Is It Smart to Finance a Wedding?

A wedding day is a milestone for many people. It’s a day that’s dreamed about and planned for. It can also be expensive.

The Knot’s annual survey of recently married couples finds that average wedding costs rose each year until 2020 when Covid-19 restrictions put a hold on wedding plans for many couples. In 2019, the average cost of a wedding, not including the engagement ring, was $28,000, but this number dropped to $19,000 in 2020, mainly due to the reduced number of wedding guests and smaller venues. Even the smaller number, though, is still a pretty big one. In the end, though, you want what you want. The question is how to pay for it when the two of you have more love than money?

Here’s what you need to consider.

To Borrow or Not To Borrow

There are many variables that can affect the cost of a wedding, from the time of year you say I do, the day of the week, the number of guests, reception venue, and a host of other things. Not to mention unexpected wedding expenses that are sometimes forgotten in planning, like the cost of beauty and hair treatments and the marriage license, for example.

Temptation can also get the better of you. It’s possible that you will qualify for an amount that’s more than you need for your wedding. Will you have the discipline not to upgrade your plans and spend more than you can realistically afford? It can be easy to get caught up in the fantasy and have regrets later.

The Pros of Financing a Wedding

• You get your day with all the bells and whistles, or most of them anyway, that you’ve dreamed of. You have the wiggle room to have more guests, a highly sought-after DJ or band, and food that will still be talked about on your anniversary. Mission accomplished in having a special day that will last a lifetime of memories.

• You might be able to borrow enough money to have a relaxing honeymoon, too, which might be nice after the stress of wedding planning.

• You won’t deplete your savings to pay for your wedding. Starting your life together without a stash of cash for emergencies can be stressful.

The Cons of Financing a Wedding

• When the revelry is a wonderful but somewhat distant memory, that monthly loan payment is still owed. Depending on the amount and term of the loan, that can be a big commitment.

• Interest rates for personal loans vary based on the borrower’s credit rating and other factors. If you don’t qualify for favorable interest rates, you could end up paying a lot in interest over the life of the loan.

• Taking out a loan also increases your debt-to-income (DTI) ratio and will affect your credit score. If you are planning on near-future large purchases that will require another loan, like a mortgage, having a high DTI ratio might make it more difficult to qualify for future loans, or might affect the rates you qualify for.

Making the Decision

Borrowing money to pay for wedding expenses is a major decision. Being informed of all the details will help you make the best decision for your financial situation.

A wedding loan is a personal loan and is most often unsecured, which means you don’t need to put up collateral to secure the loan. You will, however, need to meet other qualifying factors, such as a certain credit score or employment history, to name a few.

It might be a good idea to get pre-qualified with a few different lenders and review rates and terms you would be likely to get. This step in the process won’t negatively affect your credit score because lenders only do a soft credit inquiry at this point. If you discover that you can only qualify for high-interest rates or not the amount of money you need, this might be a good time to consider other options.

Ideally, you want the lowest interest rate you can get. Fixed-rate loans carry the same interest rate throughout the term of the loan, but a variable-interest-rate loan can fluctuate throughout the term, based on changes in the underlying index rate.

There also may be fees to be aware of, such as origination and closing fees, prepayment penalties, and others. It’s helpful to know what all the fees are for and if they are negotiable.

Knowing your total costs and understanding the total interest you will pay over the life of the loan will help you with your decision about whether to borrow. Either a lower interest rate or a shorter term may save money in the long run. A personal loan calculator or amortization table can help with this analysis.

Other Options for Financing a Wedding

If you’re having second thoughts about borrowing to pay for your wedding, you might need to come up with alternatives. With wedding planning, there’s always a Plan B.

• You might be able to avoid borrowing altogether by postponing the wedding to give yourself time to save the money to pay for it. Cutting unnecessary expenses might free up some money in your budget. Or earning extra money by taking on a side hustle might be a good way to add to your savings.

• Using a credit card to pay for wedding expenses might be another option. While a personal loan might offer a lower rate than a credit card, you might find credit card offers with low introductory rates — perhaps even 0% — for a limited time. If you’re confident that you can pay the card off in full before the introductory rate ends, this could be an attractive option. If the card also offers purchase rewards, that could be a further bonus. Remember, though, that credit card debt is still debt, and it’s revolving debt that doesn’t have a fixed end date.

• Asking parents for money might not be the most appealing option, but it might be a worthwhile consideration. Even though the average age of newlywed couples is rising, which might mean more couples are established financially before they marry, it’s still traditional for the parents of the couple to contribute to the cost of the wedding and it’s common for the couple to have help paying for the wedding.

The Takeaway

Your wedding is a special day, but it’s just one day — then comes the rest of your lives together. Using borrowed money to finance your wedding is a big decision and should not be taken lightly. Taking on debt will affect your budget immediately and your borrowing options in the future.

If you do decide that a wedding loan is the right decision for you, consider loans that have no fees, like those from SoFi. Along with no fees, wedding loans from SoFi have low rates, which can save thousands of dollars compared to using a credit card. Unlike the revolving debt of a credit card, a SoFi wedding loan is installment debt with a fixed payment end date.

See if a wedding loan from SoFi will help make your wedding day everything you’ve dreamed of.

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