Christmas borrowing should be planned now

Wed, 05 Oct 2005

Christmas is fast approaching and with it brings the worry of being able to afford the season’s festivities.

As a result people are being urged to make plans for their Christmas spending and borrowing now rather than leaving it until the last minute.

It is estimated that one in four people will borrow to pay for this Christmas. Consumers are being advised by independent financial comparison service www.moneyfacts.co.uk, to plan now so there is nothing to worry about it later.

The run up to last Christmas saw Britons spending £22 billion on credit cards. The figure could be much higher this year but cardholders will often be paying as much as 15.9 per cent in interest.

By planning ahead consumers can take advantage of zero per cent interest on introductory offers by credit card companies. By choosing the right card your Christmas and New Year spending will not build up any interest.

Sainsbury’s Bank carried out research last year which showed that one in five people had not cleared their Christmas bill by the end of January. The research found that it would take an estimated 168,000 people a year or more to clear the debt.

Anyone looking to borrow for a longer term the answer is a personal loan. You are likely to get better value than by borrowing on a credit card.

Moneyfacts gives an example of what average monthly repayments will be for an unsecured personal loan of £5,000 over three years. If the loan is taken out with payment protection insurance it will cost £181.22 a month or £156.63 without.

Samanatha Owens, Moneyfacts.co.uk credit cards and personal loans editor said, "With so many of us admitting we do not save for Christmas, it is inevitable that we will have to borrow the money in one form or another. Adding up the potential savings for cards and loans shows that there are hundreds of pounds to be saved by shopping around for financial products.

"Consumers should not take out the first personal loan or credit card they see. However, not all consumers will receive the attractive headline rate, so they should check the actual rate they are offered and whether this is still an attractive deal. With credit cards, there are numerous offers available for both balance transfers and introductory rates that offer zero per cent deals."
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