Weddings aren’t cheap. If you’re looking to throw an epic party, you might be thinking about taking out a personal loan to help pay for it.
The average cost of a wedding is $33,000, according to The Knot. Breaking it down further, couples spend roughly $284 per person.
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Taking out a personal loan can be tricky, as it means you’ll be starting married life in debt. Before taking this step, it’s important to really think it through.
If you decide to go through with the personal loan, proceed with caution. Keep reading to learn how to make the process as efficient as possible, so you don’t cost yourself even more money.
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Set a Budget
If you’re going to take out loan, budget for it, create a manageable payoff plan and stick to it, said Omen Quelvog, MQFP and founder of Formynder Wealth Management, LLC.
Since personal loans often have higher interest rates, an unmanageable loan can lead to buyers remorse, he said. This can tarnish your memories of an exciting day, turning it into a regrettable decision, because of the money you spent.
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Lower Costs
You don’t need to take out the maximum loan available. To minimize the amount you have to pay back Quelvog advised looking for ways to cut wedding costs.
He said this might involve getting creative with flowers and photos or even seeing if loved ones are willing to give wedding gifts — i.e., those of a financial nature — early.
Check Your Credit Score
The better your credit score, the more likely you are to get the most competitive terms on your personal loan.
“Download your credit report, check its accuracy and ensure that you are taking steps to improve your score prior to the loan,” Quelvog said. “Correcting deficiencies, on-time payments and your overall debt-to-income ratio are the top areas where you can have the most impact on your score in the shortest amount of time.”
Shop Around
Shop around for a loan. Percentage points matter in the grand scheme of things. Getting three to four quotes will help you know you are getting the best rate you can.
Consider a Balance Transfer
If you’re discipled, consider transferring the balance of your personal loan to a credit card with a 0% introductory APR, Quelvog said.
“Set your monthly payment amount to completely pay off the balance before the end of the introductory period,” he said. “This has the potential to backfire, so understand the terms and do not deviate from your plan.”
Think Twice Before Taking Out a Personal Loan
“I cannot think of an occasion when I would recommend someone take out a personal loan to pay for a wedding,” said Samantha Mockford, certified financial planner (CFP), accredited financial counselor (AFC) and associate wealth advisor at Citrine Capital. “Debt grows with compounding interest, and it is best used very cautiously, as a tool to acquire resources that will generate the income to pay it back.”
For example, she said things like starting a business, getting an education or buying a car to get to work can be a good reason to take on debt.
“A wedding expense is spent and gone, and you cannot bank on cash wedding gifts to pay back the cost of the event,” she said.
If you don’t have the money to fund your dream wedding, she advised saving up and postponing the reception. Even if you decide to get married now, a reception is a celebration that can be put on hold.
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This article originally appeared on GOBankingRates.com: How To Effectively Use a Personal Loan To Help Pay for a Wedding
