5 Things You Should Know Before Taking Out a Loan for a Wedding
If you’re in the process of planning a wedding, you may be shocked by how expensive everything is. From the dress to food for your guests, the arrangements for your big day can be costly. According to The Knot, the average wedding in the United States costs a whopping $33,931.
If you don’t have that much money tucked away in the bank — and few people do — you might be thinking of using your credit cards to pay for your marriage ceremony and reception. However, there may be a better option: taking out a wedding loan.
Yes, personal loans for weddings exist
Believe it or not, you can take out a personal loan to pay for your wedding — and it's a pretty straight-forward arrangement. A wedding loan has a fixed interest rate and repayment term, and you make monthly installment payments.
Personal loans tend to be unsecured forms of debt, meaning you don’t have to put up any property as collateral. Instead, lenders will look at your income and credit score to determine whether or not to issue you a loan and where to set your interest rate. The better your credit score, the lower the rate you’ll receive.
If you’re thinking about taking out a personal loan to pay for your wedding, there are five things you should know before you submit your loan application.
1. Personal loans tend to have lower interest rates than credit cards
According to the Federal Reserve, the average interest rate on a credit card is 17.14%. If you use your card to pay for your big day and carry a balance, interest charges could cost you thousands more than you originally charged to your account.
If you have good credit, you can qualify for a wedding loan with a much lower interest rate. For example, Citizens Bank offers personal loans with rates as low as 6.69% as of August 2019.
2. You can get your money quickly
When time is of the essence — for example, if your dream dress is on sale — having easy access to cash is essential.
If you’re approved for a wedding loan, you can typically get your money very quickly. In most cases, the lender will disburse the funds to your bank account in as little as two business days.
3. You still need a budget
With a personal loan, you can borrow up to $50,000 to pay for your wedding expenses. However, that doesn’t mean you should borrow the maximum and splurge on every aspect of your ceremony. You should only use a personal loan to pay for the must-haves. Remember, it's OK to cut back in some areas. For example, you don’t need a doughnut bar, candy station, and a five-tier cake — just pick one!
Check out our current picks for the best deals on personal loans.
4. You need a repayment plan
Don’t take out a personal loan unless you have a strategy in place to repay it. Otherwise, you could end up borrowing too much and becoming overwhelmed by the monthly payments.
Come up with a repayment plan so you can comfortably afford the payments. Identify areas in your monthly budget to cut back — such as not eating out until after the wedding or eliminating subscriptions — and look for ways to boost your income. You could pick up extra hours at work or launch a side hustle to earn money during the evenings or weekends.
5. You can’t count on your guests to repay your loans
Many couples count on gifts from their guests to pay for their wedding expenses. Unfortunately, that can be a recipe for disaster if you over-estimate what you'll receive. There’s no guarantee your guests will give you cash; Aunt Fern may decide to give you a punch bowl or a birdfeeder, instead. A better plan is to think of any cash gifts you receive as a lucky surprise you'll be able to use to accelerate your loan repayment.
Paying for your wedding
If you decide that a wedding loan is right for you, we suggest checking out personal loans from Citizens Bank. They offer competitive interest rates and a rapid approval process, so you can get the money you need fast.
See also: How to Get a Wedding Loan in 5 Steps.