Month: December 2021

Loans Serivces

Home Equity Loan to Pay Off Credit Cards

Kevin Smith

Using a home equity loan to pay off credit card debt can be a smart move, but it’s not without risk. Since credit card debt usually has a much higher interest rate than mortgage debt, you could save money and get out of debt faster with this strategy.

The big risk is that if you can’t repay the home equity loan, you could lose your home. Not repaying your credit card debt can also have serious consequences, but you’re less likely to lose your home.

Here’s what you need to know about paying off your credit card debt with a home equity loan:

How to use a home equity loan to pay off credit card debtHome equity loan limitsBenefits of using a home equity loan to pay off credit card debtDrawbacks to using a home equity loan to pay off credit card debtHow to pay off credit card debt without a home equity loan>How to pay off credit card debt without a loanIs a home equity loan to pay off credit cards right for you?

How to use a home equity loan to pay off credit card debt

To pay off credit card debt with a home equity loan, you’ll first need to qualify for a home equity loan. Home equity is the part of your home’s value that you don’t owe to the bank. For example, if your home is worth $350,000 and you owe $250,000 on your first mortgage, your equity is $100,000, or about 28.5%.

A home equity loan, also called a second mortgage, will let you access a portion of that $100,000 as a lump sum. You can use the money however you want and take up to 30 years to repay it.

The long repayment period and fixed, lower interest rate can immediately reduce your financial stress. And if you avoid taking on new credit card debt, your home equity loan can help you make steady progress toward getting out of debt for good.

Home equity loan limits

On average, the most you can usually borrow between your first and second mortgages is 80% of your home’s value. This percentage is called your combined loan to value ratio, or CLTV.

Some lenders have stricter loan requirements and limit borrowing to 70% of your CLTV, while others have looser requirements and may let you borrow up to 90%. Your financial profile will also affect how much you can borrow.

Here’s how to calculate your home equity:

Home value － Mortgage principal balance = Home equity

So, let’s assume again that your home value is $350,000, your mortgage principal balance is $250,000, and your home equity is $100,000. With a $250,000 mortgage balance, you’re already borrowing against 71.5% of your home’s value. The strictest lenders that limit CLTV to 70% wouldn’t approve your home equity loan application.

Others might let you take out a home equity loan (or a home equity line of credit) for anywhere from $30,000 (80% CLTV) to $65,000 (90% CLTV).

Tip: Lenders want you to keep some equity because when your own money is at stake, you’ll do more to avoid foreclosure. It assures them that you’re committed to keeping your home and they won’t lose money on your loan.

Along with having enough equity, you’ll also need to meet these qualifications:

A credit score of at least 620Verifiable incomeA debt-to-income ratio of 43% or less

Benefits of using a home equity loan to pay off credit card debt

Using a home equity loan to pay off credit card debt can have several benefits:

They offer lower interest rates than credit cards. The typical credit card interest rate for someone carrying a balance is approximately 17%, according to the Federal Reserve. But home equity loan interest rates can run as low as 3% for highly qualified borrowers.They have a long repayment period. A home equity loan’s term can be as long as 30 years.You’ll enjoy lower monthly payments. A lower interest rate plus more time to repay your loan can improve your cash flow.You can borrow more money. Depending on how much home equity you have, you may be able to borrow more with a home equity loan than with other options, like a personal loan.They have fixed rates. The unpredictability of a variable APR on a credit card can make it harder to pay off debt. A home equity loan will lock in your interest rate for the entire repayment period.

You can also pay off other debts with a home equity loan.

Drawbacks to using a home equity loan to pay off credit card debt

Using a home equity loan to pay off credit card debt can also have drawbacks:

It won’t save you from bad habits. If you haven’t learned new money management skills to replace the habits that got you into debt, using a home equity loan to pay it off will only be a temporary fix. (Of course, bad habits aren’t the only reason people get into credit card debt: illness, unemployment, and emergencies can also be the cause.)Your home will serve as collateral. A home equity loan is secured by your house, so if you default on the loan, there’s a chance it can be foreclosed on. Credit cards don’t have collateral. That said, if you default on your credit card bills, a debt collector could obtain a judgment against you and force the sale of your home, depending on your state’s laws and how much equity you have.It might be harder to sell. The more you owe on your home, the greater your risk of owing more than your home is worth if the market declines. This situation is called being underwater. If you’re underwater and want to sell your home, you’ll have to tap into your savings to pay off your mortgage.You might pay more interest in the long run. Despite getting a substantially lower interest rate on a home equity loan, if you take a lot longer to pay it off than you would have taken to pay off your credit card, you might not achieve the savings you expected.You might pay closing costs. Any closing costs you have to pay will reduce your savings from refinancing your credit card debt. Some lenders don’t charge closing costs on home equity loans, but they might bundle these costs into a higher interest rate.

Learn More: Refinancing a Home Equity Loan: What You Need to Know

How to pay off credit card debt without a home equity loan

Before you take out a home equity loan to pay off your credit card debt, research these alternatives so you can choose the best option for your situation:

Personal loan: A personal loan allows you to borrow money based on your income and credit score. A personal loan is usually unsecured debt, which doesn’t directly put your assets at risk.Debt consolidation loan: A debt consolidation loan is just a personal loan that’s marketed as a way to pay off multiple debts.Balance transfer credit card: Many credit cards offer a low introductory interest rate on balance transfers. If you have excellent credit, the rate can be as low as 0%. However, you’ll also pay a balance transfer fee of the amount transferred, usually 3%. If you miss any payments or don’t pay off your balance before the introductory rate expires, this strategy can become costly.Cash-out refinance: A cash-out refinance replaces your first mortgage with a new, larger mortgage and deposits the difference in your bank account. This loan may be a good choice if interest rates have dropped since you took out your mortgage. However, you’ll have to balance the potential savings against the closing costs of a cash-out refinance and the risk of using your home as collateral. 401(k) loan: If your plan allows it, you may be able to borrow against your 401(k) to pay off credit card debt. You’ll repay the loan to your own account with interest. But you might have to pay early withdrawal penalties if you don’t repay the loan, and you risk falling behind on saving for retirement. Credit counselor: A credit counselor can offer personalized guidance and accountability to help you pay off your balances. Just be sure they are reputable — there are plenty of debt relief and credit repair scams that consumers regularly fall prey to.

Credible makes refinancing easy. You can see personalized, prequalified rates from our partner lenders in just a few minutes. We also provide transparency into lender fees that other comparison sites typically don’t.

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How to pay off credit card debt without a loan

You also have options for paying off your credit card debt without taking out a loan of any kind:

Trim unnecessary spending. If paying off credit card debt is a priority, you’ll have to deprioritize something else. Cut any unnecessary expenses from your budget, like streaming subscriptions or cable. Rent out part of your home. A drastic move that slashes a large expense — like renting out your basement or another room in your home — might also be an option if you’ve already slashed your discretionary spending.Seek a raise. The best raises often come from changing employers and negotiating a better salary and benefits package. If you’re up for it, this path could get you out of debt faster or with fewer spending cuts.Create a spending plan. Before you get your next paycheck, allocate every dollar to a specific purpose. Try a debt repayment strategy. If you have more than one credit card to pay off, strategies such as the snowball method or avalanche method could help you build momentum toward getting out of debt.Pay more than the minimum. Maybe you can only pay $5 over the minimum, or maybe you can pay double. Just keep moving forward and don’t add new charges to your card.Automate your payments. If your cash flow is consistent, automated payments can help you avoid late fees and penalty rates. If you don’t have automatic payments turned on or prefer not to have them, set up multiple calendar reminders.

Check Out: Should You Refinance Your Mortgage to Pay Off Debt?

Is a home equity loan to pay off credit cards right for you?

If you’re not confident you’ll be able to repay your home equity loan, or if you think you might sell your home soon, you could end up worse off by tying more debt to your home. It may be worth giving the no-loan strategies above a chance before going the home equity loan route.

If the circumstances that created your credit card debt are behind you and your income will easily support your home equity loan payments, getting the loan could save you money and strengthen your finances — and provide you with peace of mind.

Keep Reading: Home Equity Loan vs. Home Equity Line of Credit (HELOC)

The post Home Equity Loan to Pay Off Credit Cards appeared first on Credible.

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Financial Tips

Are Christmas Loans Worth It? Pros and Cons of Taking Out a Loan this Holiday Season

Kevin Smith

Paying for Christmas gifts and other holiday-related costs such as food or travel can be expensive, especially if you have lost your job or are working fewer hours. In fact, 11.5% of Americans say they won’t be spending any money on holiday expenses in 2021, according to a survey by Deloitte.

If you need help covering holiday expenses, taking out a Christmas loan might be a good option.

Here’s what you should know about Christmas loans:

What is a Christmas loan?How to qualify for a holiday loanPros of getting a Christmas loanCons of getting a Christmas loanWatch out for predatory loansTips for a debt-free holiday season

What is a Christmas loan?

You might see some lenders advertise special “Christmas loans” — but these are usually just personal loans that can be used for holiday expenses. Here are several important points to keep in mind if you’re considering a personal loan for Christmas:

Interest rates: The rate you get on a personal loan will depend on the lender as well as other factors, such as your credit score and the repayment term you choose. Average personal loan interest rates generally range from 4.99% to 36%. Repayment terms: You’ll typically have one to seven years to repay a personal loan, depending on the lender. While longer terms can provide lower monthly payments, it’s usually a good idea to choose the shortest term you can afford to keep your interest costs as low as possible. Many lenders also offer lower rates to borrowers who opt for shorter terms.Fees: Some lenders charge fees on personal loans, such as origination or late fees. These can increase your overall loan cost. Keep in mind that if you take out a loan with one of Credible’s partner lenders, you won’t have to worry about prepayment penalties.Time to fund: If you’re approved for a personal loan, you can generally expect to get your fund in about one week, depending on the lender. There are also some lenders that will fund loans as soon as the same or next business day after approval — which could be helpful if you need the money quickly for Christmas.

If you decide to take out a Christmas loan, it’s important to shop around and consider as many lenders as possible. This way, you can find the right loan for your needs.

Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in just two minutes.

LenderFixed ratesLoan amountsMin. credit scoreLoan terms (years)

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
9.95% – 35.99% APR$2,000 to $35,0005502, 3, 4, 5*Fixed APR:
9.95% – 35.99% APRVariable APR:
N/AMin. credit score:
550Loan amount:
$2,000 to $35,000**Loan terms (years):
2, 3, 4, 5*Time to fund:
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)Fees:
Origination feeDiscounts:
AutopayEligibility:
Available in all states except CO, IA, HI, VT, NV NY, WVCustomer service:
Phone, emailSoft credit check:
YesLoan servicer:
AvantLoan Uses:
Debt consolidation, emergency expense, life event, home improvement, and other purposesMin. Income:
$1,200 monthly

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
6.79% – 17.99% APR$10,000 to $50,0007003, 4, 5, 6Fixed APR:
6.79% – 17.99% APRVariable APR:
N/AMin. credit score:
700Loan amount:
$10,000 to $50,000Loan terms (years):
3 to 6Time to fund:
Next business dayFees:
No prepayment penaltyDiscounts:
NoneEligibility:
Available in all 50 statesCustomer service:
PhoneSoft credit check:
YesMin. Income:
Does not discloseLoan Uses:
Debt consolidation, home improvement, self-employment, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
4.99% – 35.99% APR$5,000 to $35,0006002, 3, 4, 5Fixed APR:
4.99% – 35.99% APRVariable APR:
N/AMin. credit score:
600Loan amount:
$2,000 to $50,000Loan terms (years):
2, 3, 4, 5Time to fund:
As soon as 1 – 3 business days after successful verificationFees:
Origination feeDiscounts:
NoneEligibility:
Available in all states except DC, IA, VT, and WVCustomer service:
PhoneSoft credit check:
YesLoan servicer:
Best Egg and Blue Ridge BankMin. Income:
NoneLoan Uses:
Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
5.99% – 24.99% APR$2,500 to $35,0006603, 4, 5, 6, 7Fixed APR:
5.99% – 24.99% APRMin. credit score:
660Loan amount:
$2,500 to $35,000Loan terms (years):
3, 4, 5, 6, 7Time to fund:
As soon as the next business day after acceptanceFees:
Late feeDiscounts:
NoneEligibility:
 Available in all 50 statesCustomer service:
PhoneSoft credit check:
YesLoan Uses:
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
7.99% – 29.99% APR$10,000 to $50,000Not disclosed by lender2, 3, 4, 5Fixed APR:
7.99% – 29.99% APRMin. credit score:
Does not discloseLoan amount:
$10,000 to $50,000Loan terms (years):
2, 3, 4, 5Time to fund:
As soon as 2 business daysFees:
Origination feeDiscounts:
NoEligibility:
Available in all states except CO, CT, HI, KS, NH, NY, ND, OR, VT, WV, WI, and WYCustomer service:
PhoneSoft credit check:
YesMin. Income:
NoneLoan Uses:
Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
7.04% – 35.89% APR$1,000 to $40,0006003, 5Fixed APR:
7.04% – 35.89% APRMin. credit score:
600Loan amount:
$1,000 to $40,000Loan terms (years):
3, 5Time to fund:
Usually takes about 2 daysFees:
Origination feeDiscounts:
NoneEligibility:
Available in all 50 statesCustomer service:
Phone, emailSoft credit check:
YesLoan servicer:
LendingClub BankMin. Income:
NoneLoan Uses:
Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
9.99% – 35.99% APR$2,000 to $36,5005802, 3, 4Fixed APR:
9.99% – 35.99% APRMin. credit score:
580Loan amount:
$2,000 to $36,500Loan terms (years):
2, 3, 4Time to fund:
As soon as the next business dayFees:
Origination feeDiscounts:
AutopayEligibility:
Available in all states except NV and WVCustomer service:
Phone, emailSoft credit check:
YesMin. Income:
$20,000Loan Uses:
Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
2.49% – 19.99% APR$5,000 to $100,0006602, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)Fixed APR:
2.49% – 19.99% APRMin. credit score:
660Loan amount:
$5,000 to $100,000Loan terms (years):
2, 3, 4, 5, 6, 7*Time to fund:
As soon as the same business dayFees:
NoneDiscounts:
AutopayEligibility:
Available in all states except RI and VTCustomer service:
Phone, emailSoft credit check:
NoLoan servicer:
LightStreamMin. Income:
Does not discloseLoan Uses:
Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
6.99% – 19.99% APR1$3,500 to $40,0002660
(TransUnion FICO®️ Score 9)3, 4, 5, 6, 7Fixed APR:
6.99% – 19.99% APR1Min. credit score:
660
(TransUnion FICO®️ Score 9)Loan amount:
$3,500 to $40,0002Loan terms (years):
3, 4, 5, 6Time to fund:
Many Marcus customers receive funds in as little as three daysFees:
NoneDiscounts:
AutopayEligibility:
Available in all 50 statesCustomer service:
PhoneSoft credit check:
YesLoan servicer:
Goldman SachsMin. Income:
$30,000Loan Uses:
Credit card refinancing, debt consolidation, home improvement, major purchase, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
18.0% – 35.99% APR$1,500 to $20,000None2, 3, 4, 5Fixed APR:
18.0% – 35.99% APRMin. credit score:
NoneLoan amount:
$1,500 to $20,000Loan terms (years):
2, 3, 4, 5Time to fund:
As soon as the same day, but usually requires a visit to a branch officeFees:
Origination feeDiscounts:
NoneEligibility:
Must have photo I.D. issued by U.S. federal, state or local governmentCustomer service:
Phone, emailSoft credit check:
YesMin. Income:
Does not disclose

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
5.99% – 17.99% APR$600 to $50,000
(depending on loan term)6601, 2, 3, 4, 5Fixed APR:
5.99% – 17.99% APRMin. credit score:
660Loan amount:
$600 to $50,000*Loan terms (years):
1, 2, 3, 4, 5Time to fund:
2 to 4 business days after verificationFees:
NoneDiscounts:
NoneEligibility:
Does not discloseCustomer service:
Phone, emailSoft credit check:
NoMin. Income:
Does not discloseLoan Uses:
Debt consolidation, home improvement, transportation, medical, dental, life events

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
6.95% – 35.99% APR$2,000 to $40,0006403, 5Fixed APR:
6.95% – 35.99% APRMin. credit score:
640Loan amount:
$2,000 to $40,000Loan terms (years):
3, 5Time to fund:
As soon as one business dayFees:
Origination feeDiscounts:
NoneEligibility:
Available in all states except IA, ND, WVCustomer service:
Phone, emailSoft credit check:
YesMin. Income:
NoneLoan Uses:
Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
4.74% – 19.28% APR10$5,000 to $100,000Does not disclose2, 3, 4, 5, 6, 7Fixed APR:
4.74% – 19.28% APR10Min. credit score:
Does not discloseLoan amount:
$5,000 to $100,000Loan terms (years):
2, 3, 4, 5, 6, 7Time to fund:
3 business daysFees:
NoneDiscounts:
AutopayEligibility:
Available in all states except MSCustomer service:
Phone, emailSoft credit check:
YesMin. Income:
Does not discloseLoan Uses:
Solely for personal, family, or household uses

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
8.93% – 35.93% APR7$1,000 to $50,0005603 to 5 years 8Fixed APR:
8.93% – 35.93% APR7Min. credit score:
560Loan amount:
$1,000 to $50,000Loan terms:
3 to 5 years 8Time to fund:
Within one day, once approved9Loan types:
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchasesFees:
Origination feeDiscounts:
AutopayEligibility:
A U.S. citizen or permanent resident; not available in DC, SC, WVCustomer service:
Phone, emailSoft credit check:
Yes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
5.94% – 35.97% APR$1,000 to $50,0005602, 3, 5, 6Fixed APR:
5.94% – 35.97% APRMin. credit score:
560Loan amount:
$1,000 to $50,000*Loan terms (years):
2, 3, 5, 6Time to fund:
Within a day of clearing necessary verificationsFees:
Origination feeDiscounts:
AutopayEligibility:
Available in all states except West VirginiaCustomer service:
EmailSoft credit check:
YesMin. Income:
Does not discloseLoan Uses:
Debt consolidation, credit card refinancing, home improvement, and other purposes

Credible Rating>


Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.


View details>
4.37% – 35.99% APR4$1,000 to $50,00055803 to 5 years4Fixed APR:
4.37% – 35.99% APR4Min. credit score:
580Loan amount:
$1,000 to $50,0005Loan terms (years):
3 to 5 years4Time to fund:
As fast as 1 business day6Fees:
Origination feeDiscounts:
NoneEligibility:
Available in all 50 statesCustomer service:
Phone, emailSoft credit check:
YesMin. Income:
$12,000Loan Uses:
Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposesCompare rates from these lenders without affecting your credit score. 100% free!

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All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

Christmas loans for bad credit

You’ll generally need good to excellent credit to qualify for a personal loan — a good credit score is usually considered to be 700 or higher. There are also several lenders that offer personal loans for bad credit, but these loans usually come with higher interest rates compared to good credit loans.

If you’re struggling to get approved for a Christmas loan, here are a couple of options to consider:

Take out a secured personal loan. While most personal loans are unsecured, some lenders offer secured personal loans that require collateral. Because these loans are less risky for the lender, you might have an easier time qualifying if you have poor or fair credit.Apply with a cosigner. You might also consider applying with a creditworthy cosigner, which could improve your approval odds. Not all lenders allow cosigners on personal loans, but some do. Even if you don’t need a cosigner to qualify, having one could get you a lower interest rate than you’d get on your own. Tip: It could also be a good idea to work on building your credit so you’ll have an easier time qualifying for loans in the future. There are several potential ways to do this, such as making on-time payments on all of your bills and paying down credit card balances.

Learn More: Getting a Loan with No Credit: 5 Loans for New Borrowers

How to qualify for a holiday loan

While eligibility criteria for a personal loan can vary by lender, there are a few common requirements you’ll likely come across, including:

Good credit: You’ll generally need good to excellent credit to qualify for a personal loan. If you have poor or fair credit, having a creditworthy cosigner could improve your chances of approval.Verifiable income: Some personal loan lenders have a minimum income requirement while others don’t — but in either case, you’ll likely need to provide proof of income to show that you can repay the loan.Low debt-to-income ratio: Your debt-to-income (DTI) ratio is the amount you owe in monthly debt payments compared to your income. To get approved for a personal loan, your DTI ratio shouldn’t be higher than 40% — though some lenders might require a lower ratio than this.

Check Out: Credit Card Consolidation Loans

Pros of getting a Christmas loan

Christmas loans offer a few potential benefits, including:

Lower interest rates: Personal loan interest rates tend to be lower than credit card rates.Fixed payments: Personal loans typically come with fixed interest rates, which means your payments will stay the same throughout the life of your loan.Fast funding: The time to fund for a personal loan is usually about one week — though with some lenders, you might get your money as soon as the same or next business day after approval.

Cons of getting a Christmas loan

There are also some possible downsides of Christmas loans to keep in mind, such as:

Fewer options for bad credit: If you have poor or fair credit, it could be harder to get approved for a personal loan.Increased debt: Getting a personal loan means you’ll have another payment to manage on top of any other debts you might already have. If you’re already stretched financially thin, taking on another loan might not be a good idea.No rewards or perks: Unlike many credit cards, personal loans don’t offer any rewards or perks.

If you decide to get a personal loan, remember to consider as many lenders as you can to find the right loan for your situation. This is easy with Credible: You can compare your prequalified rates in two minutes — without affecting your credit.

Ready to find your personal loan?
Credible makes it easy to find the right loan for you.

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Watch out for predatory loans

If you need a small, short-term personal loan for Christmas, it’s critical to make sure you’re working with a vetted lender that provides reasonable rates and terms. This is especially true if you have poor or fair credit since predatory lenders and scammers often target borrowers with bad credit who are desperate for a loan.

Here are a few types of loans to watch out for:

Payday loans: While these short-term loans generally don’t require a credit check, they can come with astronomical rates and fees — sometimes as high as 300% to 500% APR. If you can’t quickly repay a payday loan, you could get stuck in a revolving debt cycle that could be hard to escape.Pawn shop loansThese loans are offered by pawn shops and require you to provide an item of value as collateral. If you don’t pay off the loan, the pawn shop can sell your item. Like payday loans, pawn shop loans can also come with extremely high rates and fees. Car title loans With this type of loan, you’ll give the lender the title of your car (or motorcycle). You’ll typically have to repay a car title loan within a short amount of time — usually 30 days or less. If you fall behind on your payments, the lender could seize your vehicle.

If you’re looking for a personal loan, here are a few personal loan scam warning signs to watch out for:

Using high-pressure sales tacticsNot requiring a credit check Approaching you about the loan out of the blueNot having a physical address

Go with your gut — if something feels off about a lender, it probably is. Also keep in mind that if you compare your options with Credible, you’ll be working with vetted, trustworthy lenders.

Learn More: How to Check If a Personal Loan Company Is Legitimate

Tips for a debt-free holiday season

While taking out a Christmas loan could help you cover last-minute holiday expenses, here are also a few other strategies that could help you avoid holiday stress:

Set a budget. Creating a budget based on your income is a great way to determine what you can actually afford to spend for Christmas.Look for deals. Scour the internet and your local shops for deals on what you’re looking for to lower your overall costs. For example, consider taking advantage of savings offered on Black Friday, Cyber Monday, and other shopping holidays.Stick to the basics. It’s easy to get caught up in the moment and buy what you want (or what someone else wants). But try to be firm whenever you can or compromise when necessary. For example, you might buy a couple of small, practical gifts for those on your list instead of a big expensive gift for each person.

If getting a Christmas loan seems like the right fit for you, remember to consider as many lenders as you can to find the best loan for your needs. Additionally, be sure to think about the overall cost of the loan before you borrow — this way, you can be prepared for any added expenses.

You can estimate how much you’ll pay for a loan using our personal loan calculator below.

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