5 Things You Need to Know Before Getting a Wedding Loan

Is the biggest party of your life really worth committing to years of debt?
Last updated Sep 15, 2020 | By Robin Kavanagh
Newlyweds walking together

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Your wedding day may be one of the most incredible — and expensive — days of your life. With the average wedding costing between $33,000 and $44,000 in 2018, according to recent research from The Knot and Brides.com, respectively, it’s no wonder that paying for your special day might be challenging.

While some weddings may cost much less and others much more than the average, many come with a price tag that could equal college tuition for a full four years, a down payment on a house, or the cost of a luxury car. Since you would look at how to get a loan to pay for items such as these, it’s not too much of a stretch to think taking out a loan to pay for a wedding might be a good idea.

This article will give you a look at both the positives and negatives of taking out a personal loan to pay for your wedding.

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What is a wedding loan?

Wedding loans aren’t a specific type of loan. You don’t go to a bank and ask to apply for a wedding loan the same way you would a mortgage or auto loan. Though some banks may offer “wedding loans,” these are most often unsecured (i.e., don’t require collateral) personal loans that can be used to pay for anything but are marketed to those who may be planning a wedding.

The number of people taking out wedding loans is increasing, especially as online lending options continue to grow. If you’ve recently been searching the web for wedding loans, you may find offers from lenders such as Upstart, SoFi, and Prosper when you check your credit score through an app or scroll through your Facebook feed. You can enter your information, then get a decision in only minutes and funds in your account within days. You can also apply for personal loans through banks you have existing accounts with or from a new bank or credit union.

Since these are personal loans, the amount you can borrow and the annual percentage rate, or APR (interest rate), can vary widely from lender to lender. Some banks will loan you as little as $500 or as much as $100,000.

The APR that may come with these loans will take into account a variety of factors, such as your credit score, income, education, and outstanding debt. Generally, APRs for the best personal loans range from 6% to 36%, though some can go lower or higher. There are also different types of APRs for personal loans. A fixed-rate loan has an APR that remains the same throughout the duration of the loan, while interest with a variable-rate loan can change periodically.

Personal loans usually come with two-, three-, or five-year terms, meaning you’ll be able to space out payments over this period of time. The longer the term, the lower your monthly payment will be. That payment will include all of the interest for the term of the loan and possibly additional fees. Some banks will charge you for running credit checks or what they call an origination fee, which is meant to defer administrative costs. These fees are usually deducted from the amount of the loan, giving you a lower total amount from the bank.

5 things to know before getting a wedding loan

Depending on who you ask, wedding loans can either be a great idea or a last resort to pay for your big day. Here are some essential things to consider if you’re thinking about this option.

  1. Relatively quick-and-easy way to get money
  2. It’s easier than ever to get a personal loan, especially if you have good credit and a steady income — or a cosigner that has these things. Even if your credit is less than perfect, you still may be able to get approved for an unsecured loan, though likely with a higher APR.

    If you have a credit-monitoring app or account, you may see preapproved offers or loans that the app thinks you have a good chance of being approved for, based on the information in your account. Your bank can also be a great resource for finding loan options.

    Finally, if you have a CD (certificate of deposit), savings account, or a home, you may also be able to get a secured personal loan. This type of financing offers something of value to the bank as collateral if you end up not paying back the loan. A secured personal loan lets you borrow against this amount without actually having to dip into your savings or sell your house. These loans also often offer lower interest rates, as the risk is considered low.

  3. APRs can be lower than other types of borrowing — but can be pricey if you have less-than-perfect credit
  4. One of the cardinal rules of lending is basing APR rates on creditworthiness, which usually means a good credit score will get you a lower rate. Less-than-perfect scores may not disqualify you for loan approval, but they can increase the APR that’s offered.

    This means that though a personal loan may traditionally offer a lower APR than, say, a credit card, if your scores don’t make the grade for that lender, the APR could be even higher than what a new credit card would offer.

    Most experts recommend trying to get the lowest APR you can find when considering a personal loan, especially for a wedding.

    “When you take on debt to pay for a one day party, you're basically adding another tax to your overall bill,” says Jessica Bishop, founder of The Budget Savvy Bride. “With the added interest, you'll end up spending even more than the party was actually worth.”

  5. You choose how much you need and get a fixed repayment term
  6. Budgeting is a crucial factor when planning your wedding and can help you limit the amount of money you borrow. This can steer you away from overspending and ensure that you’re including the things you really need.

    “...you’ll only receive a loan in the amount you ask for,” says Logan Allec, a CPA (Certified Public Accountant) and owner of personal finance site Money Done Right. “If you’ve applied for other loans, you may be approved for more than you originally wanted. However, with wedding loans, you’ll find it easier to stick to your budget because you’ll only be allotted what you asked for (or less, depending on your situation).”

    You’ll also be able to budget how much of your income to allocate each month toward paying back the loan, since you’ll be paying down the balance for a fixed period of time. If you put your wedding expenses on a credit card that accrues interest daily or monthly, you could easily be paying for your wedding many years longer than a personal loan term.

    Each month you don’t pay off the full balance of the credit card, more interest is added to the amount you owe. If you make the minimum payment each month, that money will go to all the interest you’ve gained during the previous month’s billing cycle and only a small amount of the actual balance. You’d have to budget for payments significantly larger every month to reduce the balance, which can put more of a strain on your finances than a singular monthly payment that would come with a personal loan.

  7. They may come with additional fees
  8. As mentioned above, personal loans can come with additional fees. Though origination fees are common, prepayment fees and penalties are also items to look for in the fine print of a loan.

    If you pay off your loan early, the lender may not get all of the interest it was expecting from you. When this happens, the lender may charge a penalty based on either the principle you’re paying off or the remaining interest. The goal is to recoup its losses.

  9. You’re starting your marriage in debt
  10. In addition to whatever impact your current debt may have on your future finances as a married couple, a wedding loan could add significantly more to that burden. In turn, this might cause struggles with trying to make ends meet, stress, pressure, and even resentment — none of which are positive in a new marriage.

    “Start your marriage off on the best financial footing by not taking on debt for your wedding,” says Bishop.

    She continues, “We know the statistics on divorce and the fact that money-related issues are often cited as a factor in the dissolution of a marriage. So why would you want to start your married life together with that sort of burden on your back?”

4 alternatives to wedding loans

If you’re thinking that a wedding loan may not be the right choice for you, there are some alternatives that could help you plan a wonderful wedding without breaking the bank.

  1. Lower your wedding costs or find ways to save (or both)
  2. What do you really need for your wedding? There are a ton of ways to minimize expenses, from choosing a public venue (like a park or beach) to opting for artificial flowers to setting up payment plans with a caterer. Make a list of necessities and nice-to-haves, then work backward from there.

  3. Postpone your wedding to give you more time to save up
  4. If getting married isn’t an immediate necessity, think about setting the date far enough in the future so you can make a strategic savings plan. That way, you’ll have a budget of cash to work with and not have to worry about carrying any debt.

  5. Spend on credit cards strategically
  6. Rewards and 0% APR credit cards are your friends when planning your wedding costs. Take stock of the points and miles you’ve earned and what you can spend them on for your event to lower your out-of-pocket expenses.

    Also look into 0% APR credit card offers, which let you make interest-free purchases for a set time period. Be careful to read the terms, though, as some may charge you deferred interest if you don’t pay your balance by a specific date.

  7. Turn to family and friends
  8. Your friends and family love you and want to help. Learn to say yes when they offer, draw on their strengths, and get creative when it comes to your registry.

    Perhaps your guests would like to donate to your wedding fund instead of bringing a gift. How about creating a wish list of items for the event that people can pledge to purchase? Maybe there’s someone who would even be willing to loan you some money. Don’t be afraid to ask!

You have several options when it comes to paying for your wedding. There are both positives and negatives to choosing a personal loan, but in the end, only you know what’s best for your situation. Be sure to take your time and do your research before making any decisions.

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