British adults, around 14.3 million people, expected to struggle to afford Christmas. Around 4 million adults, or 8% of the population, expected to rely on credit to fund their festive spending.

Of those using credit, 43% expected repayment to take more than six months, while 17% expected it to take more than a year.

These figures show that while borrowing for Christmas may be necessary for some households, it makes sense to work out how much you actually need, what it will cost and whether the repayments fit your budget.

Why Do People Borrow Money for Christmas?

Christmas can bring plenty of extra costs, from presents and food to travel, parties and hosting family. MoneyHelper says UK households are expected to spend over £850 at Christmas, including presents, food and drink.

StepChange’s 2025 research found that 60% of people planning to use credit for Christmas expected to borrow more than the previous year, while 87% said the higher cost of living was a reason they needed to borrow.

If a gap in your Christmas budget is still apparent after planning your spending, borrowing may be considered. However, the amount of credit you need should be based on that budget rather than simply choosing a round amount and potentially taking on a bigger commitment than necessary.

What is a Christmas Loan?

When people talk about a “Christmas loan”, they are not referring to a special type of regulated credit. It is generally a personal or other form of consumer loan being used to pay for Christmas spending.

This means that someone searching for a Christmas loan could find very different types of credit, from a mainstream personal loan to high-cost short-term credit. The type of credit you choose will affect how much you repay and how long you will be making repayments for.

There are several different ways to borrow or spread a cost, so it is important to understand how they work before applying.

How Much Should You Borrow for Christmas?

First, work out how much Christmas is realistically going to cost you. Add up things such as:

• Presents
• Food
• Travel
• Hosting
• Events
• Any other specific costs for your circumstances

Then subtract money you have already saved and anything you can comfortably cover from your normal income. The amount left over gives you a much better starting point for deciding whether you need to borrow.

For example:

• Christmas costs: £800
• Already saved: £350
• Affordable from Oct-Dec income: £200
• Potential Shortfall: £250

The important thing is not to borrow more than you actually need. Borrowing less means having less to repay later.

How Much Does a Christmas Loan Cost?

There are several things you should consider when comparing the cost of a Christmas loan.

APR

APR helps you compare the annualised cost of similar credit products. A representative APR is one that the lender reasonably expects at least 51% of the credit agreements resulting from the promotion to receive at or below. It is useful for comparison, but it should not be the only figure you consider.

Total Repayable

This is arguably the easiest figure to understand. If you borrow £500, how much will you actually pay back in total before the loan is fully repaid?

Repayment Period

A longer loan term can make individual repayments smaller, but depending on the product and interest rate, you could pay more overall. A lower monthly payment does not automatically mean a cheaper loan.

Fees

Different lenders can charge different fees, such as late or default fees and early repayment or settlement charges. Check the terms before you apply.

Can You Get a Christmas Loan With Bad Credit?

There is no single universal credit score that every lender uses to accept or decline applications. Lenders use their own criteria to assess creditworthiness and affordability.

FCA rules require lenders to assess whether repayments are affordable and whether they can be made without causing significant financial difficulty or requiring the customer to borrow further.

A poorer credit history does not automatically make borrowing impossible, but it can affect which products or interest rates are available to you.

Understanding how your credit score and credit report work can make comparing borrowing options less confusing.

What About Buy Now Pay Later or Payday Loans for Christmas?

Buy Now Pay Later can allow specific purchases to be split into instalments, often interest-free, but it is still a form of credit. Several Christmas purchases can also create overlapping payment schedules.

Since July 2026, regulated third-party BNPL providers have stronger requirements around affordability and consumer protection. You can readmore about how Buy Now Pay Later works before deciding whether it is suitable for you.

Payday lending generally falls within the FCA definition of High-Cost Short-Term Credit. Interest and fees are capped at 0.8% of the amount borrowed per day, default charges are capped at £15 and total interest, fees and charges cannot exceed 100% of the amount borrowed.

These limits provide important protection, but high-cost short-term credit can still be considerably more expensive than other forms of borrowing. Comparing the total cost of different options is therefore important, rather than choosing based purely on speed or convenience.

Could Saving Reduce How Much You Need to Borrow?

MoneyHelper recommends setting a Christmas budget and saving in advance where possible. Even if you cannot save the full amount, saving part of it can reduce the remaining shortfall.

However, with household budgets already under pressure, saving for Christmas can be easier said than done.

At Cambrian, our Christmas Saver accounts are designed to help members save throughout the year, with savings locked from January to October. Even putting away £10 a month can give you £100 to put towards Christmas spending.

What Should You Check Before Taking Out a Christmas Loan?

MoneyHelper warns that Christmas borrowing can leave people facing repayments into the New Year and recommends budgeting before taking on debt.

If you are considering credit to help spread the cost, make sure you understand:

• How much you actually need to borrow
• The APR
• The total amount repayable
• How much the repayments will be
• How often they are due
• How long you will be repaying the borrowing
• Any fees or charges
• Whether you can repay early
• What other loans, cards, overdrafts or BNPL agreements you are already paying
• Whether the repayments will still be manageable once Christmas is over

The important question is not simply whether one repayment looks affordable, but whether all of your commitments together are affordable.

Borrowing for Christmas With Cambrian Credit Union

Here at Cambrian, we lend to people, not credit scores. While we can never guarantee that a loan application will be successful, all full applications are manually reviewed by a person.

Cambrian Personal Loans are available from £200 to £7,500, with rates from 15.9% to 39.9% APR. We also have no hidden or early repayment fees.

If you are considering borrowing for Christmas, you can use our loan calculator to see a breakdown of different amounts and repayment periods before deciding whether taking out credit is right for your situation.