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You can enjoy the holidays as much as the next person, but you have to admit something. Financing all the travelling and gift-giving puts pressure on your budget.
If you come up short of what you need, an installment loan might appear as a handy shortcut to your financial problems. After all, everyone borrows money to bridge the gap sometimes, so why can’t you take out a loan for the holidays?
Any legitimate direct lender of installment loans will tell you there’s a time and place to borrow. Sometimes, it makes sense. Other times, it promises a financial headache in your future.
Rule #1: Installment Loans Are for Emergencies
An unexpected emergency is one of the few times when an online installment loan might fit into your holiday plans. That’s the sole reason these loans exist — to help you cover unexpected expenses you can’t ignore.
In other words, you shouldn’t borrow money for things you can expect in your budget, like holiday spending. You also shouldn’t borrow money for things that aren’t expressly necessary.
Why? Because borrowing costs money. You will have to pay interest and finance charges on the amount you borrow, so it increases your costs. These fees aren’t worth a toy your niece will grow out of in half a year.
What Constitutes a Holiday Emergency?
What does the unexpected look like this season? It’s different for every person. Only you can decide whether an expense is truly urgent and essential.
Let’s look at the three examples below for more insight:
1. Household Repairs:
Emergency: The temperatures plunge, and you turn up the furnace. But your faulty appliance won’t heat your home.
Why is borrowing an option? If you live in a cold climate, your safety relies on a working furnace. You may need to hire a repair technician, even if you don’t have the cash to cover their invoice.
2. Auto Repairs:
Emergency: Imagine leaving the shopping mall with all your gifts in hand, only to see someone dinged your taillight in the parking lot.
Why is borrowing an option? If the person didn’t leave their information, you’re on the hook for these repairs, even if you can’t afford it. While you might be able to ignore a paint scratch,you have to repair a broken taillight. You could get slapped with a minor mechanical violation and a fine if you don’t!
3. Medical Expenses:
Emergency: You grab your trusty potholders to pick up a bubbling pot of potatoes on the big day. As you move toward the sink, the loop on your left potholder snags on something. In a flash, half of the boiling water splashes over your exposed forearm.
Why is borrowing an option? Kitchen burns are no joke; they can lead to serious second- and third-degree burns. You may need to borrow a loan if you don’t have insurance or your deductible is too costly.
The Takeaway:
A rule that says you should never borrow isn’t practical. In real life, you can encounter household and medical emergencies that introduce surprising costs that you can’t delay. Borrowing in these situations might help you cover these unexpected expenses without putting your home or life on the line.
A more realistic rule is borrowing only in emergencies when you have no other options. Following this rule might involve spending less on the festivities. But all that hard work is worth it if you avoid unnecessary debt in the new year!