Hanneh Bareham | (TNS) Bankrate.com
If you want a big, extravagant wedding or a small, casual one, you might find yourself lacking funds as you go deeper into planning. This is where a wedding loan could be useful in making your special day a reality.
Wedding loans make sense for some situations, but not all. Consider other options before deciding on a loan to ensure you’re starting your life with your new spouse on a good financial path.
What is a wedding loan
A wedding loan is typically a personal loan used to pay for various wedding expenses, including the venue, catering, and a videographer.
A wedding loan is aimed at engaged couples planning weddings. Some couples may use a wedding loan to finance specific parts of their big day, like upgrading catering options, while others will use financing to cover the entire event.
These loans are simple and fast to apply for — many lenders will even approve you online in a few minutes. The rate of interest you’ll get varies and is usually based on your income, credit score, and current debts.
While some loans are marketed specifically as wedding loans, you’re generally free to use any kind of personal loan to cover wedding costs, including home equity loans.
The expense of a wedding loan
The cost of a wedding loan depends on various factors, such as your loan term, interest rate, and how much you want to borrow. You can use a personal loan calculator to easily figure out how much your specific loan will cost.
The following table shows the costs of a three- and five-year loan with a 10 percent annual percentage rate.
3-year, $10,000 wedding loan at 10%5-year, 10,000 wedding loan at 10%
| Monthly payments | $323 | $212 |
| Total Interest paid | $1,616.19 | 2,748.23 |
| Total borrowing costs | $11,616.19 | $12,748.23 |
When to get a wedding loan
It’s easy to get carried away planning the wedding of your dreams, especially with the constant influence of social media platforms. But it’s not advised that you take out a wedding loan unless it’s necessary.
When deciding whether to take out a loan, think about how crucial a larger budget really is. If you’re able to reduce costs in any way to better fit your available funds, then a wedding loan may not be necessary and you just saved yourself thousands of dollars.
Since wedding loans are unsecured, you don’t need to put anything up for collateral. While this reduces your personal risk, it increases the lender’s risk — meaning it is harder to get approved and get a competitive interest rate without a good credit score. But if you have excellent credit, you may be able to get a large loan at a low rate.
Pros and cons of wedding loans
When considering whether to finance your wedding, it’s important to consider the benefits and drawbacks before apply.
Pros of wedding loans
- Soft credit checks: Lenders that offer wedding loans often allow you to prequalify so you can see the loan offers at your disposal without hurting your credit.
- Potentially lower interest rates:Compared to credit cards, interest rates for wedding loans are usually lower and can save you thousands of dollars.
- Extended payment periods: Most wedding loans have repayment terms of three to five years, so you can take your time paying off your wedding.
- They’re unsecured: Because wedding loans are unsecured, you don’t risk losing your home, car or any other property you own if you can't repay them.
Downsides of wedding loans
- Involve accumulating debt: Wedding loans can lead you into a significant cycle of debt, particularly if you already have other debts.
- Interest rates can be high: If you don’t have a good credit score, you might have to agree to a high interest rate that can raise the total cost of your loan.
- May result in unnecessary spending: Wedding loans might prompt you to spend on upgrades and extras you wouldn’t consider if you paid for your wedding with the cash you have available.
How to request wedding loans
To request wedding loans, follow these five steps:
- Check your credit: Determine where your credit stands by checking your credit score. If your credit isn't the best, you might want to take steps to enhance it before applying for a loan.
- Explore lenders: There are plenty of wedding loan lenders — from banks to credit unions. Review each lender’s credit requirements, funding times, loan rates and terms to decide which ones are a good fit.
- Get prequalified: Many lenders offer a prequalification process that won’t affect your credit score and can give you an idea of the loans available to you. To prequalify, you’ll need to fill out a brief form with your personal details.
- Compare offers: Thoroughly compare the wedding loan offers you receive. Consider interest rates, terms and fees. Select the most favorable option that will save you the most money.
- Apply: Once you choose a wedding loan, complete the formal application. Most lenders provide swift approval for eligible applicants and typically deposit funds within a few business days or even 24 hours.
Other options for financing a wedding
If a personal loan isn’t part of your wedding plan or you don’t think it’s the best fit for your situation, there are financing alternatives that may align more comfortably with your financial situation.
Credit cards
Some credit cards provide an introductory 0 percent APR for a set period — typically between 12 and 24 months — after you open the account. This means you have time to pay off the balance without being charged interest.
A 0 percent APR credit card can be a great way to pay for vendor deposits and other immediate costs you can’t cover right away but can pay off in the next few months. Just make sure you can pay off the amount before the promotional period ends.
Personal savings
Try saving for a few years before a wedding. Dipping into a wedding-specific savings account you and your betrothed have will be better in the long run, since you won’t have to pay interest on loans or credit cards used to finance a wedding.
Ways to save
- Create a budget: Examine your monthly income and expenses. Then, develop a budget that suits your lifestyle needs and enables you to save for a wedding.
- Take advantage of credit card perks: Many credit cards offer rewards such as cash back and points that you can redeem for free or discounted things such as airfare, lodging or gift cards.
- Automate savings: Set up for a portion of your paychecks to go straight into your wedding savings account. This can help you save without having to think about it too much or put in a lot of effort.
Help from family members
Some relatives might be willing to assist with the cost of the wedding. If a family member offers to help pay for the big day, this is a good way to fund the wedding without needing a wedding loan, using a credit card, or using your own savings.
The bottom line
As the average cost of a wedding keeps rising, fewer people can afford to pay for their big day upfront. Wedding loans are becoming more popular due to the demand and might offer better interest rates than credit cards and other financing options.
But before you put yourself in debt, consider if you really need to finance the wedding costs or if you can lower the total price by making a few small sacrifices that won’t affect your experience. If you decide that taking out a personal loan to fund the wedding is the right choice for you, make sure to research and compare rates and fees from multiple lenders to find the best option.
Key takeaways
• You could use a personal loan to cover various wedding expenses, like a professional photographer or caterer.
• The cost of a wedding loan depends on different factors, such as your interest rate, repayment term, and loan amount.
• Your eligibility for a wedding loan and how much you can borrow usually depends on your income, credit score, and existing debt.
• Before using a personal loan to finance your wedding, consider other options, like a credit card with a low APR promotional period or personal savings.
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