How to Finance an Engagement Ring

Gone are the days of exchanging simple wedding bands. According to wedding experts at The Knot, the average engagement ring costs about $5,900, although that can vary a lot depending on where you live. The best way to finance an engagement ring is to pay cash, but it's safe to say that most Americans don't have a spare $5,900 to pull out of their pockets.

It should be said that 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, 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:

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. 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.

Personal loan

Personal loans are available through banks, credit unions, and online lenders. Those with the strongest credit scores can land a low, fixed rate, and there are repayment terms to fit every situation. One advantage of a personal loan when financing an engagement ring is that you know exactly what it will cost you each month. As long as you choose a fixed-rate loan, you can factor those payments into your budget until the money is repaid.

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:

What happens if I don't pay the ring off during the promotional period? Say you purchase a $5,000 ring at 0% interest for 18 months. You'll need to make payments of $278 each month to pay it off before the promotional period ends. But what if you're hit with an unexpected expense -- you'll find many of those with a wedding -- and can only make monthly payments of $100? That means that at the end of 18 months, you will have $3,200 left to pay. Now, let's say the interest rate jumps to 17% (which is not uncommon). If you continue to make $100-per-month payments, it will take you another 43 months to pay off the ring, and you will end up paying $1,093 in interest.

Is my credit score high enough to qualify for engagement ring financing? Whether you are applying for in-store financing, a 0% APR credit card, or a personal loan, you'll need solid credit. If your credit score is not high enough to qualify, you'll need to find an alternative payment method. Whether you are eligible or not, your credit score will be dinged with a hard credit check. If your score is not high enough, work to improve your credit score before you apply for financing.

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, if your credit score is too low to qualify for a low interest rate, or you're already trying to get out of debt.

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 answer this question. 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.