The last period of the year is usually a stressful time for our pockets. Black Friday kicks off a shopping campaign that reaches its peak during the Christmas holidays. Between the two appointments, each person will spend an average of 1,000 euros, according to calculations by online offer comparator Kelisto.es
Many of these consumers will turn to some type of financing. The personal loan and the credit card are the two most popular options. Each of them has its advantages and disadvantages.
In any case it is essential to compare offers to pay less interest. The potential savings that can be obtained range between 40 and 90 euros, which is the difference between the cheapest alternatives and the most expensive ones offered by banks and finance companies.
Personal loans are the cheapest solution to finance Christmas shopping, as credit cards charge, on average, more than double the interest.
For example, a consumer who wishes to finance purchases worth 1,000 euros in 12 months would pay an average interest of 7.44% TIN (Nominal Interest Rate) with a personal loan. However, if you do it with a card you would have to pay a TIN of 18.12%. That is, 144% more, according to Kelisto.es.
In the case of cards, the cheapest one has a TIN (Nominal Interest Rate) of 5.846%, compared to 21.95% for the most expensive one. According to Kelisto.es, if a consumer decided to finance 1,000 euros of Christmas expenses within 12 months with the most advantageous option, they would save more than 90 euros in interest.
As for the personal loan, the savings are also notable, but lower than in the case of cards: if you choose the cheapest on the market, you would have to pay an interest of 3.49% TIN, compared to 10.4% of the cheapest option expensive. , which represents a saving of 38.22 euros in interest.
Regardless of its cost, other factors must be taken into consideration when choosing one or the other alternative. For example, personal loans have lower interest, “but the offer for expenses such as Christmas is very limited, because they are usually designed for larger projects and their processing time is usually longer,” says Pedro Ruiz, spokesperson for Personal Finance of Kelisto.es.
In addition to personal loans and credit cards, there are other options for financing Christmas shopping.
Some institutions offer financing on purchases. Sometimes the conditions are much better than those of the banks. Naturally, these offers are not always the most advantageous “and, moreover, they only serve to pay in installments for the product purchased in a particular place”, warn on Kelisto.es.
They are loans that financial institutions make available to their already approved customers, since they already have their information and know what amount they can grant and at what price. The advantage is that, being pre-granted, they can be activated almost instantly. But the conditions are usually not as good as those of other banks.
It is a payment deferral service, to pay for purchases later. It’s not just banks that offer it: even commercial establishments themselves, who enter into agreements with financial institutions.
It allows you to defer payment for up to 3 months at no cost. But this type of financing is only valid for a specific expense and the total amount is usually limited to not very large amounts.
They are loans that some banks offer at standard conditions, and their great attraction is given by their immediacy. Of course, the interests are very high and “very few microcredits offer up to 1,000 euros on the first request”. Furthermore, it is normal for them to require a very short return period.
What are the best strategies for managing holiday spending without falling into debt?
Interview: The Economics of Holiday Spending
Editor of Time.news (T.E.): Good morning, everyone! Today, we’re diving deep into the heart of holiday spending with our expert guest, Pedro Ruiz, spokesperson for Personal Finance at Kelisto.es. Thanks for joining us, Pedro!
Pedro Ruiz (P.R.): Thank you for having me! I’m excited to discuss this important topic, especially as we approach the festive season.
T.E.: Absolutely! As the holiday season nears, spending tends to spike. According to recent data, consumers are expected to spend around 1,000 euros each during this time. What drives this increase, in your opinion?
P.R.: It’s a combination of factors, really. Black Friday kicks off this shopping frenzy, and people are often looking to take advantage of discounts and deals. Additionally, with Christmas looming, there’s pressure to buy gifts and special items, which can lead to overextending budgets.
T.E.: In your recent findings, many people are turning to financing options during this shopping campaign. What are the most common methods consumers are using?
P.R.: The two most popular options are personal loans and credit cards. Each has its own set of advantages and disadvantages. For example, personal loans often offer lower interest rates, making them a cheaper option for financing larger purchases. However, credit cards provide flexibility, albeit often with much higher interest rates.
T.E.: Speaking of interest rates, your research indicates that personal loans can have significantly lower costs compared to credit cards. Can you elaborate on the differences?
P.R.: Certainly! When you look at average interest rates, a personal loan has a nominal interest rate (TIN) of around 7.44% for financing 1,000 euros over 12 months. In comparison, credit cards can charge a staggering average of 18.12%—that’s roughly 144% more! By choosing the right option, consumers can save between 40 to 90 euros just on interest alone.
T.E.: Those numbers are quite eye-opening! Is it safe to say that personal loans are the better option for financing holiday shopping?
P.R.: Generally, yes. Personal loans are cheaper, but they do come with some trade-offs. They’re typically designed for larger financial projects and the processing time can be longer. If someone is looking for quick access to funds, a credit card might be more appealing despite the higher interest—so it’s essential for consumers to weigh their needs against cost.
T.E.: Great point! You mentioned that while personal loans are more cost-effective, they might not be readily available for smaller holiday expenses. What should consumers keep in mind when considering their financing options?
P.R.: It’s crucial for consumers to compare offers to find the best deal. They should also consider the total cost of borrowing, not just the interest rate—there might be fees involved that could affect the overall expense. Additionally, understanding their own financial situation and repayment capability is vital. A thorough comparison can lead to significant savings, as we highlighted earlier.
T.E.: All valuable insights, Pedro! Before we wrap up, do you have any tips for consumers looking to manage their holiday spending better this year?
P.R.: Absolutely! First, set a budget! Know how much you can afford to spend without falling into debt. Secondly, do your research—compare financial products and their terms to ensure you’re making the most informed decision. Lastly, try to avoid impulse purchases; planning your purchases can save both money and stress.
T.E.: Wise words to live by! Thank you so much for your insights, Pedro. It’s been a pleasure talking to you about budgeting strategies for the upcoming holiday season.
P.R.: Thank you for having me! And to all the listeners, happy shopping, and remember, be smart about your finances!
T.E.: That’s a wrap on our interview! Stay tuned for more insights and tips on how to navigate the complexities of personal finance. Happy holidays, everyone!