How much will you pay to tie the knot? With weddings becoming more expensive, it’s no surprise that some couples are using debt financing to pay for them. Credit cards remain a popular payment option, but some institutions are now offering wedding loans as a way to pay for the rising costs of getting married. Are they a great alternative to credit cards or a one-way ticket to a bigger debt burden? Learning about more wedding loans can help you make wise financial decisions.
A Quick Overview of Wedding Spending
Nearly 74% of couples accrued some type of debt to pay for their wedding, according to a Student Loan Hero survey mentioned by CNBC’s Helen Zhao. Around 61% of engaged pairs planned to use credit cards for these costs. The average cost of an American wedding ranges between $29,000 and $45,000, but the amounts that couples finance vary. Some rake up less than $10,000 for their nuptials, while others charge between $10,000 and $19,999. Wedding funds also come from private savings, help from family and friends, and personal loans.
The price of using credit cards to fund a wedding can be high. U.S. News and World Report revealed that current annual percentage rates for most credit cards in the United States range between 17% and 24%. Higher APRs translate to more expenses for borrowing money. Even those with 0% introductory APRs can still cost more in the long run, especially after their rates hike up.
What Are Wedding Loans?
Looking for other solutions, some couples are taking out wedding loans to pay for their celebrations. The Balance explains that most are simply personal loans that are rebranded to attract a new market. They have the typical characteristics of standard personal loans as described by NerdWallet: no collateral, terms lasting between two and five years, and payback in fixed monthly installments. As with regular personal loans, lenders use your credit history to judge your creditworthiness when you apply for a wedding loan.
Understand the Pros and Cons
Credit Karma lays out the benefits and disadvantages of taking out a wedding loan. With fixed repayment terms, you’ll be able to easily budget every month. Many institutions offer personal loans, so you have plenty of options to choose from depending on your credit score. You could also enjoy lower interest rates with a personal loan. In 2018, interest rates on a 24-month loan from a bank averaged a little under 11%. As mentioned earlier, credit card rates tend to be much higher.
On the other hand, personal loans may not be a smart choice for a couple of reasons. For one thing, you’ll have the extra expense of a fixed monthly payment. Also, you probably won’t qualify for the best loan terms if you have poor credit. Those with subprime credit scores usually have difficulty even getting approved, and when they do, they’re forking over more money. NerdWallet reveals that borrowers with FICO scores below 630 could be charged APRs as high as 27.2%. There’s also the long-term cost of paying those loans. Money Under 30’s Miranda Marquit points out that you’ll start your marriage with more debt, which can add more stress and make it harder to build a financial future together.
Wise Financial Decisions Start Before You Marry
Weddings and money go hand in hand. You can’t plan your nuptials without knowing how you’ll pay for the celebration. With wedding costs skyrocketing, many couples look for alternative funding sources. Personal wedding loans offer some benefits, but it’s important to count the costs before you decide to borrow. Setting your priorities, creating a sensible budget, and evaluating your options are all important steps for designing an affordable celebration.
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