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According to a recent YouGov survey, the average British household will spend £820 on Christmas this year.

The largest expense is on presents, which is an average of £599 per household, followed by £180 on food and drink and £43 on cards, trees and decorations. This is approximately a 6.6% increase in Christmas spending from last year.

James McCoy, research director at YouGov, explained: “It seems clear that households are approaching Christmas with more economic optimism than last year. This renewed consumer confidence looks set to translate to an increase in festive spending, especially when it comes to gifts and food and drink.”

With Christmas spending in the UK expected to soar to over £22.3 billion this year, several households will be looking at ways to borrow money for the festive season and make it one to remember. Moneysupermarket.com estimates that at least 30% of the population will go into debt this Christmas so they are likely to be exploring their borrowing options.

Above all, staff will tend to get paid early from work in order to fund their Christmas but may find themselves short towards the end of the month or early January.

But the cost of borrowing short-term finance can vary dramatically based on the financial product you choose. So we have provided a breakdown of the different ways to borrow money over Christmas based on borrowing £1,000:

Loan Product Amount Borrowed APR Total Interest 6 months Repayment Source
Payday Loans £1,000 1270% £957.35 £1,957.35 Quiddi Compare
Guarantor Loans £1,000 49.90% £618.36 £1,618.34 Guarantor Loan Comparison
Credit Union £1,000 26.80% £63.50 £1,063.50 Capital Credit Union
Balance Transfer Credit Card £1,000 2.9% £29.00 £1,029.00 Tesco Bank

It appears that a credit union and balance transfer credit card offer the lowest costs of borrowing. A credit union is a not-for-profit organisation that helps individuals borrow in the local area. If you work for the public section such as a nurse, policeman or teacher, you can get finance at very low rates from your local credit union.

A balance transfer card allows you to move debt from one credit card to another, and with very low rates, it offers an affordable way to manage and pay off outstanding debt

Borrowing responsibly over Christmas

Borrowers must be cautious about borrowing from short term lenders over the Christmas period. The opportunity to receive quick funds from payday or guarantor lenders comes at a huge premium and customers should go to their local credit union for the best rates.

If you must proceed with a payday or guarantor product, you should only take this out if you can afford to repay and have a plan in place to do so. Failing to repay on time can lead to increased debt and negatively impact your credit rating.

Approval is typically subject to employment, credit and affordability checks to ensure that applicants are able to meet repayment.

Borrowing your should avoid at Christmas

Expensive ways to borrow include getting store cards towards your Christmas shop. Whilst the initial discounts might be appealing, the cost of borrowing is around 29.9% which is very high.

Avoid using an unauthorized overdraft on your credit card and this is so expensive, it can translate to an APR of 300,000% (Source: BBC). Try using a 0% interest credit card as this is free to use up to a certain limit.

Saving up for Christmas

The Money Advice Service recommends saving up for Christmas rather than borrowing money from lenders or credit cards. Households are advised to set up a budget and save for up to 3 months towards holiday presents and foods.

For household decorations, the charity encourages people to reuse items every year rather than throwing them out. Finally, it is important to price compare online for all presents, foods and decorations to ensure you save as much money as possible.