How Wedding Loans Work—And How to Avoid One

It can all come down to your priorities

newlyweds leaving their wedding
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The average wedding costs anywhere from $30,000 to $34,000 in 2019, depending on who you ask. The venue and reception take up at least half, if not more, of that total bill.

Everybody wants their wedding day to be a memorable occasion. A nice setting and good food go a long way toward setting the perfect mood, and you'll probably want to share the occasion with all your family and friends. But this all adds up to a lot of expense for many couples.

What if you don’t have the funds to throw the party of the century? Do you have to take out a loan to pay for wedding expenses? Many couples do borrow for their weddings, but there can be some downsides.

What Is a Wedding Loan?

It used to be that a "wedding loan" was just a personal loan. You can take out a personal loan to pay for just about anything you want to spend money on, and your wedding would certainly fall into that category. But some lenders are now labeling these loans "wedding loans," perhaps as a marketing ploy to pique the interest of borrowers who are heading down the aisle.

You don't have to put up collateral for a personal or wedding loan. Approval hinges on your credit history.

Should You Use a Wedding Loan?

This question is somewhat synonymous with, "Do you want to spend $30,000 on your wedding?" Two more questions come into play if your answer is yes: "How healthy are your savings?" and "How much can Mom, Dad, and family chip in?"

You'd have no choice but to take out a loan if your heart is set on a lavish wedding, but you haven't saved enough to pay cash for it and your parents' contributions will be limited. Now the issue becomes one of exploring your options and honestly weighing the pros and cons of a wedding or personal loan.

The Advantages of Wedding Loans...

On the upside, you're hopefully only going to get married once, so this is a once-in-a-lifetime event that's definitely splurge-worthy. Personal loan interest rates can be much kinder than those associated with credit cards, so you'll probably do better with a loan rather than maxing out your cards to swing all this.

All those upcoming months of timely payments can polish up your credit score, too, even if it's already pretty good.

And the Disadvantages

Taking out a wedding loan pretty much guarantees that you and your beloved will begin your life together in debt. Studies show that financial issues are a common—if not the most common—cause of stress in marital relationships. Why put yourself in a difficult position right from the start?

Maybe you can swing those monthly loan payments just fine between the two of you and with both your earnings, but that's money you're not putting toward other goals. Do you already own a home or do you want to save for a down payment? What about children and their eventual educations? And you'll probably want to plan and save for your golden years together. Wouldn’t it be nicer to start your marriage by building your future together as opposed to playing catch-up?

If You Decide to Borrow

Borrow wisely if you decide to get a loan to pay for your wedding. Check your credit before applying, and fix any errors or negative items that will prevent you from getting the best deal on a loan.

Your future spouse might have to co-sign for the loan if you can’t qualify on your own. This means that both of you will be equally responsible for the payments—which can be a good idea or a bad one depending on how you look at it. Equal responsibility means that both of you will have your credit dinged if something goes wrong. You won't be able to fall back on the other's better credit in an emergency.

Wedding Loan Options

Look for loans with certain characteristics to find the one with the best terms and that most suits your circumstances and concerns.

  • Unsecured loans don't require any collateral so you won’t lose your house, your car, or other property if you fail to repay.
  • Short term loans take less time to repay, so you’ll pay less interest over the lifetime of the loan. And you can put the loan behind you more quickly. The principal payments will be larger, however, because you're squeezing your borrowed balance into fewer monthly payments.
  • A fixed interest rate means that you’ll know exactly what your payment is going to be until you make the last one, although you might get slightly lower rates if you go with a variable rate loan. Your monthly payments will change periodically if you take this option.

    Get a personal loan from a bank, a credit union, or an online lender for the best rates. Peer-to-peer lenders might also be an option—they offer relatively short-term loans at competitive rates.

    A Few Alternatives

    A wedding loan isn't your only option, and even if it is, you can take some steps to tie the knot without risking your financial future.

    • Budget and save: Unless you’re getting married next month, you have some time to plan and set money aside. Pay for as much as you can yourself. You don't have to take out a loan to cover the entire event.
    • Family and friends: Some people would be mortified to ask friends and family to help out with their wedding, but you can simply ask for cash and crowdfund the wedding if this option doesn't horrify you.
    • Farm out the jobs: Your friends and family might also offer their time and skills so you don't have to pay for every aspect of your wedding. Maybe someone has a beautiful property that's available for the big day. Someone else is an amazing chef with the ability to serve numerous people. You might happen to know a great photographer who won’t “forget” to take photos as the night progresses.
    • Defer costs: Maybe you can hold off on buying that expensive ring. Start with something you can afford now and upgrade later in life, perhaps on a significant anniversary or whenever your financial situation allows.
    • Cut back: You might have to make difficult decisions about your wedding day. Can you invite fewer people or make the event more modest? Maybe an open bar isn't in the cards. Consider just offering beer and wine, and let your guests pay for the hard stuff if they want a cocktail. They'll remember the general feeling of the day more than the specifics—and, again, your future happiness is the most important thing.

      Points to Ponder

      • Ask yourself what’s really your greatest lifetime priority. The wedding of the century? A nice home? Four kids? Retiring in Maui? Which would it be if you only got to choose one? That’s where you should put your money.
      • A wedding loan isn’t “free” money. It must be paid back with interest. That $30,000 loan will end up costing you at least $33,000 out of pocket at a 10% interest rate, depending on if and how the interest compounds.
      • Don’t neglect to factor the loan payment into your post-nuptial budget. Are things going to be tight? So tight that you’ll fight over what to spend your money on?
      • Time is money. Consider bumping the big day back six months, nine months, or even a year to save up as much as possible during that time so you'll have to borrow less.