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Is taking out a loan to pay for your wedding a good idea?
Weddings are expensive and as the typical price rises to between £18,000 and £22,000 it isn’t surprising that many couples look to borrow money to be able to afford their perfect big day. Loans and credit cards can quickly become the answer to providing you with the wedding of your dreams but should you use them?
There are many pros and cons for using credit to pay for your wedding but ultimately it is up to you and whether you feel like the debt would be affordable and manageable for you and your financial situation now and in the future.
Why a loan for your wedding would be beneficial
Personal loans allow you the opportunity to borrow up to around £25,000 (depending on your circumstances) usually without having to give some sort of security such as security against your house. You can usually borrow the money for around five years with a fixed term or variable interest rate.
When interest rates are low, personal loans can be seen as a relatively cheap way of accessing the funds required to cover the cost of a wedding. With a personal loan, it is also easier to budget for the monthly cost as payments are fixed, taking into account the interest rate, to finish when specified after one, three or five years.
If you opt of a shorter loan term then you will pay less interest overall, the longer the term the more interest you will pay but the smaller the monthly repayments. As a result, it is always worth looking at your household finances to work out exactly how much you can afford to repay a month so the loan is a manageable expense for the household income to bear.
Be aware that you may be able to take a repayment holidays from your loan but you will need to discuss this with your lender. This can provide you with financial breathing space if funds are tight but it is likely to extend your loan term by an extra few months.
What are the disadvantages of taking out a loan for your wedding?
One of the main disadvantages with any loan is the interest rate because the higher the amount you borrow, the more interest rate you will pay. This can obviously impact the amount you will have to spend on your loan term over the repayment period.
When you apply for a loan, the lender will take into account your income and outgoings to establish affordability as well as your credit score when deciding how much you can borrow and the interest rate to charge you on your loan; this means that those with poor credit histories are unlikely to be able to borrow at the best rates on the market (or indeed at all).
As a result, it is always a good idea to sign up to a free credit report service where you can find out your credit score, your likelihood of being accepted for a loan and any errors on your credit file that you can deal with to improve your report. It is always wise when considering borrowing not to overstretch your finances.
Therefore, when looking into taking a loan out to pay for your wedding, it is always a good idea to consider the pros and cons of a loan as well as looking into your affordability for the monthly repayments. If you realise that you can’t afford it, you may need to look into other methods to fund the cost of your wedding.
What are the alternatives to a loan for paying for your wedding?
There are a couple of alternatives to loans which can help you to pay for your wedding including:
- Credit cards – You can’t borrow as much on a credit card but it can be useful for some purchases that you can then pay off over the following months. Some credit cards offer a 0% interest rate so as long as you pay back what you’ve spent in a certain period of time then you will not need to pay any interest on the amount borrowed. Like a loan, it is advisable that you check your affordability for repayments before you take out a credit card.
- Loan from family or friends – Another option is to borrow money from friends or family and pay them back over a time period agreed to by both parties. When borrowing from family or friends, interest may not be added but it is advisable to discuss in advance the expectations for paying back the loan and putting this on paper to lessen the chance of disputes in future.
- Save – To eliminate borrowing altogether you could save for your wedding and stick to a strict budget based on what you want and what you can afford. This can take longer to get the amount of money together but it eliminates the risk for you and your partner as well as ensuring that the wedding is paid for upfront without costs running on for years to come.
If you are struggling with debt from a loan or credit card, get in touch with us on 0800 901 2488. Our friendly, professional advisers will help you to find the solution to deal with your current financial situation.