What Options you Have Available if you are a Little Short Over the Holiday Period

Finding yourself short on cash during the expensive holiday period is a common situation for many people in the UK. 

While the festive season can be a joyful time, it often comes with unexpected costs for gifts, travel, food, and social events, with the average family spending up to £1,000 to make Christmas jolly.

What’s more, with many employers graciously giving their staff an early Christmas wage around the middle of December, it can be around 6-7 weeks later before getting their next pay check at the end of January. This can lead to a long time period without any income and a Christmas hangover.

Knowing your options and how to manage them carefully can prevent debt from spiraling and help you enjoy the holidays without long-term financial stress.

Using Credit Cards

One option is to use a credit card, especially if you have access to a card offering a 0% balance transfer or 0% purchase period. These cards allow you to spread the cost of purchases over several months without paying interest, as long as you pay off the balance before the promotional period ends. 

According to recent data, over 40% of UK adults use credit cards during the festive season to manage extra spending. 

However, it is essential to be disciplined. If you do not repay the balance in time, interest rates can jump to over 20% per year, which can quickly make the debt harder to manage. Credit cards can be a useful tool when used strategically, particularly for planned spending or emergency purchases.

Personal Loans

Personal loans are another option if you need extra cash. Emergency or short-term loans can provide a lump sum that covers the costs of gifts, travel, or celebrations. 

These loans are available from banks, credit unions, and online lenders, with varying interest rates. While a personal loan may offer fixed monthly payments and a clear repayment plan, loans for emergencies can often carry high rates, sometimes exceeding 100% APR. 

This makes them an expensive choice if the money is only needed for a short-term period. It is important to compare rates carefully and borrow only what you can realistically repay to avoid additional financial stress after the holiday period.

Overdrafts

Overdrafts are a quick way to access extra cash, but they should generally be avoided unless it is a last resort. 

Many UK bank overdrafts charge high interest on unarranged borrowing, sometimes over 39% APR. Even arranged overdrafts can be expensive if used for an extended period. 

Using an overdraft for non-essential spending, such as holiday gifts, can make repayment difficult in the new year. Overdrafts are better reserved for emergencies rather than planned holiday expenses.

Borrowing from Family and Friends

Borrowing from family or friends is another option, and it can be cheaper than formal credit if they do not charge interest. This approach requires careful communication and clear repayment agreements to avoid potential conflicts. Discussing timelines, amounts, and expectations in advance is important. 

According to surveys, about 25% of adults in the UK have borrowed from friends or family in the past year for short-term financial needs, highlighting that it is a common and accepted approach. While this can ease immediate pressure, it should be used responsibly to maintain personal relationships.

Buy Now, Pay Later (BNPL) Options

For smaller purchases, such as gifts, buy now, pay later schemes can be a useful tool. BNPL services allow you to spread the cost of individual items over weeks or months, often interest-free if payments are made on time. 

In the UK, the use of BNPL has grown rapidly, with more than 10 million adults using such services in 2024. It is important to read the terms carefully, as missed payments can result in fees and impact your credit rating. BNPL is most suitable for controlled, planned spending rather than covering large unplanned expenses.

Managing Spending Carefully

Whichever option you choose, the key is to plan and manage spending carefully. Creating a budget for gifts, travel, and entertainment can prevent overspending. Understanding the interest rates, fees, and repayment terms of each borrowing option is crucial to avoid turning short-term convenience into long-term financial stress. 

Combining careful budgeting with strategic use of credit cards, personal loans, BNPL, or borrowing from trusted friends and family can make the holiday season more enjoyable and financially sustainable.

In summary, short-term financial solutions during the holiday period include credit cards, personal loans, overdrafts, borrowing from family or friends, and BNPL schemes. Each has advantages and risks, and choosing the right option depends on your personal circumstances and ability to repay. Planning ahead and using these tools wisely can help you cover holiday costs without creating long-term debt problems.