How to finance a wedding

The average cost of a wedding in the U.S. is nearly $34,000, which is all very well if you have a trust fund or rich auntie who is willing to pay for it. For many working Americans, though, that’s a staggering price tag. If you’re asking yourself how to pay […]

The average cost of a wedding in the U.S. is nearly $34,000, which is all very well if you have a trust fund or rich auntie who is willing to pay for it. For many working Americans, though, that’s a staggering price tag. If you’re asking yourself how to pay for a wedding, here’s how it can be done.

What is a wedding loan?

A wedding loan is any loan you take out to cover the costs of a wedding. Strictly speaking, there is no such thing as a wedding loan. There are a number of ways to borrow money towards your wedding expenses, but there is no specific product category that covers nuptials only.

How do wedding loans work?

Wedding loans are personal loans. Whether you borrow money from a bank, credit union, or online lender, you are taking out a personal loan to pay for your special day. Because the loan is unsecured, the lender does not care if you spend it on hair extensions, a trip to Bermuda, or to marry the love of your life.

Like all personal loans, it begins with a loan application. Every lender wants to see that you have a good credit score, strong credit history, and can be trusted to repay the loan. In return, you promise to repay the loan, typically in equal monthly installments. So you’ll need to know how much you want to borrow and how much you’ll be able to repay each month.

What financing options are available for weddings?

Personal loan

As mentioned, a personal loan is a go-to financing source for wedding loans. A healthy credit score can snag you a low interest rate and some lenders offer loan terms of as much as seven years. Loan amounts vary from lender to lender, but can be up to $100,000. Even if you have poor credit, there are lenders for bad credit who specialize in finding a way to get you financed.

Private loan

Your parents or other close family members might be willing to lend you some funds, even if they can’t pay for the wedding outright. You should be prepared to pay the loan back with interest, but family rates might be lower than bank rates. Before approaching loved ones about a loan, put some thought into a wedding budget to show them how you plan to create your special day without breaking the bank. Be sure to show them how you plan to repay the money you borrow as well. The caveat here is that you should never borrow money from anyone who would be taking money out of an emergency fund or retirement account to pay for your wedding.

Home equity line of credit (HELOC)

If you and/or your intended own a home, look into a home equity line of credit (HELOC). It uses your home as collateral and, because it is a line of credit, you can borrow only what you need. You don’t have to take the money in a lump sum. Here’s how most HELOCs work:

  • A lender looks to see how much equity you have in the home. For example, if the home is worth $250,000, but you owe $150,000, you have $100,000 in equity. Typically, they will loan up to 85% of the equity in the house, or in this case, $85,000.
  • You can then use that line of credit to withdraw up to that amount for a set period of time, usually 10 years. During that time, once you repay any portion of the HELOC, you are free to withdraw it again as needed. You’ll then have 10 or 20 years to pay back those funds, depending on the loan.

The good news is that a lender will likely offer you a competitive interest rate because they have your home as collateral. The bad news is that if you miss loan payments, they have the right to repossess the property.

Credit cards

If there was a class called How to Finance a Wedding 101, the first thing you would learn is that credit cards are a dangerous way to pay for a wedding. Imagine that you financed $10,000 of your wedding costs with a credit card that charges 15% interest. Even if you make monthly payments of $225, it will take you 66 months to pay the card off. In addition, you will pay an extra $4,688 in interest. Even if you use a 0% APR credit card, you need to be certain you can pay off your balance before interest comes due.

How to finance a wedding

The first step to financing a wedding is to work out how much your big day will cost. You’ll need to make a detailed wedding budget, which takes into account things like where you plan to get married and the number of people you want to invite.

Once you have some ballpark costs, it’s time to consider how much you can pay in cash and how much you might you need to borrow.

When it comes to wedding loans, here are a few important steps to make the process easier:

  1. Boost your credit score. Pay down debt and keep on top of any bill payments. Check your credit reports. Order copies of your report from the “big three” credit reporting agencies and go over each carefully. If you find any mistakes, dispute them with the agency in question.
  2. Rate shop lenders. Look for the best interest rates and loan terms. As long as you shop within a short period of time (aim for two weeks or less), credit agencies will count all the loan inquiries as a single hard credit check.
  3. Read the fine print. Carefully study the conditions of each lender’s offer to make sure you’re getting the best deal possible.
  4. Budget carefully. Only borrow as much as you can reasonably afford to repay. Your wedding ceremony should be a source of happy memories, not unmanageable debt.

Alternatives to wedding loans

Cash

Marriage comes complete with special challenges, such as learning how to blend two lives that were once independent. Even if you have lived together, there is something about being married that changes the flavor of the relationship. Adding debt to the mix is, at best, fraught with risks. In a perfect world, you would save up enough cash to pay for your wedding and begin the new chapter of your lives together with one less financial burden.

Family contribution

Maybe you can’t afford to pay for the entire thing yourselves. Why not ask your parents and grandparents to pitch in what they can? As long as you don’t raise your budget accordingly, you may be able to pay for the remaining portion in cash, or at least push the wedding back long enough to come up with your portion.

Hybrid

Decide how much you can afford — today, without a loan. Do you have $1,000 cash that is not earmarked for something important (like an emergency fund)? Do you have a credit card with a 0% promotional rate that you could tap and pay off before the promotional rate expires? Could you spare an extra $50 a month to put towards your wedding fund? Move the financial pieces around like a Rubik’s Cube. The more money you can pull together, the less you will have to borrow.

Anyone who has been married for years will tell you that a great relationship is built on many things, including mutual respect, shared goals, and trust. No one ever looked back after decades of marriage and said that the wedding was the best thing about being together.

If your big question is how to finance a wedding, chances are, you are already feeling stressed. Why not go easy on yourself and build a wedding around what you can afford? The people who care about you will celebrate, no matter what.

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