Christmas is coming, so the trade association for leading short-term lenders has put together a guide on how to enjoy and afford Christmas without a long financial hangover.
Russell Hamblin-Boone, Chief Executive of the Consumer Finance Association (CFA) explained: “Christmas is expensive and times are tough for everyone, so many people will be thinking about borrowing some money to cover the cost of their festivities. But it is important to be realistic about what you can afford to spend and then make your money go as far as possible.
“A short-term or payday loan is, for some, a better option than overdrafts or credit cards because it limits the Christmas financial hangover rather than allowing it to linger for months afterwards. However, if you are going to borrow money to help spread the cost of Christmas then make sure you stick to your budget and have a clear plan about how you are going to repay the money you have borrowed.
“Short-term loans are not the only option available to consumers but used sensibly they offer many benefits over other forms of credit. For example, short-term loans account for just £1.20 of every £100 of problem debt, whereas credit cards and overdrafts accounting for more than 60 per cent of unmanageable debt. The reason is that these revolving forms of credit seem, at face value, to be cheaper but allowing the debt to continue indefinitely ends up costing far more. You shouldn’t need to still be paying for Christmas 2012 when Christmas 2013 comes around. By following our guide we can help to prevent consumers being caught in a long term debt trap.”
The CFA gives the following advice to consumers to help them get the most of their cash and avoid financial problems in the future:
Set a budget and stick to it
It is easy to get carried away with Christmas. Don’t spend more than you can realistically afford. So write down all of your outgoings throughout December and January – not just your rent/mortgage and utility bills, but food, socialising, travel costs (to get you to work and those Christmas parties!) etc. Then you will know how much money you have left for gifts and socialising.
Look for the best deals
- Setting your budget is easier if you know how much the things you want to buy will cost. So before you spend a single penny, shop around and look for the best deals. It will make your money go much further.
- With the economy still struggling, retailers are working hard to entice you into their stores. So look out for pre-Christmas sales, which can offer big savings.
- Look out for multi-purchase deals. There are lots of ‘Buy 1 get 1 free’ type deals around to make your money go further.
- Don’t forget to shop around using price comparison sites, which often have their own discount arrangements with some stores.
Get cash back on all of your Christmas shopping
Cash back sites are a useful way to reduce the overall cost of Christmas. You’ll get a percentage of the money you spend online back again, which soon mounts up when you are doing your Christmas shopping. But remember, the cash back isn’t typically paid for several weeks or even months after you’ve made your purchases.
Only borrow what you can afford to repay
So, having worked out your budget in step 1; having looked for all the best deals and; having decided to borrow some money to help you afford the Christmas you want, you now know how much money you have and you know how much you want to borrow. The question is, can you afford to repay that loan when it is due? If not, don’t apply for the loan and revisit step 1 to reduce your total budget or your outgoings.
Only borrow from a reputable lender
You book your holiday with an ABTA approved travel agent to give you protection. You get your insurance from a member of the Association of British Insurers. Responsible and trustworthy payday lenders abide by the Good Practice Customer Charter and stringent codes of practice. This gives you all sorts of assurances and extra protection. Membership of a leading trade association is a good sign. The reputable ones to look out for are the Consumer Finance Association (CFA), Finance & Leasing Association (FLA), British Cheque Cashing Association (BCCA), and the Consumer Credit Trade Association (CCTA).
Think about what would happen if your circumstances changed
Things change quickly in the modern world and the Consumer Credit Counseling Service has found that life changes are one of the major factors in financial distress. So, although everything may be fine at the moment, think about changes that may have a big effect on your bank balance. What would you do if you were made redundant? Or if you got pregnant? What about if there were fewer wage earners living with you? Could your finances stand the additional pressure of a loan payment on top of all of your essential outgoings?
Still want to borrow even though you’re already overstretched?
Don’t! If you have more money going out than is coming in, don’t panic. Free, independent help is at hand. Try:
They are experts who will help you to deal with your creditors and get your money under control again.
 Funding Debt Advice in the UK – A Proposed Model
 CCCS Consumer Debt and Money Report 2012