Pressures on family finances are so great that more than one million people plan to take out a payday loan to cover the cost of Christmas, according to a report.
The finding was made by researchers for the Government-backed Money Advice Service (MAS), which also suggested that spending on the festive season will be curbed this year despite predictions to the contrary among retail bodies.
The MAS found that 1.2 million across the UK were thinking about turning to a payday lender to fund their seasonal spending while 32% of those questioned planned to ramp up their credit card debts.
The survey also showed that 9% of people were still paying off their debts from last Christmas at a time when wage increases are failing to keep up with rising living costs such as higher energy and food bills.
The squeeze on budgets was highlighted when separate official figures showed on Friday that personal insolvencies edged up to their highest levels in a year during the third quarter of the year - driven by a sharp increase in individual voluntary arrangements.
The MAS said that people typically expected to spend £487 this Christmas - a fall of £21 when compared to the same study in 2012.
Payday lenders, which typically offer short-term loans, have been blasted for their treatment of customers struggling to keep up their repayments amid soaring penalties.
A crackdown has been taking place on the lending industry to stop consumers sinking into a spiral of debt.
New curbs proposed by the Financial Conduct Authority (FCA) will force lenders to place "risk warnings" on their promotions and advertising, urging consumers to "think" before taking on a payday loan.
The watchdog has powers to ban adverts if it thinks they are misleading while lenders will only be allowed to roll over a loan twice and they will only be able to make two unsuccessful attempts to claw money back out of someone's bank account under proposals due to come into force next year.
Consumer group Which? recently called for tougher action to clean up the whole of the consumer credit market, after research it carried out found going overdrawn with your bank can be as "eye-wateringly" expensive as taking a payday loan.
The research carried out by the MAS, an independent body set up by Government, found that pressure to please other people and loved ones was the top reason for people overspending at Christmas, followed by wanting to give children the perfect Christmas and being tempted by special offers.
Jane Symonds, head of service delivery at the MAS, said: "Christmas is an exciting time to catch up with family and friends but can also be a worry financially, and very stressful if money is tight."
:: The MAS has a guide to help people plan their Christmas budgets at www.moneyadviceservice.org.uk/christmasplanner.
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