Thankfully, there are plenty of loan options available if you find yourself in need of filling any funding gaps. Depending on your financial situation, a typical fixed-rate personal loan may be a good option for financing your big day.
Types of loans you can use for a wedding
There are a number of loan options available for financing a wedding; however, it’s not a one-size-fits-all process so it’s important to weigh the benefits and drawbacks of each option before making a final decision.
Those with good credit who need to borrow a specific amount.
A wedding loan is a personal loan that’s marketed toward those who need to cover wedding-related expenses. You’ll most likely find these loans with an online lender — traditional banks and credit unions typically don’t offer loans labeled as such.
Some online lenders offer wedding loans as a separate product, but not every institution will. Keep in mind that just because a lender offers a wedding loan doesn’t mean that it’s automatically a good fit.
Compare the lender’s wedding loans to its personal loan details. Check to see if the rates, repayment terms, usage restrictions and fees are the same between the two products to see if there’s any value in taking out a wedding loan over a regular personal loan.
- Potentially lower interest rates than a credit card.
- Fast access to cash, sometimes as soon as one to two business days.
- Most lenders offer prequalification without impacting your credit.
- Interest rates may be higher than loans for other uses.
- May encourage or tempt you to spend past your budget limit.
- Potential for fees, like origination or late-payment charges.
Unsecured personal loan
Borrowers who need a large lump-sum amount quickly.
Unsecured personal loans are essentially a wedding loan without the label. Most lenders have borrowing caps between $30,000 and $50,000, with some offering a maximum amount of $100,000 to the most creditworthy borrowers.
Unsecured personal loans, like wedding loans, don’t require any collateral which can make it harder to get approved. Those with good or excellent credit, a steady, reliable income and a solid financial record are most likely to meet the approval requirements.
The sheer convenience of having a large lump-sum amount of cash on hand to spend however necessary is one of the contributing factors that make taking out a personal loan for a wedding so enticing. Plus, most lenders don’t restrict what you can use the loan for — as long as it’s a legal purchase.
- Large borrowing amounts depending on creditworthiness.
- Pay off in fixed, monthly installments with interest rates that don’t change.
- Can be used for more than just your wedding if needed.
- Repayment will usually take at least two years.
- Potentially high interest rates and expensive fees.
- Involves taking on debt, which can lead to a debt cycle if you’re not careful.
Home equity loan
Homeowners with a significant amount of equity built up in their home.
A home equity loan is a lump sum amount of money that you borrow from the equity you’ve previously established in your home. Equity is the total value of the home minus the amount you owe on your mortgage. Most lenders allow you to borrow a maximum of 80 to 85 percent of the equity you have.
Home equity loans can be useful for funding a wedding for a variety of reasons. For one, the money is disbursed in a lump sum amount, so you can get the cash you need all at once.
Home equity loans may also allow you to borrow more than you would be able to with a personal loan if you have adequate equity built up in your home. While this can be an asset to your wedding planning process, it’s important to make sure you don’t over borrow, as you run the risk of losing your home.
- Collateral may result in lower borrowing costs than with personal loans.
- Fixed interest rates with set monthly payments.
- Longer repayment terms than with other types of loans.
- Run the risk of losing your home if you fail to make the payments.
- Must have sufficient credit and equity to qualify.
- May have to pay closing costs, which typically range from 2 to 5 percent of the loan amount.
Home equity line of credit
Those in the beginning stages of their wedding planning process who have equity in their home
A home equity line of credit (HELOC) is like a home equity loan in that you borrow from your home’s equity. The main distinction between the two is that one allows you to draw funds over time, while the other is disbursed in a lump sum.
HELOC’s often have much longer repayment terms, sometimes that span up to 20 years, so the monthly payment can be much lower than with a loan. Plus, rates, while variable, are often lower with a HELOC than with a loan.
Typically you can borrow up to 80 percent of your home’s equity with a HELOC, and its flexibility makes it a popular choice for financing a wedding. Unlike other borrowing methods, you’re able to borrow more as needed up to your credit limit, which can make it a useful resource in the case of unexpected or emergency expenses.
- Flexible withdrawals through the draw period.
- Potentially lower APRs than credit cards and other loans.
- Longer repayment terms than with other types of loans.
- Home is collateral.
- You’re reducing your home’s existing equity.
- Variable interest rates are subject to change based on the economy.
What is the best loan to get for a wedding?
If you have excellent credit and solid finances, an unsecured, fixed-rate personal loan is likely your best choice when it comes to financing your wedding. This is because your strong credit makes you more likely to be offered the most competitive rates, favorable terms and low fees that can make repayment a smoother process.
Fixed interest rates stay the same over the life of the entire loan unless you refinance with a different lender for a different interest rate, which is an important asset to be aware of right now. As the Federal Reserve continues to raise interest rates with the aim of slowing inflation, scoring a loan with a fixed rate could save you thousands in interest.
What’s more, some lenders offer benefits and perks that can increase the overall value of your loan. For example, it’s common for lenders to offer a 0.25 percent to 0.5 percent interest rate reduction for enrolling in autopay, while others may offer grace periods and alternative repayment options.
While an unsecured fixed-rate personal loan won’t be best for every borrower out there, it’s at least worth considering if you need to borrow a loan to pay for your upcoming nuptials.
How to apply for a wedding loan
Keep these steps in mind when applying for a loan to finance your wedding-related expenses.
1. Check your credit score and report
Your credit report is essentially a more detailed look at your credit history. Your report contains your score, your repayment history (including any missed payments), accounts you’ve defaulted on, and how many hard checks you’ve recently undergone.
Checking your report will give you a well-informed take as to whether it’s a good time financially to take on additional debt. You can check it for free at AnnualCreditReport.com.
2. Shop around and get prequalified
Compare lenders by looking at their minimum eligibility requirements, APR ranges, repayment options, borrowing amounts and fees charged. If possible, prequalify with at least three lenders. This will give you a well-rounded prediction of your approval odds and potential rates with no impact on your credit score.
Once you’ve found the lender that offers the most competitive rates and best meets your needs, you’ll begin the application process. Most of the time it’s completed online, but some lenders may require you to complete a portion of your application in person.
Most lenders offer quick approval and funding, so make sure the lender you apply with has a funding timeline that best meets your needs.
This article originally appeared here and was republished with permission.