Wedding season is in full effect and brides and grooms are ready to start planning their dream wedding. If you’ve recently gotten engaged you also know how exciting planning a wedding can be – but with the excitement comes a lot of financial hurdles.
That’s why many couples are taking out loans for their weddings. And if you’re reading this article you’re probably debating taking out a loan for a wedding. So keep reading our comprehensive guide to wedding loans.
What’s a Wedding Loan?
Wedding loans are personal loans that people take out to pay the cost of their wedding. A wedding loan is usually attained through a third-party loaner or a bank.
These loans are usually short-term and have a fixed interest rate depending on the lump sum of money taken out.
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!
Your credit score will play a huge factor when taking out wedding loans. For example, having a good credit score could decrease your loan interest and affect the loan amount.
If you have bad credit, you’ll still be able to acquire a loan. However, you might get declined by some loaners or get a higher interest rate than someone with good credit.
Ability to Pay Off Your Loan
Your ability to make repayments on your loan is referred to as serviceability. This can be calculated by taking in your monthly expenses and your wages.
If your monthly expenses are more than what you make, a loaner might decline you or give you a smaller loan. So if your monthly wages fall under a certain amount consider taking out a small loan for a wedding instead of a big lump sum.
Have All the Proper Documentation
When taking out a loan, there are many documents that you’ll need to provide the lender. Here is a list of documentation that you may need to provide your lender:
- Proof of income
- Proof of identities such as a valid license or passport
- Bank statements
- Proof of income via a W-2 or check stub
If you’re cosigning on a lease with someone, you’ll both need to disclose this information with the lender. Therefore ensure your paperwork is in order before applying for a wedding loan.
Discuss Loan Terms
Some people prefer to stretch out their loans into smaller payments. However, this means the loan term will be longer and the interest rate will be higher.
It’s always recommended to pay higher repayments per month rather than stretching out your loan. However, if you’re not able to make higher repayments, be aware of the interest charges.
Discuss Interest Rates
There are 2 types of interest rates: a fixed rate and a variable rate. A fixed rate means the interest won’t fluctuate during the loan term agreement.
However, a variable rate means the interest is subject to change during your loan term agreement. Oftentimes, the interest on a variable rate fluctuates depending on how much the market changes.
Be Aware of Additional Fees and Charges
Ask your lender about any payment processing fees and late fees. This way you’re not confused by any unknown fees and chargers.
You should also ask if you’re able to have a grace period for repayments. Some lenders will give you one to three days before they begin charging your late fees.
Questions to Ask Yourself Before Taking Out a Wedding Loan
Now that you know more about loans, it’s time to sit down with your partner and discuss every detail. This way there isn’t any confusion when the first loan payment comes!
Who Will Pay Off the Loan?
Financial problems are one of the leading causes of divorce so making sure you have your wedding finances in order is essential! After getting married some couples choose to have a joint bank account.’
The loan payments can easily be charged to this account. However, if you and your partner are choosing to bank separately, you’ll need to figure out a way to pay the loan.
Some couples will split the repayments evenly. This can become a problem if one couple doesn’t make as much as the other. Overall, it’s best to sit down with your partner and discuss how the wedding loan will be paid.
Will it be 50/50, or does one person pay more than the other, or does one partner pay for the loan completely?
Will Your Future Financial Goals Be Affected?
Planning a wedding is one of the first hurdles of a marriage. And, after the honeymoon is over, you’ll need to start planning your future. This means having a financial goal in mind for future expenses.
So before you take out a loan, make sure your financial goals align with your current goals. Because remember that a wedding loan can put a halt to buying a home, traveling, and other big expenses.
So if these are goals you would like to accomplish right after getting married, make sure you have the capital before taking out a wedding loan!
Do You Really Need a Loan for Your Wedding?
We all dream about having a big and extravagant wedding. However, sometimes the expectations we put on ourselves to have the best wedding are unrealistic.
Not to mention, they lead to an unrealistic wedding budget. So before taking out a loan, ask yourself if it’s really necessary.
Do you have one too many people on the invite list? By asking yourself these questions, you can avoid future complications. However, if you’ve had your heart set on a specific venue or wedding dress, then take out a wedding loan!
You can also tweak your wedding to have fewer expenses but still be your dream wedding. This way you can have a lower loan sum.
Pros and Cons to Taking Out a Wedding Loan
Before taking out loans for a wedding, make sure you’re aware of all the pros and cons associated with this financial move. Because just like any other loan, a wedding loan can backfire if you don’t properly prepare.
Pros of Taking Out a Wedding Loan
Some couples choose to pay for their wedding via a credit card. However, most credit cards have a higher interest charge than loans. Therefore, it’s more affordable to take out a wedding loan instead.
Not to mention, weddings cost around $25,000 to 30,000 so most credit lines won’t cover all of these expenses. Therefore, you’ll need to divide these expenses between multiple credit cards. And this financial move can be a slippery slope towards a debt crisis.
Secondly, you can increase your credit by taking out a loan. So if you have a lower to mid-range credit, taking out a wedding loan will fix two issues at once! However, be aware that in order to raise your credit score, you’ll need to make regular payments each month.
Lastly, taking out a loan is fairly simple. Most lenders have a convenient application process that can be done online. Therefore, you can begin to plan your big day from the comfort of your own home!
Cons of Taking Out a Wedding Loan
One of the first cons of taking out a wedding loan is the urge to spend even more money. Oftentimes, couples will start getting too excited and comfortable with the accessibility of a loan.
Therefore, they’ll start adding more details to their wedding and ask for a bigger loan. It’s best to fight these urges and stick to the original plan!
Another con is the fees associated with a loan. It’s always best to look for different lenders before taking out a loan. This way, you know you’ve chosen the best lender!
The last con to taking out a personal loan for a wedding is that your marriage is starting off in debt. However, some couples don’t mind this because they already have other loans such as a car or school loans. So before taking out a loan, make sure you and your partner are in complete agreement.
Start Planning Your Big Day Today
Taking out a loan for a wedding loan can be the best financial decision you make for your marriage. However, you and your partner should carefully review all of the possibilities listed above.
Overall, having a unified front and understanding will save you from any future conflicts. If you enjoyed this article don’t forget to check out the rest of our webpage for the latest news on hot topics!