Should I get a loan for engagement ring financing?

Man and woman standing together on a beach, smiling together for a selfie and showing off the new engagement ring on her handImage: Man and woman standing together on a beach, smiling together for a selfie and showing off the new engagement ring on her hand

In a Nutshell

Buying an engagement ring is a significant purchase, and it may be hard to pay for a ring upfront. If you’re unable to pay for a ring outright, there are a few engagement ring financing options you can consider, including a personal loan, a credit card and store financing.
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Planning for wedded bliss can be costly. The average couple spends $5,900 on an engagement ring, according to The Knot’s 2019 Jewelry and Engagement Study.

While paying cash for major expenses is usually preferable, it’s not always possible. And if you’re thinking about financing an engagement ring, you probably want to know you’re getting a good deal.

Fortunately, there are a few options available if you want to apply for engagement ring financing. We’ll go over some of your choices here, including credit cards that offer 0% intro purchase APRs, unsecured personal loans from traditional lenders and buy-now, pay-later lenders.

Should I finance an engagement ring?

Taking out a loan to finance an engagement ring could be a good choice, depending on your financial situation and preferences. But you’ll want to consider all financing options. Here are three financing choices you may have available to you as well as some of the pros and cons of each option.

1. Personal loans

Personal loans are a type of installment loan that you pay back over a set number of months or years. If you qualify for a personal loan, you’ll receive a lump sum of money that you can use toward a large purchase like an engagement ring.

Applying for a personal loan is usually a straightforward process. Many lenders offer the option to apply for prequalification, so you can see what you might qualify for and compare options from different lenders. Once you’ve selected a lender, you can formally complete the application process. Just keep in mind that prequalification isn’t a guarantee you’ll be approved and that your final terms may differ once you actually apply.

Benefits of a personal loan

  • Many personal loans are unsecured loans, which don’t require any collateral, like a savings or investment account, to secure the loan.
  • Average interest rates for personal loans tend to be lower than average interest rates on credit cards (assuming you’re paying interest on the card), according to Federal Reserve data.
  • Some personal loan lenders offer fixed interest rates, so if you qualify for a fixed-rate loan, your monthly payments will stay the same.

Drawbacks of a personal loan

  • Your interest rate may be higher with an unsecured loan than a secured loan since the loan isn’t secured with collateral in case you default.
  • If you qualify with poor credit, you may be offered a high interest rate.
  • Personal loans may come with origination fees for processing your loan, which can eat into your total loan amount.

2. A loan from a buy-now, pay-later lender

Several popular buy-now, pay-later lenders have cropped up in recent years. Lenders such as Affirm, Klarna and Afterpay let you shop with certain retailers and apply for an installment loan to pay off your purchase over time.

If you’ve found an engagement ring you love, you may want to check if the retailer offers financing through any of these lending platforms.

Benefits of buy-now, pay-later financing

  • If you already know what engagement ring you want, you may be able to apply for in-store or online financing.
  • Some buy-now, pay-later lenders offer 0% APRs if you meet certain requirements. That might be a better option than paying with a credit card, depending on your credit health.
  • Some companies, like Affirm, say they consider more than credit scores when they evaluate your application. But remember that just because you may qualify for something doesn’t make it a good idea. Consider whether you can afford repayments in your budget.

Drawbacks to buy-now, pay-later financing

  • Your retailer options may be limited if you go this route.
  • You could end up paying more than you realize if you pay your monthly bill late and are charged a late fee.
  • You could end up with an APR that’s just as high — or higher — than a credit card if you don’t read through your terms carefully.

3. Credit cards

There are a few different ways you can use a credit card to pay for an engagement ring. For instance, you could use a credit card you already have or you could apply for a new card — ideally one offering an introductory 0% purchase APR.

If you’re planning to use the card only to buy an engagement ring, then you might consider applying for a credit card through a jeweler. Some jewelry stores offer intro rates, though they may not be 0%.

Benefits of a credit card

  • Some credit card issuers may offer an intro 0% purchase APR for new cardholders.
  • You may be able to earn cash back rewards on your purchase, depending on what credit card you get.
  • Some jewelers offer special financing options.

Drawbacks of using a credit card

  • Introductory 0% purchase APR offers last only for a limited time.
  • If you don’t qualify for a card with a low intro purchase APR — or can’t pay off your card balance in full before your promotional period expires — then you may pay a high interest rate.
  • You may have to make a down payment if you’re financing through a jeweler.

How do I compare my engagement ring financing options?

So how do you know which engagement ring financing option is the right choice for you? There are a few things you should consider when comparing any financing offers.

  • Interest rate: Can you qualify for a credit card that offers an introductory 0% purchase APR? If not, then you may want to think about applying for a personal loan through a traditional or online lender.
  • Fees: Make sure to read the fine print before agreeing to a loan or credit card. If you’re considering taking out a personal loan, is there an origination fee or a prepayment penalty for paying off your loan early?
  • Total amount: This is one of the first things you should look at when considering any loan or credit card because it will give you an idea of the overall cost of financing. After fees and interest are added up, what’s the total amount you’ll spend over the life of the loan?
  • Your financial situation: Can you comfortably afford to make the monthly loan payments? If you’ve gotten a credit card that offers a low intro purchase APR, can you realistically pay that money back before the promo period ends? Be honest with yourself about what you can afford to do.

What’s next?

If you’re ready to take the next step in your relationship but can’t afford to pay cash for an engagement ring, ask yourself a few questions before deciding to finance an engagement ring.

  • Can I qualify for a credit card that offers an intro purchase APR?
  • If so, can I pay it off before the intro rate is up?
  • Is my credit good enough to qualify for a personal loan?
  • If I qualify for a personal loan or credit card, are there any additional fees I should know about?
  • Can I comfortably afford the monthly payments?

Once you ask yourself these questions, you’ll be able to make a decision on the type of financing that works with your credit, finances and budget.

About the author: Jamie Johnson is a Kansas City-based freelance writer who specializes in finance and business. She covers a variety of personal finance topics, including building credit, credit cards, personal loans and student loans… Read more.