Should you get a wedding loan?
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The royal wedding is set for Saturday. Expect one glitzy affair. U.K.-based wedding planning company Bridebook puts the price of Prince Harry and Meghan Markle's nuptials at around $2.7 million (or nearly £2 million), excluding security and the royal honeymoon.
Most people don't spend nearly as much on their big day, because most people aren't, you know, British royalty. But we can certainly throw down. The average cost of a wedding in the U.S. is $33,391, according to The Knot. That's a big chunk of change, and if you don't have the cash on hand, you might find "wedding loan" offers enticing.
Consider this move carefully, though. You don't want to into debt on your big day just to keep up with the Windsors Joneses.
A wedding loan isn't really a thing. It's just a personal loan you take out to pay for your wedding. A personal loan is an installment loan. You borrow a lump sum from a bank, credit union or online lender, then pay it back via set monthly payments over a set time period, usually two to five years.
As a form of financing, personal loans have a few things going for them. First, there's a hard end date to the debt. You can't make a few payments on a personal loan, then run its balance back up again, like you can with a credit card. Second, personal loans tend to carry lower interest rates. Think around 5%, if your credit is good, versus 15% on a credit card.
But here's the thing: If you're looking for financing, you're spending money you don't actually have. And while there are certainly times debt is a good thing or at least unavoidable (like if you're buying house), funding a big old wedding isn't one of them.
There are a few steps you can take to host a baller wedding without borrowing. Here are a few of them:
Have a long engagement. That way, you can save up the funds you need to host the event you want.
Redraft your budget to speed up those savings. We have a spreadsheet that can help right here.
Tap family or friends, if you feel comfortable asking loved ones for help. Some people even crowdfund their wedding these days.
Do-it-yourself. Thanks to sites like Pinterest, it's easy to do a "designer" wedding on a dime. Scan social media sites for ideas on affordable favors, centerpieces and more.
Hold off on a honeymoon to limit the big expenses you'll have to cover at once.
If you've already committed to a wedding loan or you just can't shake the thought of one, protect your finances with these tips:
Make sure your credit is in good shape. A good credit score qualifies you for the best interest rates on any type of financing, so do what you can to improve yours before shopping for a loan. You can find ways to improve your credit here.
Consider all your alternatives. There are pros to personal loans, but depending on how much money you need and how long it'll take to repay what you borrow, you might be better off with a 0% financing or balance-transfer credit card. If you can pay off the balance within the offer window (usually anywhere from 12 to 21 months), you can skip interest entirely.
Shop around. Comparison-shopping is one of the best ways to save on any financial product. (We know, because we help people compare and buy life insurance.) Request rate quotes from multiple financial institutions, including banks, credit unions and online lenders to get the best deal on your loan. If you do so within a 45-day time frame, you should preclude any damage too many inquiries might do to your credit score. (They'll get grouped as one application.)
Read the loan terms carefully. Make sure you won't be hit with hidden fees and that the lender plans to report your payments to the major credit bureaus, so you at least build credit off the loan. Ask, too, if there are any penalties associated with an early payoff.
Have a payoff plan. You have to remain disciplined with a credit card. Running up new charges can seriously derail a payment plan. When opting for a personal loan, carefully consider its length. What's the largest monthly payment you can comfortably afford to pay back the loan ASAP?
Want some more ideas for doing a wedding a budget? Here's how to plan a wedding without your bridal party going broke.
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