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Getting hitched to your beloved can be costly. One of the most significant purchases is the engagement ring. According to The Knot, the average cost of an engagement ring in the U.S. in 2021 was $6,000. While most anyone would like to pay for an engagement ring with cash, the reality is that you might need to tap into financing to propose properly. Read on to learn about options for financing, which include personal loans for engagement rings.
Why Finance an Engagement Ring?
To cover the costs of the ring, it might be necessary to take out a loan or buy it on credit.
Using a Personal Loan to Finance an Engagement Ring
Can you get a personal loan to pay for an engagement ring? Indeed you can. The various personal loan types can be used for a variety of things, including home improvements and expenses for weddings and big-ticket items such as the wedding and engagement rings.While the advantage of a personal loan engagement ring is that it provides money up front to pay for it, you'll be forking over interest fees over the length of the loan. Plus, you'll need to apply and qualify for any personal loan, which results in a hard pull of your credit profile. Personal loans for engagement rings
Pros of personal loans for engagement rings
Cons of personal loans for engagement rings
Money is offered in one lump sum up front
Need to apply and qualify for a personal loan
Repayment amount usually the same throughout the life of the loan
Will owe interest fees
Versatile on ways you can use a personal loan
Hard pull of your credit when applying
Personal Loan Financing vs Cash for Buying an Engagement Ring
If you foot the cost of the ring with cash, you don’t need to go through the rigamarole of applying for a loan and you won’t be worried about making payments and interest.If you are able to buy the ring later on, you can devote savings to the purchase. Consider squirreling away a portion of that end-of-year bonus, workplace sales commission, money earned from side hustles, or small windfalls throughout the year, such as your tax refund.Another tactic is to save a portion of what you'd like to spend on an engagement ring, and then finance the remaining portion with the loan. That way, the personal loan for an engagement ring won't have to cover the entire cost.
Finding Personal Loans for Engagement Ring Financing
Here are some tips on how to find a personal loan for an engagement ring that suits your needs and budget:
Compare Rates
The cost of the personal loan engagement ring hinges on how much you'll end up paying in interest fees. While many personal loans have a fixed interest rate, some offer a flat fee. You'll also want to check to see what type of repayment schedule you'll be on.
Compare Total Costs
Beyond interest rates, look at what fees might come tacked on to a personal loan. This might include an origination fee, documentation fee, late fees, and prepayment penalties. What trade-offs will you be making in pursuing a personal loan for a wedding ring or engagement ring? If you take out a loan for say, $5,000, will that cut into the possibility of taking out a loan for another life financial goal? Will it delay any financial progress you'd like to make?
Check Requirements
Before deciding on which lenders you'd like to pursue, check their lending requirements. This often is found on their website, or you can reach out to the lender for additional details. Common things a lender will take into consideration are:
Your income
Your debt
Your credit score and profile
Amount and length of the loan
If your credit is less-than-stellar, it might be difficult to secure a personal loan. Personal loans for fair credit tend to have higher interest rates and less favorable repayment terms. You might consider working on improving your credit before going after loans.
Alternative Financing Options for Engagement Rings
If a personal loan might not be for you, here are some other ways to fund that engagement ring:
Buy Now, Pay Later Lenders
Buy Now, Pay Later (BNPL) is a popular form of short-term financing for those purchases you can't afford to pay for up front, nor do you want to put on a credit card where you'll be slammed with interest fees. BNPL services usually partner with hundreds, if not thousands, of different retailers.BNPL options typically put you on a payment plan that's spaced out over a few weeks or several months. There's a cap as to how much you can spend, and the amount depends on financial factors. The average amount owed on a BNPL is about $900. While these services don't usually come with any fees, should you be late with a payment, you might get dinged with a penalty. So while BNPL can make that engagement ring more affordable, you'll want to make sure you can keep up with the payments.
Credit Cards
Putting an engagement ring on your credit card can be an easy way to finance, especially if you use an existing card. Depending on how long it'll take you to pay it off, you'll get hit with interest fees. The average APR for a credit card in the U.S. is 19.53%, and should that payment stretch out for months, or years, that's a significant amount you'll pay in interest. Plus, late or missed payments on your credit card mean your credit could be negatively impacted. To make sure your credit score is strong, you'll want to stay on top of your payments.
In-Store Payment Plan
Similar to BNPL lenders, some jewelers, department stores, and retailers offer an in-store payment plan for big-ticket purchases. These plans might not have any interest fees. However, depending on the retailers and the specifics of their in-store payment plan, you might owe interest if you haven't completed your payments by a certain date. Further, late fees might kick in, which could potentially ding your credit. If you're not able to qualify for a personal loan, it's typically recommended that you steer clear of payday loans. Payday loans have extremely high interest rates — an average of 391% — and, therefore, some states have set an interest rate cap and created some regulations to protect borrowers.
Compare Personal Loan Interest Rates Today
A personal loan can work out well, depending on your situation, needs, and preferences. To make sure a personal loan for an engagement ring is the best route to take, be realistic about what you can afford out of pocket and what you're willing to finance. Doing your homework and looking at terms, rates, and different options will help you make a decision. Exploring personal loans on Lantern will reveal the rates you could qualify for.
Frequently Asked Questions
Can you take out a loan for an engagement ring?
What is the average amount spent on an engagement or wedding ring?
What are the pros and cons of personal loans vs payment plans for engagement rings?
Photo credit: iStock/marchmeena29
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About the Author
Jackie Lam
Jackie Lam is a freelance writer with experience covering small business, budgeting, freelancing and money, and personal finance. She has written for more than 60 outlets, including Salon.com, CNET, BuzzFeed, Business Insider, and Time's NextAdvisor. She is currently working on her AFC® financial coaching certification to help artists, freelancers, and small businesses.
