If you are getting married and you are nervous about the big day because of the financial implications, then you may be considering getting a wedding loan. Weddings can be extremely expensive. Before deciding to get a personal loan to fund your wedding you need to take consideration of the advantages and disadvantages of doing so. Let’s take a look further to help you understand your decision.
What is a wedding loan?
A wedding loan is just as it sounds; it is a loan that you take out in order to cover expenses for a wedding. It is a personal loan, which is an unsecured instalment loan, that enables you to borrow a specific amount at a fixed interest rate and payback through monthly instalments.
Advantages of wedding loans
- You pay a fixed payment terms
One of the benefits of a personal loan is that you will have a fixed payment throughout the loan repayment. You can choose the time frame, and go for a longer time frame if you want to reduce the payments for a set amount of borrowing.
- Potentially lower interest than other borrowings
Personal loans tend to have low-interest rates than credit cards and so maybe a better option than putting the whole wedding on your credit card.
- Very easy to get
If your credit score on Credit Experia is over 700, you probably get it past a loan fairly easily. If you have a credit score over 740, your credit will probably be considered to be excellent, and you will be able to get good loan rates.
- You don’t need collateral
Personal loans are unsecured, and so there is no need to put assets down to secure the loan, such as a house or car. Essentially the lender is trusting that you will pay back the loan because you have had a decent credit usage history in the past.
- Personal loans can help you build your credit score
By having a personal loan and paying it back monthly you can increase the health of your credit score in most cases. This can certainly be considered an advantage, especially if you are later going to be getting a mortgage.
- You have to pay back
This may seem a strange title, but with credit cards, you can end up holding credit card debt and paying interest for a long period. But with a personal loan, you are paying monthly payments and are reducing the capital and interest throughout the loan until it is paid off. This means you don’t end up with cycling debt that causes financial stress.
Disadvantages of wedding loans
- There may be high interest for you
If you have great credit, then you may be paying high-interest rates for personal loans, and therefore a wedding loan could be a bad idea.
- You could be entering years of debt
If you take a loan over five years, then you are committing to 5 years of interest loan payments, and you are starting your wedding life with some shared debt. That’s fine if it’s affordable and if it is what you want to do, but it is certainly something you need to bear in mind as you begin your planning.
With proper planning, you should be able to do a slightly smaller affair and not borrow so much so it may take the stress out of your life in the future. Many marriages fail due to financial stress and so it a good idea to reduce financial obligations as much as possible in the early years of your relationship.
- The money could be going towards other shared goals
If you take a loan out for paying for wedding expenses, then you are using a proportion of your disposable income for the monthly instalments, and this could affect the amount you can borrow due to having less disposable income for a mortgage.
You are also reducing the amount of money available for a mortgage deposit in the future, and you may be affecting your ability to go on holiday, have a takeaway on a Friday and generally affecting the quality of your lifestyle. You need to think about this when you are taking a loan out, and whether you will still have the money to do the things that you want to do together to enjoy your lives.
In conclusion, more people are taking out personal loans for weddings, but you need to understand the pros and cons of the decision before you do so. Hopefully, this article has helped you to understand more and given you some food for thought.