Weddings have always been special occasions worth celebrating in style. The tradition remains, and modern weddings are an opportunity for the bride and groom to shine. However, getting married is a huge step, and planning the event is a complex undertaking deserving a lot of consideration. The cost of a wedding can be overwhelming for couples who haven’t saved up for the big day, with dress, venue, catering, cars etc. all biting hard into the budget. A wedding loan could be the answer.
It’s not uncommon for a typical Australian wedding to cost more than $50,000 (see notes), and taking out a loan may be the best way to make ends meet and put on a wedding worth remembering. Most large expenditures in life are made possible with the assistance of a loan. Whether purchasing a house or car, studying at university, investing, building, renovating, or getting married, funds are required. Wedding loans are among the most popular personal loans, and there are a variety of suitable loan types, dependent on financial circumstances.
Wedding loan options
Prior to determining your borrowing power, the bank or lender will need to know how you want to use the loan. They also need to understand your present financial situation regarding other loan repayments, outstanding debts, credit cards and living expenses. Wedding loan options are varied, along with respective interest rates and repayment schedules.
Personal loan: Wedding loans can be used to purchase a broad range of products and services. Some personal loans hold no restrictions on purchases, so money can be used for the wedding venue, catering, limousines and even the honeymoon. Variable and fixed loan options are usually available with repayments made from one to seven years.
Line of credit: If your finances are in reasonably good shape, your bank may provide a line of credit (overdraw limit) on your bank account. This is a good option if you want ‘just in case’ money available if the wedding plan goes over budget. Once money is accessed, a set interest rate is charged.
Home equity loan: Home equity can be used to fund a wedding. As an established bank customer, your long-term home loan repayments and increased value of your home means there is little risk for the bank. Additionally, home equity loans are tied to your home loan, providing much lower interest rates than other forms of wedding loans.
Credit card: Most types of personal loans for weddings carry lower interest rates than credit cards. But it you don’t have other options or are going after the rewards points, you might considering using a credit card for wedding purchases. Credit cards are a form of self-managed borrowing and by planning ahead, you can ensure your cards are in good shape and ready to tackle wedding expenses.
Wedding loan features
Lenders often provide discounts, incentives and flexible repayment options when personal loans and other financial products are bundled together. Flexible loan incentives include the facility to make early repayments, take out a loan extension, or make interest-only repayments during difficult times. Some lenders charge a fee for the convenience of making early repayments, so your choice of loan needs to take all associated conditions into consideration.
Fixed and variable interest rates both have benefits and drawbacks, although choosing the appropriate rate option is also determined by personal preference. A fixed rate gives certainty about repayments for the course of the loan, at higher interest rates, while variable rates are lower at the time of loan application, but are dictated by regional and global financial markets that can change unexpectedly. If you choose to forgo the loan option and instead use your credit card for major wedding purchases, it could be an opportunity to utilise rewards points for additional expenses.
Wedding loan considerations
Hosting a successful wedding is a big achievement, but when the confetti is cleared away and the honeymoon is underway, your first loan statement will be on the way. It’s important to understand the financial obligation of servicing a loan for the entire repayment term. Prior to taking out a wedding loan, there are questions that need answering.
- What are the fees charged while establishing, maintaining, and servicing the loan?
- What interest rate is being offered?
- Are repayments genuinely affordable for the duration of the loan?
The financial obligations associated with weddings can be daunting. However, with proper management and a good plan in place, everything can be covered by a wedding loan that allows bride, groom and all wedding guests to participate in a dazzling and opulent occasion fit for celebrating this very special time.
Let me know what you think in the comments! Did you borrow money for your wedding?
- According to Bride to Be magazine, the average Australian wedding cost in 2015 or 2014 was $65,482. (source)
- I found the following loan options at the Big 4: