For many brides- (and to be fair, grooms-) to-be, the word frugal never enters their minds when planning their special day. So perhaps it’s not shocking that the average cost of a wedding is $31,213—an all-time high according to the latest research conducted by TheKnot in their 2014 Real Weddings Study.
If you’re fortunate to have someone paying for your wedding—or at least cover a portion of the costs—you might not need to worry about sticking to a budget. But if you’re like many young couples and don’t have a ton of cash just sitting around (and borrowing the money from your folks is out of the question), you’ll need to pare down your ceremony and reception. Even then, you might need financial assistance in order to make your wedding day happen.
Our credit experts break down all of your payment options. See which one may be the right fit for you.
Tapping Your Home Equity
If you own your house, you may be able to get relatively inexpensive financing with a home equity line of credit (HELOC) to foot your wedding bill. Since this type of borrowing is backed by your home (i.e., a secured loan), it’s likely that the interest rate will be lower than what accompanies a personal loan.
Keep in mind, not all banks offer HELOCs these days. Shop around. In fact, sometimes local credit unions can be the best place to look for a HELOC.
One cautionary note: If you fail to pay back your loan, not only will your credit be damaged, but more importantly, the bank could initiate foreclosure proceedings against you.
Opting for a Personal Loan
If someone says that she’s getting a wedding loan, chances are, she’s referring to a personal loan. If you don’t have collateral—like a home—this may be a strong option for you. Most financial institutions, including local and nationwide banks, credit unions, and even some online banks, offer personal loans. To help determine the interest rate that you ultimately land, lenders will use your credit history. The higher your credit score, the lower your interest rate.
While rates for personal loans are fairly low, they are more costly than what you will pay for a mortgage or a home equity line of credit. That’s because a personal loan is unsecured—meaning that there is no collateral (like your home) held in exchange for lending you the funds.
While interest rates on personal loans run in the mid- to high-single digits, they’re still substantially lower than what you’d pay by charging your wedding expenses on a credit card. This explains why in just about every situation, it’s better to get a personal loan than to put the charges on your plastic.
You may also want to consider peer-to-peer lenders such as Prosper or Lending Club. These lenders often offer lower interest rates than a bank. Services like Credit Sesame can help you sort easily through various loan options by matching your credit profile with the lowest cost loans that suit your needs.
Financing from Friends and Family
Many years ago, asking for cash gifts to help pay for your dream day was considered taboo. These days, it’s increasingly acceptable to ask for cash in lieu of a wedding gift. In fact, there are several online services such as OurWishingWell.com that allow couples to set up a registry where guests can easily gift cash.
Not comfortable with asking directly for cash? Consider crowdfunding your wedding (heck—people are using it for everything!). Tilt, for example, is a crowdfunding site that allows you to leverage your social network to fund just about anything, including weddings. And there are other options like GoFundMe.com which allow friends and family pay your way to your big day.
And who wants to start their marriage off on the wrong foot?
