Australians are expected to spend an extra $1079 each over the festive period, with the biggest splurges on Christmas gifts, vacations and Boxing Day sales, according to Commbank research.

This is a large amount of money, and for many Australians, Christmas spending can put even more pressure on an already overstretched budget.

Comparison site finder.com.au has seen a six-fold increase in people applying for interest-laden payday loans over December, indicating many are desperate for extra cash over the holiday period.

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Finder.com.au money expert Michelle Hutchinson says it’s concerning to see so many people have been caught out.

Fast cash also comes with huge interest rates.

“It shows that a lot of people haven’t planned for extra expenses that come with the festive season and with seven days until Christmas, many are jumping into the easiest credit options,” Ms Hutchinson says.

Payday loans aren’t your friend

Finder.com.au’s research found the average interest rate for a payday loan was a whopping 292 per cent per annum.

For a 30 day loan of $1000, less than what the average person spends over Christmas, a interest fee of $240 would apply – almost one fifth of what you’ve borrowed.

The average purchase interest rate on a credit card was 17.6 per cent per annum.

Ms Hutchinson says anyone can be caught out by unexpected expenses, or simply haven’t calculated their spending according to when they’re paid.

“It’s a matter of timing. It’s now at the very end of the month and a lot of people may get paid on the 31^st of the month,” she says.

“Enquiries come through every day from people who’ve had unexpected expenses come up that they need to pay and they don’t have any extra cash”.

How much does it cost to borrow using a payday loan?

^{The calculator works off the following assumptions: fees do not change for the life of the loan, a 20% establishment fee and a monthly fee of 4% of the principal loan amount. You may want to seek advice from a financial professional before signing up to a loan.}

There are other options

While you could pay $240 to borrow $1000 using a payday loan, you could instead pay $15 in interest to have the same balance on a credit card for a month.

Personal loans are also a safer option, with an average interest rate of 14.5 per cent.

“It costs more to borrow $1,000 for one month with a payday loan than to borrow $2,000 for 12 months with an average unsecured personal loan,” Ms Hutchinson says.

Ms Hutchinson says payday loans should be a last resort, and people should consider credit cards with promotional offers of  zero per cent interest on new purchases.

Credit cards are a better option – if you can manage them. Photo: ShutterStock

“As long as you set yourself a plan and pay off that debt before the end of the promotion period, then you can save a lot of money”.

Don’t get caught out next year

You should ideally put away money before December, but if you’ve been caught out this year, consider how much you spent, and prepare for it in 2015.

“You know it’s going to cost you that much next year,” Ms Hutchinson says.

“There’s no point in ignoring it or you’re going to end up paying for it in the long run”.

“Think about how much you have spent this year on Christmas and if you divide that by 12 months, you can then put aside each month into a high interest savings account”.

Also realistically think about much you can afford for each person, and don’t feel pressured to spend more than that.

“This time of year doesn’t have to been expensive. There’s no need to spend hundreds of dollars on presents,” Ms Hutchinson says.