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Should You Take Out a Personal Loan to Pay for a Wedding?

Christy Bieber, The Motley Fool

Is it a good idea to take out a personal loan to fund wedding costs? Find out here.

A married couple walking out of church holding hands and looking at each other.

Weddings have become extremely expensive, with estimates on average wedding costs ranging from $25,764 to $33,391 in 2017. Paying this much cash out of pocket can seem impossible for many brides- and grooms-to-be -- and most people today can’t just count on their parents to pick up the tab.

If you’re looking at big costs to cement your betrothal, you may be considering taking out a personal loan to pay for a wedding. Is that really the best idea?

Is it a good idea to take out a personal loan to pay for a wedding?

The simple answer to the question of whether you should take out a personal loan to pay for a wedding is: No. You should not borrow money for a big party, even if it is your wedding.

Borrowing money means you start your married life in debt -- or in more debt if you’re like most people and you also have student loans or credit card debt to contend with. If you’re paying interest on your wedding for multiple years, you’re going to have less cash to do other stuff with -- like buy a house, save for retirement, or save to start a family.

If you borrow $25,000 to fund your wedding and pay 10% interest, which is a pretty competitive rate for a personal loan, your monthly payments would be around $807 per month over a three-year repayment term. That means you’d pay a total of $4,040 in interest over the life of the loan. If you instead took $807 per month and put it in savings, you’d have over $29,000 by the time your three years was up -- which would be just about enough to put down a 10% down payment on a $300,000 house.

Being in debt and having big monthly payments also adds financial stress to your new marriage. Since money is a leading cause of marital strife and divorce, you aren’t exactly setting yourself up for success by borrowing a fortune to pay for your big day.

Instead of borrowing, consider scaling down your wedding dramatically, saving up, and paying in cash. You could have a nice wedding at a low-cost venue, like your home, a national park, or your alma mater. By keeping your guest list small, the catering simple, and avoiding big expenses like super fancy flowers, you could have a great wedding for a very reasonable cost.

What if you’re going to borrow anyway?

If you’re committed to having a big wedding, there’s likely nothing that’s going to change your mind since wedding planning involves emotional decisions. If that’s your situation and you’re going to borrow anyway, a personal loan is usually a good way to do it.

Your alternatives to a personal loan could include a home equity loan -- but only if you have a house with equity in it -- or a credit card. Many soon-to-be newlyweds don’t have a house to qualify for a home equity loan, so this wouldn’t be an option -- and putting your home at risk to pay for a wedding is a really bad idea anyway. As for a credit card, the interest rate on most cards is higher than the rate on a personal loan.

If you can qualify for a 0% APR credit card, this may be a cheaper way to pay wedding costs since you can pay no interest at all on what you borrow. But, the 0% rate usually lasts only for a short time, such as 15 months.

When the promotional 0% rate expires, your rate on the card will likely go way up. Figure out what you’ll be able to pay each month, see how much of the balance will remain after your promotional rate ends, and calculate the interest you’d end up paying after rates rise. Do this before you decide to take the credit card approach.

For most wedding borrowers, paying off the debt in 15 months isn’t possible, so a personal loan with a three- or five-year repayment term would come with a lower total interest cost -- as well as predictable monthly payments and a definite debt-free date.

Borrow smart if you need a personal loan

If you’re going to take a personal loan for your wedding, be sure to shop around to find a lender offering the most affordable rate. Decide if you’ll apply jointly with your fiancé for the loan or if you could potentially get a better rate if only one of you applies due to having a better credit score or less other debt.

Finally, whatever you do, borrow the minimum necessary for the shortest time possible you can so you’ll get your wedding debt paid off ASAP and can move on to accomplishing other goals together.

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