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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Nov 5, 2013

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Black Friday is fast approaching.

Unlike most holidays which ostensibly maintain the appearance of being about family and generosity, Black Friday is an almost comedic celebration of consumerism.

Despite all its criticism, consumerism bolsters the economy along and helps keep millions of people employed as Americans everywhere rush to buy the latest clothes, electronics, and gifts in time for December.

All this frenzy amid a struggling economy means that some people will inevitably not have enough money to get the items they want. For some people this may simply mean they will have to purchase a smaller flat screen TV than they wanted. For other families, this will sadly mean smaller meals and fewer, if any, holiday gifts.

When faced with such possibilities, many people turn to borrowing money, such as personal loans, in order to make their Black Friday purchases.

While most people do payback the money they borrow, financial experts were nearly unanimous in urging restraint when thinking of borrowing personal loans this Black Friday.

No Go on Black Friday Debt

Antoinette Davis, a Seattle bankruptcy attorney and Avvo legal analyst, said that it is flat out unwise to borrow money for Black Friday.

“No matter how good the deals appear to be, the rule of thumb is if you don’t have disposable funds to make purchases on Black Friday, then simply put, you should not make purchases on Black Friday,” she said. “And by the way, if you have money available but those funds are earmarked for rent and monthly bills, then you don’t really have the available funds to make Black Friday purchases.”

Davis urges shoppers to think of the long-term effects of holiday shopping, even when deals are difficult to resist. Items, such as electronics, that are marked down can end up costing more money in interest over the months and years following their purchase.

This advice goes double for people who are currently struggling. A clear sign that a person is in no position to borrow personal loans and splurge is that he or she is making the minimum payments on their debt. Instead of purchases for Black Friday deals, many shoppers would be better off putting funds into savings and retirement accounts.

Gail Cunningham, Vice President of Membership and Public Relations at the National Foundation for Credit Counseling, said that adding new debt on top of old debt is one of the worst habits that a person can have.

“A better solution is to be realistic about where you stand financially and not self-inflict more financial pain through over-spending on Black Friday,” she said.

There are a whole host of problems that can come as a result of borrowing a personal loan just for Black Friday. If a borrower defaults, they can end up having less available credit for future purchases or emergencies. This can include being denied for other types of loans, all because of a bad decision during the holiday season.

David Jones, President of the Association of Independent Consumer Credit Counseling Agencies, said that while there are many real bargains during Black Friday, they can become “non-bargains” when interest rates on personal loans kick in.

“This is a good time for consumers to plan for the coming holidays by making a list of intended gifts that they can afford and then sticking to that list no matter what,” he said. “Also, getting debts under control now instead of letting them spiral out of control amid the emotions of the season will pay big dividends next year.”

Avoiding Debt Beyond Black Friday

Kevin Gallegos, Vice President of Phoenix operations for Freedom Financial Network, said that Americans should avoid going into debt not only on Black friday, but in general year-round.

“Finances contribute significantly to holiday stress, perhaps this year more than ever,” he said. “From a financial perspective, if you safeguard your budget, you’ll make it through the holidays with less stress and a clearer conscience, which will bring plenty of joy, now and in the New Year.”

Not all debt is bad though, some of it can even be considered “healthy” according to Gallegos.

Debt for education, business, and buying a home is oftentimes not only necessary, but a healthy sign of an increase in wealth or opportunity. However, when people borrow personal loans beyond their means, they can end up causing some of the same problems that led to the Financial Crisis.

Amid the holiday rush, many people will turn to their credit cards, forgoing the time it takes to get a personal loan at their local bank or credit union. Unfortunately, credit cards can be quite expensive.

“Carrying credit card debt can have negative impact on your credit score,” he said. “If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that’s 35 percent utilization. Anything over 35 percent is considered high and can negatively impact credit scores. Over 50 will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score.”

A Personal Loan for Black Friday

One business is offering a personal loan especially for Black Friday.

Amy McGraw, Vice President of Marketing for Tropical Financial Credit Union, said that her company is offering $1,000 as a personal loan with the added benefit of building up borrowers’ credit. This Black Friday personal loan proved very popular last year, bringing in hundreds of approvals the first week it was offered. Tropical FCU will be offering it beginning Nov. 18 for two weeks.

This clearly shows that some lenders offer products to qualified customers who genuinely seek a personal loan that can help them make their purchases. Even if this goes against the advice of many experts, for many successful borrowers getting a personal loan is a worthwhile act on Black Friday, rather than a lesser of two evils.

Despite the advice of the experts who spoke against borrowing personal loans amid the holiday frenzy, surely many people will get into some kind of debt in the coming weeks, be it from credit cards or personal loans. Fortunately, debt usually isn’t the end of the world and there is always the option to refinance in the future if payments become difficult.

Ironically, shoppers should clearly stay in the black on Black Friday and not in the red, despite that color’s presence this time of year.