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Wedding Financing 101: Tips to Fund Your Dream Day

A wedding is a special celebration for which many couples spare no expense. Some people spend years planning—and saving for—their dream wedding. From the venue to the dress, wedding costs can quickly add up. And, some couples may consider taking out a loan to help finance the expenses.

Couples spent an average of $30,000 on their wedding in 2022. With such high costs, it’s no surprise that some couples may need financial assistance. Before taking on debt, however, couples should carefully evaluate their options to make an informed decision. In this article, we’ll explore the pros and cons of getting a loan for a wedding and offer some tips to help you make the best choice for your financial future.

How Much Do Weddings Cost? 

The cost of a wedding varies significantly, depending on many choices such as the location, date, number of people attending, and decorations. For example, renting a lavish venue costs more than a modest one, and nighttime reception costs more than a daytime affair.

Dozens of other personal decisions can also affect the cost, including the following estimates, according to WeddingWire:  

  • Catering: $1,800-$7,000 on average
  • Photographer: $1,150-$3,000 on average
  • Wedding Planner: $1,000-$2,500 on average
  • Flowers: $700-$2,500 on average
  • Transportation: $500-$1,100 on average

Since weddings tend to cost so much more than the average American’s disposable income, many people consider taking out a loan for the big day. Couples planning a wedding on the heels of another major expenditure, such as buying a home or starting a family, may be especially focused on financing options that will incur the least amount of debt.

How Does a Wedding Loan Work? 

While lenders do not actually offer a specific “wedding loan,” this can be any loan you take out to use for your wedding expenses. People typically consider one of two types of traditional loans for this purpose: a personal loan or a home equity loan. Each type of loan requires its own eligibility criteria and comes with unique pros and cons.

Personal Loans 

Like most types of loans, eligibility for a personal loan depends largely on your credit score. Lenders may offer personal loans of up to $100,000 over a term of up to 7 years; however, a person’s credit score ultimately determines how much they can borrow, their interest rate, and the terms of their loan. Lenders range from traditional brick-and-mortar banks to online-only loan agencies.  

Pros of Using Personal Loans For Your Wedding 

  • Accessibility: Borrowers can choose from a wide variety of lenders who offer personal loans, including banks, online agencies, and credit unions.
  • Flexible Loan Amounts: While your unique borrowing terms may vary, financial institutions commonly offer personal loans between $1,000 and $100,000.
  • Low Interest Rates: Interest rates also depend on your credit score and other criteria; however, many personal loans offer lower interest rates than the average credit card.
  • Easy to Apply For: The process of applying for a personal loan is convenient and uncomplicated, especially with many lenders now operating fully online.
  • Quick Approval: Many lenders will approve your personal loan and deposit funds into your account within several days, some even promise funds within 24 hours. 

Cons of Using Personal Loans For Your Wedding 

  • Existing Loans Impact Future Loans: Borrowers still paying off an existing loan have a harder time qualifying for an additional loan, which could affect future plans to take out a loan for a house or car with your new spouse, for example.
  • Creates New Joint Debt/Expense: The debt of a personal loan may add stress to a newlywed relationship. This may be of special concern to marriages in which at least one person already has ongoing debt.
  • Easy Come, Easy Go Spending: Sometimes couples have trouble controlling their spending once their wedding loan is approved. Suddenly flush with cash, even frugal spenders might justify a pricier dress, a venue upgrade, or an expanded guest list.
  • A Higher Cost in the End: Borrowing a sum of money for your wedding and then paying it back with interest will be a higher overall cost than if you paid out of pocket.

How to Get a Personal Loan For Your Wedding 

You can shop for wedding loans at your preferred financial institution, including most banks, credit unions, and internet-based lenders. Prospective borrowers should know their credit score before they start the application process. Lenders also commonly require information about income and existing debt to consider offering a wedding loan. Applicants may want to compare the interest rates, terms, and loan approval process of multiple lenders before making a choice.

Home Equity Loan, or Home Equity Line of Credit (HELOC) 

Home equity loans or lines of credit essentially allow you to open a secondary loan, which is only available if you have equity in your home. (Equity is the value of your home minus your outstanding mortgage.)

This type of wedding loan requires borrowers to have a high credit score, low debt-to-income ratio, and responsible mortgage payment history. Typically, lenders will only lend up to 80% of the value of your home, so you must have equity built up.

Lenders determine individual loan amounts and interest rates based on the current climate of the market, your personal credit history, your financial liability, and your LTV (or loan to value). The lender will consider the current value of your home and the amount of the outstanding loan (your mortgage) and typically lend up to 80% LTV. For example, if your home is worth $500,000 and you have a $250,000 mortgage—you would qualify for a loan of $150,000 because that amount plus your outstanding mortgage equals 80% LTV.

Pros of Using Home Equity For Your Wedding 

  • High Loan Amounts: Though actual loan offers depend on your credit score, mortgage terms, and other qualifications, home equity loans and HELOCs may offer loans of up to $1,000,000. 
  • Low Interest Rates: Most HELOCs offer low variable interest rates for the duration of the “draw period,” which typically lasts for 10 years. You’ll generally make “interest only” payments during the draw period.
  • Conversion Options: Some HELOCs can be converted into a fixed-rate loan at the end of the draw period.

Cons of Using Home Equity For Your Wedding 

  • Risk of Losing Your Home: Since your home is your collateral, the lender can foreclose on your home if you cannot afford to pay back the loan. 
  • Contingent on Home Value: If your home drops in value during the loan period, you may end up in debt for more than your home is worth. If this also increases your debt-to-income ratio, lenders may be less likely to approve you for new loans.
  • Hidden Fees: Some lenders bury their explanations of charges including annual fees, inactivity fees, or pre-payment penalties in the fine print of their home equity loan contract.  

How to Get a Home Equity Loan or HELOC For Your Wedding 

Banks and credit unions commonly offer home equity loans and HELOCs to qualified customers. Your credit score affects your eligibility to a lesser degree for this type of loan.

Lenders for this type of wedding financing require the same employment, income, and debt verification as a personal loan, plus additional mortgage statements and the address of the home. The application process also typically requires borrowers to undergo a property appraisal. 

Should You Get a Loan For Your Wedding? 

Personal loans can be used wherever a borrower needs fiscal support, including financing a wedding. The ideal candidate for a wedding loan has good credit, can afford to make their monthly payment for the duration of the loan, and does not intend to take out another loan in the near future.

On the other hand, financial advisors do not recommend using a personal loan for wedding costs if you have poor credit and unreliable spending habits, as it could escalate your debt, further damage your credit score, and even potentially put you at risk of losing your home.

4 Tips For Getting the Best Wedding Loan 

Borrowers can take the following steps to make the most of their wedding budget and avoid extra debt when applying for a wedding loan.

1. Take out as little as possible. 

Even applicants who qualify for a large loan should consider only borrowing what they need. Since the interest of a loan is commensurate to the loan amount, you can avoid exorbitant repayment fees by taking out a smaller loan. You can also minimize wedding expenses in the first place by inviting fewer guests, booking on “off” days, and using in-season flowers and food.

2. Ensure your credit is in good shape. 

Lenders use your credit history as a primary factor in determining whether to offer you a loan. While bad credit may not completely disqualify you from taking out a wedding loan, you should take steps to improve your credit before applying for a loan whenever possible.

Borrowers considering a personal loan for wedding financing should always make the monthly payments toward their credit balance on time and pay more than the minimum requirement. Couples looking to establish good spending habits and build credit might consider a secured credit card.  

3. Get prequalified for your loan. 

Prequalification for your wedding loan helps you understand whether you meet the requirements for a loan and compare interest rates among lenders. The prequalification process typically requires applicants to disclose their income, desired loan amount, and current debt. Prospective lenders also run a soft credit check for prequalification, which does not affect your credit score.  

4. Factor in the loan’s term length, interest rates, and fees to compare options.

Depending on your financial fitness and credit history, lenders may offer loans with a variety of interest rates, fees, and repayment options. As part of the prequalification or preapproval process, you can compare their offers to offers to determine which terms suit your circumstances.

Automated online tools can also help borrowers plug in data to compare options. Some aggregate sites allow applicants to select their desired loan amount, credit score range, and state of residence to find lenders with affordable repayment terms in their area. Borrowers should prepare a budget to ensure they can make monthly payments on their loan over time. 

Other Ways to Help Pay For Your Wedding 

Combining your wedding loan with other smart financing tools can help minimize your loan amount. Consider the following methods of stretching your money to cover your wedding.

Extend Your Engagement and Save Together 

Extending your engagement can enable you and your partner to grow your savings toward wedding costs. Couples with some flexibility around setting a date can consciously put money away to finance the wedding and also potentially bond over this joint fiscal responsibility. On the flip side, others may prefer a shorter engagement or decide to keep finances separate throughout the process of preparing their wedding budget.

Personal Savings 

Some couples have the means to use their personal savings toward wedding expenses. This option can work well for those who earmark some or all of their savings for wedding planning; however, using a general savings account for wedding costs will deplete funds fast. Couples should consider whether they need to keep some personal savings set aside for non-wedding expenses such as bills, school loans, or a retirement fund.

Credit Cards 

Using a credit card to finance your wedding comes with its own pros and cons. For example, while credit cards often include high interest rates, many cards offer low or 0% interest rates for an introductory period. Couples can potentially avoid paying interest on wedding expenses put on their card during this time.

Credit cards may also offer additional purchase protection for wedding costs. Customers can dispute charges if necessary through the credit card company. They may also enjoy perks like cash back or points toward future purchases for some wedding-related expenses. Potential drawbacks of using a credit card for a wedding include higher debt and damage to your credit score. 

Contributions From Family and Friends 

Some couples may choose to request contributions from friends and family to help pay for their wedding. This type of wedding financing is not a sure thing, as you cannot assume people will contribute. You should also encourage everyone to only contribute money that they can afford to spend.

Couples can also borrow directly from a friend or family member and plan to pay back their private loan with interest. Since doing business with family or friends can sometimes prove tricky, borrowers and lenders should mutually set the terms of the loan and both sign a written agreement.