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Gone are the days of exchanging simple wedding bands. The average engagement ring costs about $5,900 according to TheKnot -- but most Americans don't have a spare $5,900 to pull out of their pockets.
You don't have to spend that much, and overstretching yourself financially is not a good first step on the road to marital bliss. But if you are yearning to get down on one knee with an impressive diamond ring, financing an engagement ring may be the way forward.
What are my options to finance an engagement ring?
Fortunately, you have choices when it comes to financing an engagement ring. Here are some of them:
Personal loan
Personal loans are offered in a wide range of amounts. With a personal loan, you know exactly what your monthly payments will be, and you know exactly when the loan will be paid off. Plus, they often have lower interest rates than credit cards. Personal loans are available from banks, credit unions, and online lenders.
If you have an excellent credit score, you can confidently apply for the best personal loans.
If your credit score isn't perfect, it's worth taking a few months to improve your credit score. Borrowers with high credit scores can get approved for low interest rates -- and a low interest rate can save you hundreds of dollars. If you just can't wait, though, you can always apply for personal loans for bad credit. Just make sure you can afford the monthly payment before you commit, or you'll risk dragging your score down even more.
You can use the calculator below to get an idea of the monthly payments on a personal loan.
Financing an engagement ring: Personal loan calculator
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Jewelry store financing
Most jewelry stores offer engagement ring financing in the hope that you will shop with them for the big day. Many offer special promotions, like deferred payments or 0% interest for a set number of months. Look at the financing terms carefully and make sure you understand any hidden costs or penalties for missed payments. If you're getting 0% interest, for example, you want to be confident that you can pay off the debt during the 0% promotional period -- and know what the APR will be if you can't.
Credit card
Charging an engagement ring on a credit card with a 0% promotional APR can be a smart move. These rates are typically available for 12 months or more. Your ring purchase should earn reward points and, if the card has a sign-up bonus, it may also help you get those bonus points. Calculate how much you'll need to pay off each month so you can pay the card off before the promotional rate ends and make sure it fits in your budget. Just like the promotional rates sometimes offered by jewelry stores, you don't want to be stuck with a sky-high interest rate.
When is it a good idea to finance an engagement ring?
Financing an engagement ring is serious business. It means taking on new debt and squeezing new payments into your monthly budget. You can feel confident financing an engagement ring if your budget shows that you earn more than enough to make the monthly payments. Financing makes sense only after you have an emergency fund in place and a plan for paying your bills if your financial situation goes sideways.
Here are some questions you should ask yourself before agreeing to engagement ring financing:
Is my credit score high enough to qualify for engagement ring financing? Whether you are applying for in-store financing, a 0% intro APR credit card, or a personal loan, a good credit score helps your chances of approval. If your credit score is not high enough to qualify, you'll need to find a cosigner, put up collateral, or choose an alternative way to finance your purchase. It's always a good idea to work to improve your credit score before you apply for financing.
If you're using jewelry store financing or a credit card: What happens if I don't pay the ring off during the promotional period? Say you purchase a at 0% interest for 18 months. You'll need to make a minimum monthly payment to pay it off before the promotional period ends and your interest rate goes up. But what if you're hit with an unexpected expense -- you'll find many of those with a wedding -- and can't make your monthly payments? That means that at the end of 18 months, you'll still owe money. Now, let's say the interest rate jumps to 17% (which is not uncommon). You could end up paying hundreds in extra interest charges. If you're opting for 0% financing, make sure you can pay off the entire balance by the end of the promotional period.
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When is it not a good idea to finance an engagement ring?
Engagement ring financing should be the last thing on your mind if you find yourself short on money by the end of each month. And if you have bad credit, you might struggle to qualify for a low interest rate.
Consider waiting a little longer to buy the ring. That way you can save some money and improve your financial situation. You could also see if you can reduce your engagement ring budget, whether by buying a more affordable ring or finding discounts in stores or online. There's no point in spending more than you can afford if it makes it more difficult to finance your wedding and the rest of your life together.
And it should go without saying, but if the relationship with your intended is at all shaky, financing an engagement ring to "fix" the problem is the wrong move.
Is financing an engagement ring right for me?
Only you can decide on the best financing option for your circumstances. Maybe, for you, that means saving up cash for a ring. Or maybe it means taking out a loan, or using a credit card to pay for your engagement ring.
Before you decide to proceed with financing an engagement ring, ask yourself these four questions:
- Could I pay cash instead?
- Will financing cost me a lot in interest payments?
- Can I easily make the monthly payments?
- Do I have a plan to pay the loan off quickly?
Getting married is like hang gliding off Mount Everest. It's exciting, terrifying, and it takes a lot of planning to get things right. If you decide that engagement ring financing is a good idea, take your time to find the right financing opportunity. Just like it's important to find the perfect engagement ring, it's important to pick jewelry financing that works for you.
Still have questions?
Here are some other questions we've answered:
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About the Author
Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business. Her work has appeared on San Jose Mercury News, The Detroit News, Oakland Tribune, and Dun & Bradstreet. After moving around the globe, she's thrilled to be living in her hometown of Kansas City.
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