As the holiday season ramps up, so does consumer spending…and financial stress. From travel expenses to gift-giving splurges, borrowers often face sharp increases in personal debt as we near the end of the year. These behaviors have a direct impact on loan payment behavior, leading to increased late payments, higher default risk and an overburdened servicing staff.
But the season doesn’t have to derail your financial performance. With proactive strategies and the right digital payment tools, lenders can help borrowers stay on track. Even better, they can do it while reducing manual workloads and delinquency. Here’s what you need to know heading into the holiday months.
Seasonal Spending Trends: The Holiday Effect on Borrower Behavior
According to Deloitte’s 2025 holiday survey, average household spending is expected to decrease around 10 percent from last year. However, the end-of-year retail season continues to be one of the most financially demanding times for consumers, with many turning to credit and short-term financing to fund purchases. These seasonal spending trends are further complicated by the nature of temporary holiday employment, which can create income variability that makes budgeting (and repayment) more difficult.
At the same time, data from TransUnion’s Consumer Credit Industry Insights Report points to early signs of softening repayment behavior, especially among non-prime borrowers. As borrowers extend themselves financially for the holidays, lenders may see this trend accelerate.
Common Payment Challenges During the Holidays
The pressure to spend, whether out of obligation, celebration or social influence, can quickly shift borrower priorities. Loan payments often take a backseat to holiday expenses. As a result, there is often a spike in late payments during and after the holiday season.
Borrowers with unpredictable income or limited savings are particularly vulnerable. Even those with steady income streams may opt to delay or pause payments when faced with mounting gift costs, travel expenses or year-end bills. These challenges impact cash flow and their relationships with lenders, especially when communication is infrequent or rigid repayment structures leave little room for flexibility.
How Proactive Communication Can Offset Risk
To maintain strong loan performance through Q4, lenders need to get ahead of borrower behavior. Proactive communication is key.
Automated reminders via email, SMS or app notifications can keep payments top of mind, especially during a season filled with distractions. Better yet, offering flexible payment scheduling helps borrowers align their due dates with their holiday pay cycles or bonus payouts. When borrowers feel supported rather than penalized, they’re more likely to stay engaged and on time.
Recurring payments are another essential tool. Encouraging borrowers to set these up before the holiday rush means fewer missed payments and fewer manual interventions for your team.
Of course, a great experience starts with loan disbursement itself. Look for an instant funding solution; 66% of borrowers say they’ll return to a business that offers instant funding technology that speeds up the process. That can increase business volume by as much as 25%.
Why Digital Payment Tools Are Critical This Season
Technology plays a crucial role in adapting to borrower needs during high-stress financial periods. Offering a range of payment channels, such as online portals, mobile apps, IVR, text-to-pay and digital wallets, meets borrowers where they are, whether at home or on the go.
REPAY’s fully integrated platform enables 24/7 access to fast, secure payments across channels, helping lenders create an easy, positive borrower experience. This level of accessibility supports on-time payments while also building trust and convenience into every transaction.
Automation also reduces back-office burden. With fewer manual processes, your team can focus on high-value tasks like borrower outreach and support rather than chasing down late payments or reconciling complex payment methods.
Steps Lenders Can Take Before the Holiday Rush
Q4 may be well underway, but it’s not too late to take action. Here’s what lenders can do now to reduce payment risk and support borrower success:
- Start outreach early. Don’t wait for borrowers to start missing payments. Send reminders now.
- Segment your borrowers. Identify high-risk groups and tailor your messaging accordingly.
- Promote recurring payments. Make it easy to “set it and forget it” for the rest of the year.
- Offer flexible scheduling. Let borrowers adjust due dates based on income timing.
- Train your team. Ensure frontline staff understand the tools available and how to communicate with empathy.
These strategies can help to mitigate short-term risk while building stronger long-term borrower relationships.
Closing the Year Strong: Keep Borrowers on Track with Better Tools
The holidays present a unique challenge for loan servicers, but also a powerful opportunity to modernize the borrower experience. With smart, omni-channel payment solutions and proactive borrower engagement, you can prevent seasonal slowdowns and enter the new year with fewer delinquencies and stronger borrower relationships.
Staying ahead of shifting payment behavior takes more than just tech, though. It requires timing, flexibility and meeting borrowers where they are. Lenders that act now will be better positioned to support their customers and outperform competitors during the busiest financial season of the year. Contact REPAY today to learn more.
Payment Readiness Checklist for Holiday Loans:
Make sure your borrowers (and your team) are ready for Q4:
Set up automated payment reminders Identify at-risk borrower segments Offer recurring payment enrollment Provide flexible due date options Ensure staff training on digital tools and borrower outreachFrequently Asked Questions:
How much do consumers spend during the holidays?
According to the Deloitte Holiday Retail Survey for 2025, “shoppers expect to spend US$1,595 down 10% from 2024.” The year-over-year decline is due to concerns about a weaker economy in 2026.
Does holiday spending really affect loan payments?
Yes, holiday overspending can disrupt monthly budgets, leading to an increase in late or missed payments. This is especially true for borrowers with limited financial flexibility, who may prioritize holiday expenses over debt repayment.
How does seasonal employment impact loan behavior?
Temporary jobs can create short-term income boosts, but also add volatility. While some borrowers may catch up on payments during seasonal work, others may overestimate income and take on more debt than they can manage once the seasonal jobs end.