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It May Adversely Affect Your Creditworthiness
Your wedding loan could temporarily lower your credit score or otherwise lessen your appeal to lenders.
On the credit score front, the biggest risk is the possibility that youll miss a loan payment. Missing even one payment due date is grounds for some lenders to issue an adverse report to the three major credit reporting bureaus. If your financial situation is seriously affected by a sudden job loss or major unexpected expense, and you become unable to make loan payments for multiple months, the hit to your credit could end up being far worse, particularly if your loan is charged off and sent to collections. Payment history information generally remains on your credit report for seven years, so a lapse can have far-reaching consequences.
On the non-credit front, a new installment loan on your personal balance sheet raises your debt-to-income ratio in the absence of a proportional income increase. Though its not a FICO score component, DTI is a major factor in lenders underwriting decisions. High DTI is grounds for rejection few personal loan providers lend to borrowers with DTIs above 50%, and many write off those above 40%. Mortgage lenders generally dont lend to borrowers with DTI above 43% something to think about if youre planning to buy a house soon after tying the knot.
How Do You Pay For A Wedding With No Money
So you are dreaming of the day you finally get to marry your person. Only one problem, your savings is a little low. Luckily, with a personal loan, you likely wont need a down payment and can borrow the money you need to finance or pay for a wedding. If finances are tight you will want to choose a loan and term that offers affordable monthly payments. While its easy to get excited to know that you can access the money you need, you will want to ensure you can repay the loan on time.
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How To Qualify For A Wedding Loan
To find a wedding loan that works for you, follow these four steps:
If you decide to take out a personal loan, remember to compare as many lenders as you can to find the right loan for you. Credible makes this easy you can compare your prequalified rates from multiple lenders in two minutes.
How To Get A Loan For A Wedding
Applying for a wedding loan is just like applying for any personal loan. Youll provide personal details and information about your earnings, and lenders will review your credit and income , then offer you a loan amount and interest rate. Many online lenders offer quotes after a soft credit check, so you can request multiple quotes without worrying about your credit score.
If you have bad credit, its even more important to compare rates from several sources, as borrowers with low credit scores may get less competitive offers. Consider taking steps to improve your credit, like paying off debts and fixing credit report errors, before you apply.
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Improve Your Credit Score
You can’t do much with a bad credit score. This includes taking out a personal loan to pay for your wedding. Many wedding loan lenders won’t look at you twice if you have a score that dips down below 700.
If your wedding isn’t going to be for quite some time, paying off past debts and improving your credit score might be the way to go.
Here Are Our Recommendations For The Best Credit Cards To Finance Your Wedding Day:
The Chase Freedom Unlimited card offers an introductory zero percent APR period for 15 months on purchases that could be beneficial if youre looking for a long period to pay off your wedding expenses while avoiding APR. In addition to a generous introductory zero percent APR period, the Chase Freedom Unlimited earns at least 1.5 percent cash back on purchases and gives you $200 cash back when you spend $500 in the first three months.
If youre planning a destination wedding, Capital Ones flagship travel credit card may deserve a spot on your list of financing options. This card offers 2X miles per dollar on all purchases, which could add up quickly when paying for a wedding. Enjoy a one-time bonus of 60,000 bonus miles when you spend $3,000 on purchases in the first 3 months from account opening.
If youre using a mobile wallet app for wedding purchases, the Wells Fargo Cash Wise Visa could help you earn extra cash back. During the first 12 months from opening your account, Apple Pay® and Google Pay transactions get a 20-percent bonus for a total of 1.8 percent cash rewards back rewards. This card offers a $150 sign-up bonus when you spend $500 on purchases in the first three months. With this card, you will also have a generous 0% intro APR on purchases and qualifying balance transfers for 15 months from account opening .
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What Costs Can A Wedding Loan Cover
During the application process, you might be asked how youll use the funds. However, any personal loaneven ones not specifically marketed as wedding loanscan be used to cover wedding-related costs:
- Dresses and suits
Lenders typically offer a maximum amount available to you, but you dont need to borrow that much. Remember that youll have to repay every dollarplus interestso its smart to minimize your borrowing.
What To Consider Before Taking On A Wedding Loan
Wedding loans are becoming an increasingly common way for people to pay for their weddings a survey by the Australian Securities and Investments Commission showed that 60% of 400 online respondents used a personal loan as a way to finance their wedding.
Before deciding to get a personal loan for your big day, there are some things you need to think about, including:
Serviceability is your ability to make repayments on a loan after all of the other expenses you have to pay each month are covered.
The factors that define serviceability vary but lenders like Pepper Money can use both a serviceability calculation as well as the debt service ratio to determine how desirable a borrower may be.
This is a detailed record of your financial history, which is evaluated by lenders when assessing your loan application. Having a poor credit score doesnt mean you cant get a loan, but it does impact how desirable you are as a loan candidate
Stretching your loan means your repayment is a smaller dollar figure over a longer period, but itll mean paying more interest overall and youll be in debt for longer.
A fixed rate means the interest wont change over the course of your loan, while a variable rate means it could go up and down as market rates change.
Additional fees and charges
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The Best Alternatives To A Wedding Loan
Wedding loans aren’t the only way to pay for a wedding and there are lots of other options including:
- Reduce your wedding budget
There are many ways to cut back on the amount spent on your wedding day, from making your own cake and canapes to cutting out extras, like a wedding car and honeymoon. Before you start planning, have an open and honest conversation with your partner about how much you want to spend, and stick to this budget.
- Borrow from family members
This wont be an option for everyone, and can come with its own problems, but it may be possible to borrow the money from family members. Just make sure everyone involved is clear about the terms of the loan. Even better, get it down in writing before any money is handed over.
- A 0% credit card
If youre able to apply and be accepted for a 0% purchase credit card, youll be able to use it to pay for all your wedding expenses without paying any interest for a set period of time. However, this only works if youre then able to clear the credit card before interest payments start and you will not initially be offered large credit limits on new cards.
How To Pay For A Wedding According To A Wealth Management Advisor
After getting engaged, couples will eventually come down from the highs of their proposal bliss. Thats when theres one important reality theyll have to face: having a frank conversation about the wedding budget. Although this might sound unpleasant to some, figuring out the details of who is paying for your wedding doesnt have to be uncomfortable.
In fact, going into the planning stage with your partner on the same page wont just make the often overwhelming process easier but it will also help set you up for success in the long run. It doesnt matter if you are the ones funding your entire wedding or are only footing a small portion of the bill, its essential to figure out exactly how youre going to pay for it before jumping into guest lists and venue availability.
Keep in mind that paying for a wedding looks different for every couple and theres no right or wrong way to do it, prefaces wealth management advisor Maria Roloff. Ahead, Roloff shares her insight and tips for tackling your wedding finances.
Meet the Expert
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Who Pays For What Weddings
Traditionally, a brides parents or family will pay for the ceremony and reception. The grooms parents or family usually covers the honeymoon and rehearsal dinner. Some may break the expenses down into a more detailed list, but for the most part, these are the main expenses. Nowadays the line of who covers what is a little confusing. Some families may not have the means to cover expenses that they are traditionally responsible for. If you find yourself in a situation where your family is unable to help fund your wedding, you may need financing. Just know that you are not alone. Everyone has their own unique situation that they should be proud of. If you need financing for a wedding, visit Acorn Finance to check offers.
You May Not Have To Dip Into Your Savings
Even if you and your partner have substantial savings, you may have legitimate concerns about raiding them, temporarily or not. For instance, you might have just one type of savings at the moment say, an emergency fund youve worked carefully to build over the years, and that youve committed not to touch except in times of real trouble. You may decide that a loans interest costs and budgetary impact are worth it compared with depleting your emergency reserve.
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Use A Credit Card With An Introductory 0% Apr Period
Putting all your wedding expenses on a credit card is inadvisable, since youll end up paying mountains of compounded interest by the time your ceremony is over. However, theres an exception to the rule: You could take advantage of a credit card with an introductory 0% APR period.
Some credit cards have intro APR periods that last up to 20 months, which could give you plenty of time to plan your wedding and repay the debt before youre charged interest. Keep in mind that if you dont pay off the debt before the promotional period ends, youll end up paying interest on the remaining balance.
As an added bonus, you could try to utilize a rewards credit card to earn travel miles or cash back on all your wedding purchases. Just use caution when you take out credit card debt to pay for your wedding, and make sure you repay the balance to avoid paying interest.
What Are The Drawbacks Of A Wedding Loan
Straight off the bat, youre starting out your married life with debt, which may put a dampener on your nuptials.
And if your relationship breaks down, settling the debt might become a bone of contention.
As with any kind of debt, if you cant make the repayments, you could damage your credit rating. This could harm your chances of borrowing money later.
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Factors To Consider When Taking Out A Loan For A Wedding
Taking out a personal loan for a wedding has become increasingly popular. Especially now since COVID-19 has died down and people are able to travel. Nevertheless, your wedding finance is very important and should be carefully considered.
So before taking out loans for a wedding consider some of these factors mentioned below!
You May Need To Put Other Major Decisions On Hold
Add your personal loan to all other borrowings you and your spouse have already accumulated along the way such as car loans, credit cards and even education loans, are you in heavy debt?
If yes, then consider how this will affect the decisions in the next stage of your life.
Buying a house and having children may need to take a slight pause till your earnings are strong enough to contain your debt.
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