Borrowing Money Could Cost Eastern Iowans This Holiday Season
Americans will spend up to $300 billion this holiday season on Christmas gifts, according to Art Durnev, University of Iowa professor of finance.
“Americans borrow the most of (any country) in the world,” Durnev said. “The national debt is growing; Christmas shopping is a part of it.”
Many Iowans will need to barrow the money they’ll spend on Christmas gifts. Durnev recommends that people who seek to borrow money, save money instead.
“What’s interesting about Christmas is that it happens every year,” he said. “So if you get into (debt trouble) you cannot avoid it again the following year.”
Short-term loan companies try to capitalize on holiday spenders by increasing advertisements in the weeks leading up to Christmas. On average, many of these “pay-day” loan companies charge about $50 for every $450 borrowed, but the loans need to be repaid within two weeks or the borrower will be penalized, which could lead to damaged credit.
Traditional bank loans also offer an option for shoppers. In the current banking environment a $5,000 loan that takes three years to pay-off will require the borrower to spend about $800 on interest payments, Durnev said.
“You got to shop for the good deals, and there are lots of good deals, don’t wait until the last moment,” Durnev recommends.
The best thing shoppers can do is start saving for Christmas early, Durnev said, pointing to saving tax returns by setting up a plan to receive the return in November or December.