Christmas gifts being bought using debt and payday loans

Over 30 per cent of people will take on debt to buy Christmas presents for their friends and family, and of those, over 1 million will use high priced payday loans. Studies from Money Advice Service show that the use of credit among families across the UK will increase several per cent from last year.

The total projected to be spent per person during the Christmas season is over £500, and that will include a total of £26 billion that will be borrowed from high priced lenders or credit cards. This overspending is becoming a major problem across the UK, and many individuals who can least afford it are turning to borrowing money from a variety of sources. Unfortunately many of these people buying these gifts and presents can’t afford them.

The research from Money Advice Service shows a combination of store and bank credit cards, overdrafts, and even worse, payday loans, are being used to fund the purchase of toys, food, and more. Rather than cut back like they should, this will cause many people who can least afford it to fall further into debt. They will be paying off the the debts they incur over the holidays for many months or even years.

Not only will more money be spent, but the amount of discarded food and unused gifts continue to increase as well, and now stands at about £54. So this means that for those people that are spending their hard earned incomes during the holiday, much of the food and up to 10% of the gifts purchased (or a total of £2.4 billion across the nation) is being wasted. However, this doesn’t seem to matter that much to consumers according to the study.

Instead of borrowing money for a Christmas gift or food, try using a charity. This will always be a recommendation from Money Advice Service as well as other charities. There are schemes such as the Salvation Army Christmas appeal which offers toys for children, meals to the homeless, and more. These are much better options than using a loan.

More than 25 percent of people even admit they will spend more on food and gifts than they can afford. They do this to make others happy, or more than likely, to make themselves feel better. They also don’t worry about paying the bills that result from this overspending until the time comes. Other people even know they may need to sacrifice other needs as a result of borrowing more for these Christmas gifts.

For people that insist on spending beyond their means during the holiday season, they should explore alternatives to a payday lender. While not a great option, expanding overdraft can be less expensive to consumers. Other simple steps to take can be to shop online for the best prices, and do not use store credit cards over a bank card, as borrowing directly from a store will often have higher interest rates.

However, the best option will always be to budget in advance to save money for any Christmas gifts being bought, and spend wisely within your means. Or just use cash for any presents or toys, as this will ensure that debts are not run up.