Planning a wedding is exciting with all the details you fantasize about the big day. However, it’s also stressful with trying to find the best cake, decorations, limos, and so forth within a budget. One way to eliminate some of this stress is by taking out a loan for a wedding. There are pros and cons of wedding loans as with any type of financing. Nevertheless, you can make the best of this financing if you play your cards right.
Advantages and Downsides of Wedding Loans
Wedding loans are just personal loans that you decide to use for wedding expenses. Your credit is the major factor used for approval, but other factors play into a lender’s decision. Also, wedding loans are not secured; thus, you can’t use your home as collateral. You must also be employed or have established, steady income to be approved.
You can obtain a personal loan at practically all-full service banks or online lenders are now easy to access.
They won’t be advertised as “wedding loans“ just personal loans. With personal loans you may be approve according to your credit, income and other factors. Also, you pay back personal loans based on monthly installments.
So, let’s review the pros and cons of wedding loans, starting with the advantages.
Pros of Wedding Loans
There are pros and cons of wedding loans just like all personal loans. You just have to make the best of these loans by shopping around for what works best for you and your situation. The following are the loans for wedding expenses pros:
- The interest rate is lower than most credit cards. In many cases, this is true. There are exceptions when it comes to bad credit loans.
- You can consolidate your debt. Pay off all your non-wedding debt expenses with a loan (if they give you the full amount needed for your wedding), and just pay one monthly payment to the financial institution.
- You will have cash flow freed up. This may give you some breathing room to work with your expenses with less strain.
- You’ll gain the chance to improve your credit score (.i.e. if you pay on time)
- A lot easier to manage your budget with fixed payments. This goes hand-in-hand with debt consolidation and breathing room to work out your expenses with less strain.
- Having predictable fixed interest rates. You won’t have unpleasant surprises.
- Relief of burden off of you and your family.
- Having a fabulous wedding. One thing for sure is that you will have a gorgeous wedding with the extra funding.
Cons of Wedding Loans
The wedding finance cons are as follows:
- The lender can come for you if you default on the loan.
- The fees could be costly.
- There is a prepayment penalty for some loans.
- There could be high-interest rates especially if you have bad credit.
- Personal loans could be a temporary crutch.
- Debt which is straining on a couple is incurred at the beginning of your marriage
Even though it feels good paying off debt so you can move forward with your spouse, many financial institutions frown on prepayment cause they are in the business to make money. They make money through interest. And with prepayment, the interest will be limited, meaning less money for the institution.
Are Wedding Loans Worth It?
The average wedding expenses for 2022 and 2023 will be in a range from $24,000 to $26,000, according to the Wedding Report. With this amount and with being on a budget, you may think a wedding loan is worth it at first glance. However, you must weigh out the pros and cons of wedding loans along with your financial circumstances instead of moving hastily.
One thing to note is that there are different types of personal loans with different terms. Some loans are short-term loans. Then there are some that are installment loans. The short-term loans must be paid in full more quickly than other personal loans. So, you will pay off the interest quicker and put the debt behind you then with other kinds of loans.
The installment loans may take years to pay off. It all depends on which type of loan is for you. Some may prefer installment loans because the monthly payments are not as high as loans that require a quicker payoff. Other than that, there are fixed interest rate loans that are self-explanatory in that your interest rate and payment remain the same throughout the life of the loan.
How Wedding Loans Work
As you researched the various loans in the market which you can easily find online and by calling different financial institutions, you will see how these different loans work. The repayments start shortly after receiving the money. Upon being approved for the loan, it is disbursed as a lump sum via direct deposit in your bank account or via a check. Your income, credit score, and other factors determine your interest rates. Also, some loans typically have terms of 36 months, but some loans possess terms that last up to 84 months.
Upon researching and weighing the pros and cons of wedding loans, some realize that taking out a loan for a wedding is not a good idea. These people saw that putting wedding expenses on a credit card is their best bet. There are pros and cons to credit cards as well. Once again, it just depends on all the factors already mentioned.
You can also determine whether you can deal with the disadvantages for a bigger budget for that special big day. Another way you can see the pros and cons of wedding loans is by talking to your partner. Any major decision must be made between you and your spouse-to-be anyway to cut down on a potential strain in your marriage.
Another thing you can do is to prioritize and list your life goals. Doing this will give you a clearer view of where a dream wedding will be in comparison to being free from debt.
Otherwise, things to do include reading various wedding finance articles and talking to family and friends who paid for their weddings using different methods. You can also learn from your loved ones’ mistakes by getting a loan or certain types of loans.
Wedding loans are just personal loans that you decide to use for wedding expenses. Your credit score is the major factor used for approval. Also, these loans are not secured; thus, you can't use your home as collateral.
Pros and Cons of Wedding Loans for Bad Credit
Additional bad credit loans for wedding expenses pros consist of these loans being easier to obtain, usually have better interest rates than bad credit cards, and lenders usually respond faster. The additional wedding finance cons for these loans include the following: Additional loan repayment with your current debt load and interest rates are higher than other personal loans. With all this in mind, you must take into consideration all the ramifications in obtaining these loans.
These loans are also personal loans that you choose for wedding expenses, but they approve people who have bad credit. The pros and cons of wedding loans for bad credit simply mean you could pay more for the loan. Having a spotty employment record or a poor credit score generally isn’t attractive to lenders. However, some lenders will approve even with bad credit.
These loans generally have the same pros and cons as other personal loans. Additional bad credit loans for wedding expenses pros consist of these loans being easier to obtain, usually have better interest rates than bad credit cards, and lenders usually respond faster.
The additional wedding finance cons for these loans include the following: There will be additional loan repayment with your current debt load, and interest rates are higher than other personal loans. With all this in mind, you must take into consideration all the ramifications in obtaining these loans. If you don’t you can gain much headache and stress instead of building a life together and happily with your mate.
Credit Card vs. Wedding Loan
As mentioned before, there are pros and cons to credit cards as well. The pros include using what is needed, no interest promotions, online access, and the opportunity of the balance transfer consolidation. The cons include additional fees, high APR, a high credit score for the best offers, and separate fees and interest on cash back.
We’ve written about wedding loans vs. credit cards and the short answer is it depends on your situation. Credit cards usually carry higher APRs, but they can be used for one-off purchases. Credit cards also work as a revolving line of credit.
On the other hand, wedding loans have predictable installment payments, but you’re tied to that payment schedule for the most part.
How can I Afford a Wedding Without Debt?
You most likely can have a dream wedding without incurring debt. It takes careful planning and preparation. Obviously, you wouldn’t need to worry about the pros and cons of wedding loans if you didn’t finance your big day. Thus, the following includes ways to obtain a spectacular wedding without breaking the bank:
- Start Saving Ahead of Time
- Set a Budget and Stick to it
- Talk to Family
- Shop Around
- Throw an Off-Season Wedding
Best Ways to Save Money on Your Wedding
After doing your research, asking around, and saving, you now can decide the best ways to save on your wedding. You must start with a budget. By making a list and prioritizing, you can determine how much you can afford, and what you want to spend. You must list your wedding needs. You must determine your must-haves. Do this by starting on what you need to wear and what place you will have your wedding. You may also need a friend or a particular family member to tie the knot. Also, a church or other religious body is needed to perform the ceremony.
Once you wrote down your necessities, you can start listing your wants for the wedding. This could be food, music flowers, a venue, and decorations. Write down all your wants without holding back. You can cross off your lists later if you must. You then must prioritize your list of needs and wants for your wedding. Rank each item to determine which is most important to the least important.
Afterward, you must think and probably Google to start figuring the price for each item on your list. Once you have gotten the estimated costs, add all the costs together. If the total is more or less than your budget you can adjust accordingly to what is the next most important and what is least important on your list.
After doing your research, asking around, and saving, you now can decide the best ways to save on your wedding. You must start with a budget. With making a list and prioritizing, you can determine how much you can afford, and what you want to spend. You must list your wedding needs. You must determine your must-haves. Do this by starting on what you need to wear and what place you will have your wedding. You may also need a friend or a particular family member to tie the knot. Also, a church or other religious body is needed to perform the ceremony.
Otherwise, you most likely can have a dream wedding without incurring debt which takes careful planning and preparation. There are other alternatives to get that amazing wedding without taking out a loan or paying with a credit card. Perhaps, you can get a smaller loan, if needed, after you cut down on your costs the very best you can. The bottom line is there are various ways to have a dream wedding regardless if you need a personal loan or not. And furthermore, if you must use a personal loan or use a credit card, you don’t have to incur that much debt if you play your cards right.
Cheryline Lawson is a personal finance writer who lives in Fort Lauderdale, Florida with her husband and two boys. She has worked as a mortgage broker and loan processor in the most recent past. She shares a lot of her experiencing in financial planning, real estate investing and budget advice with national media outlets like GoBankingRates, Intuit, Bustle, Buzzfeed and CBS News. Ms. Lawson is a graduate of Broward College in Florida. She came into her own as a mortgage broker after realizing so many people need help to get into their first home. She has a passion for helping others, especially those who need financial advice to use in their daily lives.