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If you’re getting ready to tie the knot, there’s a good chance it won’t be cheap.
The average wedding ceremony with reception costs $28,000, according to The Knot’s 2019 Real Weddings Study.
If you’re fortunate, you may have enough savings to cover all your wedding expenses, or parents who are willing to foot some or all of the bill. If not, you may find yourself at a crossroads: Do you take on debt to have your dream wedding, or do you cut back with a smaller celebration?
A wedding loan — which is simply a personal loan that you use for wedding expenses — or a credit card could be viable options, but only if you can afford to pay the debt off within a reasonable time. You probably don’t want to start your new marriage stuck in high-interest debt for years to come.
If you do want to finance your wedding, here’s some helpful information to consider about using a credit card or taking out a personal loan — which we’ll refer to as a wedding loan going forward. And if you’re not opposed to scaling back to a smaller wedding to avoid going into debt, we have tips for that, too.
What is a wedding loan?
A wedding loan is a personal loan that you use to pay for your celebration.
Depending on the lender, you may be asked to indicate how you intend to use the money when you apply for a wedding loan.
Pros of a wedding loan
- Fixed repayment terms — One benefit of a personal loan is that it’s typically an installment loan. This type of loan allows you to borrow a set amount of money to pay back over a fixed period of time that’s determined by you and the lender when you take out the loan. Given making your payments on time, you can get a good idea of when you’d be able to pay off your debt.
- Many lender options — Many different financial institutions offer wedding loans in the form of personal loans — including banks, credit unions and online lenders. So you should have a number of options to compare to get the best rate available to you. Make sure to compare interest rates, fees and loan terms from several lenders. Finally, look for a loan with no prepayment penalty, so that you have the option to repay the loan early with no additional fee.
- Select the amount you want to borrow — Another benefit of a wedding loan is that you may have some flexibility in how much money you can borrow when you first apply. While loan amounts vary by lender, offers can range from $1,500 to $100,000. Just keep in mind that the loan amount you qualify for can be based on many factors, including your credit.
- Potentially lower interest rates — Depending on your credit, you might qualify for a lower interest rate on your loan. That could save you money compared with carrying a balance on a credit card. For example: In the fourth quarter of 2019, the average interest rate on a 24-month personal loan from a commercial bank was 10.21%, compared to an average interest rate of about 14.87% for credit cards, according to Federal Reserve data.
Cons of a wedding loan
- Extra monthly expense — Before you sign a personal loan agreement, consider using a loan calculator to determine your potential monthly payment to make sure it’s truly something you can afford.
- Potentially high interest — If you have poor credit, you might find yourself paying a steeper interest rate, which can significantly increase the cost of borrowing money. For example, if you take out a $10,000 loan at a 20% interest rate for 24 months, you could end up paying about $1,464 more than the same loan with a 7% interest rate.
Should you use a credit card instead?
If you have a credit card or want to apply for one, keep in mind that you and your partner may not have a credit limit to cover the cost of an average wedding. But if you need to borrow a smaller amount, a credit card may be an option.
Pros of using a credit card
- Low interest through intro APR offers — Some credit cards offer 0% APR introductory periods on purchases, for a year or longer in some cases. If you’re confident that you could pay off those wedding purchases within that time frame, getting a card with an intro 0% APR on purchases might be something to consider.
- Use existing credit — If you already have an open credit card, using it to pay for your wedding could help you avoid having to take out a loan or other new credit account. And if you already pay a monthly credit card bill, you won’t have to worry about taking on new monthly bills — you may just end up increasing your monthly payment for your existing one. But be aware that there are big drawbacks to this option.
- Travel rewards — If you’re using a travel rewards credit card for your wedding expenses, each dollar you spend may help you earn points or miles that can often be redeemed for flights, hotel stays, rental cars or other travel. In other words, you’ll be earning rewards that could help cover costs for other travel expenses you may incur, including your honeymoon if you take one. But be mindful of the APR and your credit utilization if you’re making wedding purchases on a credit card.
Cons of using a credit card
- Potentially high interest rates — If you qualify for an introductory rate but can’t pay off your credit card before the intro offer expires, you’ll have to be prepared for when the regular purchase interest rate kicks in — and it can be high. Even if you didn’t have an introductory rate, interest rates can be very high to begin with. Also, keep in mind that a high credit utilization can negatively impact your credit. And if you plan to carry a balance month-to-month, that interest can really add up. Experts recommend keeping your credit utilization below 30%.
- No end date to paying off debt — It’s wise to only put expenses on your credit card that you know you can pay off. If you put wedding purchases on the card without a plan for paying it off, you could find yourself stuck in debt and even put your credit scores at risk if you miss payments.
Ways to scale back your wedding
We get it: You have a vision for your wedding, and you may not want to compromise on certain things.
“But you should only keep wedding traditions that are personally meaningful to you in order to avoid unnecessary spending,” says Amy Shackelford, founder and CEO of Modern Rebel, an alternative event-planning company that focuses on unique weddings.
If you’re on the fence about taking out debt to pay for your wedding, first see if you can scale back a bit. Shackelford has found that the best way to reduce costs is often to lower headcount.
“People are the biggest determinant of cost, because food and beverage costs are often charged at a per-person rate,” she says.
While many couples might envision a large wedding, Shackelford reminds them that if there are 250 guests, the couple probably won’t have the chance to connect with every person at the event. She suggests lowering the number of guests to cut costs and make it easier to get more quality time with the people you care about.
There are many other ways to scale back. Shackleford suggests saving money by having a midday wedding instead of a nighttime event. And she encourages couples to think outside the box.
If money is tight, rather than immediately taking out financing, it’s a good idea to try to find ways to reimagine your special day.
A wedding loan could be a solution to pay for some or all of your wedding expenses — but it’s important to carefully compare all of your options and consider the risks of each to find the right one for you. And don’t forget that you can always scale back to hold your wedding within a smaller budget. After all, it is your day.