Getting married can be an expensive proposition that continues to get even pricier. TheKnot.com surveyed 16,000 brides and grooms married in 2014, and found the average wedding, not including the honeymoon, costs $31,213.
With your wedding on the horizon, it’s natural to want your big day to be perfect. But hosting the average wedding may mean financing your big day. Let’s take an in-depth look into wedding loans and the various options.
Planning your wedding budget
To determine how much money you need for your wedding and how much you’ll need to borrow, make a budget. Start by brainstorming your ideal wedding day and then add up the costs.
What type of wedding do you want? For instance, formal, casual or fun?
The type of atmosphere helps you determine location. Do you want a wedding at a hotel, seaside resort, in a local park or at someone’s home?
Do you want an open bar? Are you planning on having floral decorations?
Who can get a wedding loan?
Just about anyone can get a wedding loan, which is essentially a personal loan. The higher your credit score, the better your credit history and the lower your debt-to-income ratio, the more likely you’ll receive a low interest rate on a loan.
Generally, these loans are only given to one partner—ideally the person with the better credit and lowest debt-to-income ratio.
If you both have poor credit, some lenders allow for co-signers. Get a family member or friend with good credit to cosign (perhaps as a wedding gift), and you’re likely to get a wedding loan with a good interest rate.
Secured vs. unsecured wedding loans
Typically issued for specific amounts, personal wedding loans come in secured and unsecured forms. A secured loan uses an asset to help guarantee that the loan will be repaid, such as a car. If you don’t repay the loan as agreed, the loan company may take your car.
Unsecured personal loans don’t require that you put up any collateral. These loans are harder to get, however, as they are riskier for the lender. They also feature a higher interest rate than secured personal wedding loans.
Credit cards versus personal loans
Credit cards are another option for financing your wedding. Your best bet is to get a card with a 0% APR that lasts 12 to 18 months. This will give you some time after the big day to pay off the card without interest. If you do decide on the credit card route, make sure you’re able to repay before the promotional period ends. The APR is likely to rise substantially.
Wedding loans generally have a fixed interest rate that stays the same throughout the length of the loan payoff period. You also only get the loan amount you request, which helps keep you on budget when it’s time to repay.
Other wedding financing options
Brides and grooms who look at options when it comes to funding their wedding tend to find the best solutions for their budget. Here are some other options:
- Home equity line of credit.
If you own a home and have paid on the loan long enough to have built up some equity, a home equity line of credit (HELOC) is an option. This allows you to borrow against the equity you’ve built up in your home.
- Home equity loan.
Unlike a HELOC, which has a variable interest rate, a home equity loan generally features a fixed rate and a payoff time period of 5-15 years.
It’s important to keep in mind that a HELOC and home equity loan put your home up as collateral. That means that if you’re unable to pay the loan, you risk losing your home.
Also, keep in mind that HELOCs usually feature a variable interest rate, so your payments will fluctuate. This is another consideration for your post-wedding budget.
If you lack the funds to make your dream wedding a reality, personal loans can help you pay for the big day. Visit SuperMoney’s personal loan reviews for more details.