Holiday borrowing: What $1,000 really costs across 5 ways to get cash

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The holidays can be expensive, and sometimes you need extra cash to cover gifts, travel or entertaining. But not all borrowing options are created equal — some are far cheaper and safer than others. Finder.com digs into how much it could cost to borrow $1,000 across five different avenues.

This breakdown uses illustrative numbers based on current national averages, but your actual costs will depend on your creditworthiness and the terms you qualify for.

Personal loan: Predictable, low-cost borrowing

Personal loans are installment loans with a fixed repayment schedule and interest rate. It’s ideal for planned holiday spending because payments are predictable and interest rates are typically lower than with other short-term options.

For this example, the average personal loan interest rate was used for illustration, but your actual rate will depend on your credit profile. Borrowers with lower scores may pay more, while those with strong credit could qualify for lower rates and overall costs.

Example:

• Loan amount: $1,000
• Term: 24 months
• APR: 11.14%
• Monthly payment: $46.48
• Total fee/interest: $116
• Total repayment: $1,116

Why it works

• Predictable monthly payments
• Helps you stick to a budget
• Lower total interest compared to other short-term options

Credit cards are widely used for holiday shopping because of their convenience and rewards programs. But carrying a balance can be super costly due to the high APRs associated with credit cards.

Example:

• Loan amount: $1,000
• Term: 12 months
• APR: 24%
• Monthly payment: ~$94.45
• Total fee/interest: ~$133
• Total repayment: ~$1,133

Why it’s riskier than a personal loan

• Monthly payments are higher than with a personal loan
• Total cost over a year is higher than with a personal loan
• Interest accumulates quickly if balance isn’t paid in full

Payday loan: Quick, short-term borrowing with high risks

Payday loans are short-term, small-dollar loans that are typically due in full within a couple of weeks. They’re tempting for holiday emergencies because you can get cash fast, but the APR is extremely high.

Example:

• Loan amount: $1,000
• Term: 2 weeks
• APR: 400%
• Lump sum payment: $1,064
• Fee/interest: ~$64
• Total repayment: ~$1,064

If you can’t repay and roll it over for two more weeks:

• Total fees: ~$132
• New repayment after four weeks: ~$1,132

Why it’s risky

• APR compounds quickly, and repeated borrowing can create a cycle of a debt
• The upfront fee seems small, but rolling over a loan quickly increases the cost
• Extremely high APR compared to personal loans or credit cards

Saving up: The cheapest option

Sometimes the best way to fund the holiday spending is to save up in advance, rather than borrow. This method avoids interest and fees altogether.

You could set up a dedicated savings account and automate transfers or even sell unused items around your home and put the cash toward your holiday budget. Either way, you save toward your holiday budget while avoiding fees and interest.

Why it works:

• You avoid debt entirely
• Builds financial discipline
• Peace of mind during the holidays

Borrowing from your emergency fund: Why not to do it

Tapping into your emergency fund for holiday spending might seem harmless, but it can leave you in a risky position. That money is meant for true emergencies. Think medical bills, car repairs or job loss — not seasonal expenses. Using it for gifts or travel can leave you vulnerable if something unexpected happens.

Alternatives:

• Save a separate “holiday fund” instead of dipping into emergency savings.
• Use a small, manageable personal loan if you can repay it quickly.

Finder.com

Wrap up

For holiday borrowing, personal loans are typically the cheapest and most predictable option. Credit cards and payday loans often end up being more expensive, especially if you have a lower credit score or can’t keep up with repayments. Whenever possible, saving up, doing a budgeting hack like the envelope challenge or using your own money is the safest and most affordable option.

This story was produced by Finder.com and reviewed and distributed by Stacker.