If you borrow, make sure you can repay or else the New Year hangover could be much, much worse, writes Laura Slattery

Christmas is the number one consumer festival on the retailing calendar, the time of year that makes the fuss surrounding Hallowe'en, Easter and Valentine's Day look like token gestures.

During the two months preceding December 25th, retailers need little more than a snow-sprayed front window and the sound of Last Christmas blaring over the speakers to entice consumers into their stores.

But if the festive season is an excuse for large numbers of people to go on a seemingly full-time spending spree, it is also an annual trigger for debt - a time when otherwise strict budget constraints are abandoned in the haze of tinsel and coloured lights.

"Christmas is not normally a time when people would be prudent, and it's only natural," says Mr Liam Edwards, co-ordinator of the Money Advice & Budgeting Service (MABS). "Very often, people who can't afford to spend money are under pressure and feel they have had a hard time during the year. They've gone without and their children have gone without."

One obvious way of reducing the financial load of Christmas is to budget for it throughout the year or even do some advance shopping during summer sales. But, realistically, only the very organised do this and, as children's preference for toys are often dictated by pre-Christmas hype and passing crazes, it isn't always possible.

The other option is to have Christmas on credit. "If someone hasn't been saving during the year in order to spend at Christmas time, then the temptation is there for them to borrow," says Mr Edwards.

While some workers receive a Christmas bonus from their employers to cover some of their seasonal expenses, others such as part-time or temporary employees will find their income actually takes a hit over the Christmas period as workplaces shut down for the holiday.

Add to this the fact that heating, lighting and fuel usage is at its peak in the middle of winter and it's hardly surprising that the numbers of people approaching branches of the MABS tend to rise during January as the full extent of the Christmas credit hangover appears on monthly bills and statements.

According to Ms Rita O'Reilly, manager of Parentline, it is not until January that the helpline service receives calls from parents worried about the financial effects of Christmas.

"Parentline would be very much of the view that you would encourage people to buy what they can afford," she adds, recommending parents communicate with children how much that is rather than try to keep up with neighbours.

But for people who are looking for short-term loans over the Christmas period, MABS views credit unions as "ideal for saving and borrowing", especially for people who don't have access to credit in high-street banks. By law, a credit union cannot charge more than 1 per cent a month on the unpaid balance of any loan, or an annual percentage rate (APR) of 12.68 per cent.

That's more than 1.5 per cent higher than the rate of interest on personal loans at the main banks. For example, a variable rate personal loan at AIB has an APR of 11 per cent, while at Bank of Ireland, the standard variable interest rate is 10.9 per cent, with more attractive rates if you apply online.

But many credit unions will offer a more competitive interest rate than 1 per cent per month, so consumers should check with their local branch or work branch to find out what rate is available to them.

Consumers can pay back the loan as quickly as they like, accruing less interest, while banks often have a minimum term of one year on personal loans.

Taking a personal loan out to cover the cost of Christmas would mean that by the time the loan is paid off, the sound of jingle bells will have come around once again and consumers would never escape Christmas debt.

Overdrafts are a more common short-term option for creditworthy customers and these may attract additional arrangement fees in the region of €15 to €25.

Credit cards rarely see the inside of our wallets during the Christmas shopping season and may get little rest during January sales.

Abusing credit cards is an expensive habit: 25 days after cardholders receive their monthly statement, high rates of interest - 18.9 per cent on standard cards for existing customers at both AIB and Bank of Ireland - start to kick in.

With credit cards there is a year-round danger of feeling less guilty handing over a piece of plastic than pulling out €20 and €50 notes.

If the card provider thinks we're able to afford such a generous credit limit, then we can handle it, right? Not always. "Everyone should look at their capacity to repay before they borrow. Sit down and make a budget, and look at what their expenditure is and what their spending levels should be," says Mr Edwards.

If you take out a personal loan for a holiday, it should be repaid by the time you venture back into the travel agent. The length of the repayment term on a car loan should not exceed the lifespan of the car.

The same principles to borrowing apply at Christmas as at any other time of the year: it doesn't take a detailed budget spreadsheet to come to the conclusion that if you're still paying off last year now, you probably overspent. Debt consolidation loans that allow consumers to pool all their debts should be handled with care, Mr Edwards believes.

"They do suit some people, but they won't solve too many problems for people who are already having difficulty with their repayments.

"MABS's advice to people is to get full information and do the sums. People are entitled to make their own choices, but you shouldn't go down that road lightly."

If the words "don't panic" immediately result in your heart rate increasing, then it could help to bring your debt problems to an independent money adviser.

MABS runs a free and confidential service, helping people draw up budgets and manage existing debts.

"The emotional effects of debt are anxiety and a feeling of hopelessness. That's very hard to deal with on your own," says Mr Edwards.

The service also seeks to help people avoid borrowing from high-interest moneylenders and hire purchase companies, and to gain access to badly needed sources of finance at more reasonable rates.

"People on low incomes don't have choices and that's why they end up paying more," he says. "A moneylender will charge €30 on €100 over 20 weeks. That's a huge amount of interest."

Debt is often caused by unexpected circumstances such as illness or bereavement, Mr Edwards adds, but people should be able to provide for circumstances they can foresee.

As the first talk of how many "shopping days" are left hits the streets, the power of the festive season to drain consumers financially can seem inevitable.

As a result, the post-Christmas months can be "very tough".