Should You Take Out a Loan to Buy an Engagement Ring?

There's an old rule of thumb that says you should spend three months' salary on an engagement ring. Many people don't follow this rule any more, and for good reason; following an arbitrary rule that may not match your budget or goals doesn't make a whole lot of sense.

Still, even if you don't opt for a ring you'd have to work three months for, chances are good you'll likely spend a few hundred or even a few thousand dollars buying jewelry if you plan to propose to your beloved.

That's a lot of money to come out of your bank account. In fact, many people simply cannot come up with that much cash so they end up having to borrow for it. If you're thinking about financing an engagement ring using a personal loan, there are some things to consider when deciding if doing so is the right move for you.

Specifically, you should think about these pros and cons before you move forward with getting a loan.

The pros of buying an engagement ring with a personal loan

Here are some of the benefits of buying an engagement ring with a personal loan.

• Your interest rate may be lower than with other kinds of financing. Qualified borrowers who get a personal loan can usually get an interest rate well below the standard APR on credit cards. If you can borrow for a ring at an affordable rate, your interest costs and total borrowing expenses will be lower.
• You get control over when and how you pay off the debt. You can choose a personal loan with a repayment timeline that works for you, such as five or seven years. And you can pick between a fixed or variable rate loan. Fixed rate loans provide certainty in total costs since you'll know upfront what your monthly payments will be.
• You have a choice of many lenders. Many banks, credit unions, and online lenders offer personal loans. You can compare options to find a lender offering you the best rates so your loan will be more affordable.

The cons of buying an engagement ring with a personal loan

There are also some major disadvantages of buying an engagement ring with a personal loan.

• If you'll be combining finances, your spouse will get stuck paying for their own ring. If you merge bank accounts and both pay the loan together, your spouse will be contributing to those payments. This may not be a problem, but not everyone is comfortable with this arrangement.
• You'll make your ring cost more. Interest will increase the cost of your ring. And engagement rings usually lose value after you buy them, so you'll be paying even more for an asset that's already not worth as much as you paid for it.
• You'll be limiting future options. Your ring loan payments could eat up money that you might want to use toward other financial goals as a couple.

These downsides are worth considering, and you may not want to take out a personal loan to buy a ring without talking to your future spouse. This decision can affect both of your finances going forward.