Best wedding loans for 2022
Is it possible to obtain a personal loan for a wedding?
Although some lenders advertise wedding loans, what they actually advertise is a personal loan that can be used to cover wedding expenses. Most lenders don’t care whether you’re using a personal loan to restore a classic car, remodel a kitchen, or pay for your dream wedding.
How to identify the best wedding loan
Whether you opt for a physical bank, an online bank or a credit union, the best wedding loans have certain characteristics in common.
- Offers a loan of the amount you need to borrow
- Offers a low interest rate
- Provides a loan term and monthly payment you can afford
- Doesn’t charge any fees or very low fees, and doesn’t slip in unnecessary fees by calling it something else (like “admin fee”)
How many parents pay for weddings?
According to the WeddingWire Newlywed Report, parents typically cover 52% of wedding costs. The amount varies according to the age of the couple. For example, parents of Gen Y couples (born between 1981 and 1996) pay 56%, while parents of Gen X couples (born between 1965 and 1980) pay 78% of expenses.
How many couples take out wedding loans?
Given that the average wedding costs $28,000, it’s no surprise that about 45% of couples go into debt to pay for their wedding. It is important to note that going into debt to pay for a wedding is not the only option for a couple. In a moment, we’ll look at how to pay for a wedding without paying interest.
How do wedding loans work?
Wedding loans work like any personal loan. Once you’ve chosen a lender and completed a loan application, the lender will check your credit history to get an idea of how you’ve handled debt in the past. There are two types of personal/wedding loans: unsecured and secured.
An unsecured personal loan is granted based solely on your credit history and your promise to repay the loan. The interest rate is related to how risky the lender considers the loan to be. The higher your credit score, the more APR you are likely to be offered.
Another type of loan is called a “secured personal loan”. With a secured personal loan, you put something of value as collateral, which helps reduce the risk to the lender. As a general rule, any valuable item can be used as collateral. For example, a piece of art, a classic automobile, a coin collection, or jewelry might be acceptable to the lender.
The interest rate for a loan secured by collateral may be lower than the rate for an unsecured loan. This is because the lender knows that a secured loan carries less risk. If you fail to make payments, the lender has the legal right to take possession of the collateral, sell it and recover the loss.
How to get pre-approved for a wedding loan
The personal loan pre-approval process is quite simple:
- You answer a few questions, like your name, address, place of work, and how much you earn.
- The lender thoroughly analyzes your credit history by writing a credit report.
- The lender calculates your debt to income ratio (DTI). DTI compares your monthly financial obligations to how much you earn. Ideally, a lender wants to see a DTI of 36% or less. To calculate DTI, add your fixed monthly payments, such as rent, autopay, credit card payments, and child support. Divide the total by your monthly income. Let’s say your debts are $2,500 and your income is $7,000. Your DTI is just below 36% ($2,500 ÷ $7,000 = 0.357).
- Once a lender has determined that you are a safe credit risk, they will tell you that you are pre-approved and how much you can borrow.
What about borrowers with bad credit?
Having a bad credit rating doesn’t necessarily mean a loan is out of the question. However, loans for bad credit carry a much higher interest rate than loans given to borrowers with excellent credit.
If your credit score isn’t quite where you need it to get a lower interest rate, you might want to consider waiting until you can raise your credit score or explore other options for financing your big day.
How to pay for a wedding without taking out a loan
If your wedding budget is spiraling out of control, you have options. Read these suggestions and see if any of them work for you.
Create a spreadsheet
You may find it easier to come up with a plan to pay for your wedding with an expense spreadsheet. As you will notice, some of the following ideas include reference to your spreadsheet. In no particular order, here are four ideas for paying for a wedding without taking out credit.
1. Give it time
Once you decide to get married, it can be difficult to postpone the event. However, if you are worried about getting married with a loan to repay, the wait gives you the opportunity to save for each wedding cost as much as you can. For example, you can spend a few months saving up for a professional photographer, and another month or two saving up to buy invitations or some other wedding expense. Every time you put money in your savings account and check an expense on your spreadsheet, you’re that much closer to having your wedding fully funded.
There are few things more beautiful than a small, intimate wedding. Imagine yourself surrounded by the people who love you most in the world, marrying your partner and getting married without further debt. That’s what a scaled-down marriage can do for you. Take a look at your spreadsheet. What is important to you and what can you do without? For example, if you’ve always envisioned a stunning reception, why not limit the wedding ceremony and direct the funds to a reception you can afford?
3. Do it yourself
Although bridal magazines may give you the impression that there is “only one right way” to have a stunning wedding, that simply isn’t true. The people sharing your wedding day don’t care how many flowers surround you or how many attendants stand next to you. For guests, it’s about sharing your special day. The people who matter aren’t interested in how much you spend on clothes or decorations. They just want to know that you’re happy.
Why not cut expenses by doing a lot of it yourself? Gather friends together one evening to create flower arrangements, ask a family member to make fancy cupcakes. You may not be able to do it all yourself, but it is possible to significantly reduce your wedding budget.
4. Go into short-term debt
If you have a good credit rating, consider applying for a credit card with a promotional rate of 0%. Here’s how a card with a promotional rate works:
- You ask for the credit card.
- The credit card company checks your credit report.
- If your application is approved, the credit card company tells you the amount of your spending limit. The higher your credit score and income, the higher the spending limit is likely to be.
- Promotional rates typically last 12-18 months.
- Build your wedding budget around the spending limit.
- To find out how much it will cost you to fully pay off the credit card, divide the amount you plan to spend by the duration of the promotional rate. For example, if you spend €15,000 and receive a promotional rate of 0% for 18 months, the monthly payment will be €833.
Sure, $833 a month might cut into your monthly budget, but consider this: paying it off in 18 months means you won’t pay any interest. Not a single penny.
Now imagine you take out a $15,000 personal loan with an APR of 9%. You want a lower monthly payment, so you extend the loan to three years. Your monthly payment is $477, but by the time you pay off the loan in 36 months, you’ve paid an additional $2,172 in interest.
Imagine entering a new debt-free marriage. This means there are no loan terms to worry about, no monthly repayments to expect, and no new debt to affect your credit score. Even the best personal loans can’t beat that.