If you think Harry Potter was going to be the most imaginative marketing plot this Christmas, think again. Each Christmas as consumers look at their finances and investigate the different sources of funding to cover their Christmas shopping, loan companies and credit card providers polish up their marketing tactics and customer service skills.

No doubt some of you will see an advertisement for a Christmas loan over the next few months. Unfortunately for you its not provided by a jollyvaceous (curvy and happy) bearded man in a red, furry suit. Its more likely to be a cunning marketing initiative by a loans company, designed to exploit consumer cash concerns over Christmas.

If you need credit over Christmas you will probably fare better with a credit card, but if you have to take out a loan, youd be better to search for a standard personal loan, on a secured or unsecured basis. There are plenty of sites which offer price comparison services for credit cards and loans. The most popular ones include moneynet, moneysupermarket and lowermybills, but if you really want the best deal why not visit them all and cross-reference the fairest deal.

When searching for a credit card there are several things you need to consider. Firstly, you may wish to transfer existing debt from your old credit card, by taking advantage of an introductory interest free period on a new credit card. Despite the apparent 0% interest rate on all balance transfers do ensure that you are genuinely being charged no interest and that once the interest free period is over youre not going to be hit by an unusually high APR (Annual Percentage Rate) the interest rate. Also look out for additional charges and hidden fees on the credit card and make sure you have set up your account for minimum repayments.

Credit cards offer you greater flexibility in your repayments than personal loans, though credit cards may be sold with higher rates of interest. You can pay off the balance on your credit card early without a charge and as long as you track what youre buying on plastic and set up minimum repayments, youre likely to manage the debt effectively. However, do bear in mind that late repayments and fines may affect your credit history, so dont assume that just because you cant see the debt that it isnt there.

Personal loans can be a suitable credit solution if you need to make the repayments over a longer period. However, you need to be a realistic about the total repayments firstly that you can afford them and secondly that youre prepared to make all of them. For example, if you decide half way through the term of the loan that you could actually afford to pay it off in full, you should be aware that there will probably be an early repayment charge which may bring the amount to the same as the total number of repayments.

Credit is for life, not just for Christmas; what you pile on to plastic in December may lead to a significant financial hangover in January. The best thing you can do is plan your shopping in advance, shop around (including online) and stick to your list of what you intend to buy no impulse purchases!

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Resources

Price comparison research for loans

Personal loan consumer guide