Hanneh Bareham | (TNS) Bankrate.com
If you want a big or small wedding but don't have enough money, you may consider getting a wedding loan to help make your big day a reality.
Wedding loans are suitable for some situations, but not all. Before getting a loan, think about other options to ensure you're starting your new life on the right financial path with your spouse.
What is a wedding loan?
A wedding loan is a type of personal loan used for wedding-related expenses like the venue, catering, and a videographer.
A wedding loan is designed for engaged couples planning weddings. Some use it for specific parts of the wedding, like better catering, while others use it for the entire event.
These loans are easy and fast to apply for, with many lenders offering online approval within minutes. The interest rate depends on your income, credit score, and current debts.
Although some loans are specifically for weddings, you can generally use any personal loan to cover the costs, including home equity loans.
How much does a wedding loan cost?
The cost of a wedding loan depends on factors like the loan term, interest rate, and amount borrowed. You can use a personal loan calculator to easily figure out the total cost of your loan.
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 with planning the dream wedding, especially with the influence of social media. However, it's not recommended to take out a wedding loan unless absolutely necessary.
When deciding whether to take out a loan, think about how essential a larger budget really is. If you can reduce costs to better fit your available funds, a wedding loan may not be necessary and you could save 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 — making it more difficult to get approved and secure a competitive interest rate without a good credit score. However, 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 deciding whether to finance your wedding, it's important to think about the advantages and disadvantages before applying.
Pros of wedding loans
- Soft credit checks: Lenders that offer wedding loans often allow you to prequalify, so you can see the loan offers available without impacting your credit.
- Potentially lower interest rates: Compared to credit cards, interest rates for wedding loans are generally lower and can save you thousands of dollars.
- Longer repayment terms: Most wedding loans provide three to five years to pay off, so you can take your time settling your wedding debt.
- They’re unsecured loans: Because wedding loans are unsecured, you don’t have to worry about losing your house, car, or any other possessions if you can't repay them.
Cons of wedding loans
- Involve taking on debt: Wedding loans can lead you into a serious cycle of debt, especially if you already owe money.
- Interest rates can be high: If you have a poor credit score, you might end up with a high interest rate, which can raise the overall cost of your loan.
- Can lead to unnecessary spending: Wedding loans may tempt you to spend on upgrades and extras that you wouldn’t consider if you paid for your wedding with the cash you have on hand.
How to apply for wedding loans
To apply for wedding loans, follow these five steps:
- Check your credit: Find out where your credit stands by checking your credit score. If your credit isn’t the best, you might want to work on improving it before applying for a loan.
- Shop for lenders: There are plenty of wedding loan lenders — from banks to credit unions. Check each lender’s credit requirements, funding times, loan rates and terms to figure out 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 short form with your personal details.
- Compare offers: Thoroughly compare the wedding loan offers you receive. Consider interest rates, terms and fees. Choose the most favorable option that will save you the most money.
- Apply: Once you decide on a wedding loan, complete the formal application. Most lenders offer quick approval for qualified applicants and typically deposit funds within a few business days or even 24 hours.
Alternative wedding financing options
If a personal loan isn’t in your wedding plan or you don’t think it’s the best fit for your situation, there are financing alternatives that may fit more comfortably into your financial portfolio.
Credit cards
Some credit cards offer 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, come up with a budget that works for your lifestyle needs and allows 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 automatic transfers from your paychecks to your wedding savings account. This can help you save without much effort or thinking.
Help from relatives
Some family members might be willing to contribute to your wedding expenses. If a family member offers to help pay for the wedding, this can be a good way to fund the event without resorting to a wedding loan, using a credit card, or dipping into your own savings.
The main point
As the average cost of a wedding continues to rise, fewer people can afford to pay for their big day upfront. The demand for wedding loans is increasing, and these loans may offer more favorable interest rates compared to credit cards and other financing options.
However, before taking on debt, consider whether you really need to finance the wedding expenses or if you can lower the total cost by making a few small sacrifices that won’t impact your experience. If you determine that using a personal loan to finance 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 points to remember
• A personal loan can be used to cover various wedding expenses, such as hiring a professional photographer or caterer.
• The cost of a wedding loan depends on factors like your interest rate, repayment term, and loan amount.
• Your eligibility for a wedding loan and the amount you can borrow typically depend on your income, credit score, and existing debt.
• Before resorting to a personal loan to fund your wedding, consider other options like a credit card with a low APR promotional period or using personal savings.
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