You’re getting engaged! Congratulations! You can feel the excitement as you think about your future together. Once the initial excitement abates however, there are all those practical things to consider. At this time, finances are usually the overriding concern for most couples.
The first major purchase of your life together is the engagement rings. This is no small expense. Engagement rings are expensive. If you can’t afford to buy the ring you want to with your savings, there are a few financing options you can consider. One of the more popular among these is taking a personal loan for an engagement ring.
Using A Personal Loan For An Engagement Ring: How It Works
A person loan is a type of installment loan that’s offered by banks and other private lenders. Every lender sets their own eligibility criteria for approval. If you meet their minimum requirements and qualify, you’ll receive the funds within a couple of days after submitting your application. You can use the funds from a personal loan for any purpose, whether it is for home or vehicle repairs, a dream vacation, or an engagement ring.
Interest starts accruing on the loan amount from the day the funds are disbursed. You have to pay back the amount you’ve borrowed plus interest over a set number of months or years.
Taking a personal loan for an engagement ring has some compelling benefits but it does have a few downsides too. Understanding the pros and cons can help you decide whether you should use a personal loan for an engagement ring or explore other options.
Benefits Of Taking A Personal Loan For An Engagement Ring
- Personal loans are a type of unsecured loan. A secured loan is one that doesn’t require you to put up any collateral to borrow money. The lender will approve your loan application based on your financial credentials. This is great news as it means you don’t have to set aside cash in the form of savings or investment account to get the funds you need.
- Personal loans have relatively low interest rates on average. If you don’t have the cash to buy the engagement ring outright, the other alternative would be to buy the engagement ring on credit using your credit card. But if you don’t have that much in savings, chances are you won’t have the money to clear your outstanding credit card bill by the due date. Credit cards have very high interest rates and you could find yourself in credit card debt quickly. Taking a personal loan is a less risky option.
- Personal loan processing times are short so you will get the money quickly. Once your application is approved, you can expect to receive the funds anytime between one day and a week. This can be a relief to know if your engagement date is just round the corner.
- You’ll have sufficient time to pay if off. Average repayment terms on personal loans range between 2 and 7 years. Most lenders will allow you to choose your term based on how much you can afford as monthly payments. This gives you a lot of flexibility in terms of setting your monthly payments and your loan term.
Drawbacks Of Taking A Personal Loan For An Engagement Ring
- You may not get approved if your credit is poor. Lenders make lending decisions based on your credit history. Good credit history indicates that you’re a responsible borrower and more likely to pay the money back on time. This will get you approved for a loan very easily.
- You may not qualify for a low rate. All borrowers don’t pay the same interest rate on personal loans. Lenders calculate your personalized rate based on your credit score and other financials. With a low credit score, you may meet the minimum requirements for approval but not for securing a lower rate. The lower your score, the higher the interest rate you’ll pay.
- Unsecured loans have higher interest rates as compared to secured loans. The lack of collateral with an unsecured loan means the lender has nothing to fall back on in case you default on the loan. The higher interest rate is imposed to offset the higher risk.
- Many lenders charge origination fees when for processing the loan. This can add to the total loan amount and eat into your savings. In this case you can avoid the origination fees by being very careful about choosing a lender who doesn’t impose any additional fees.
So, Should You Use A Personal Loan For An Engagement Ring?
There’s no doubt that taking a personal loan for an engagement ring is a smart financing choice if you don’t have the cash to buy it outright. There are a couple of downsides to taking a personal loan to buy an engagement ring but the benefits far outweigh the downsides.
The easy approval and quick processing times means you will get the cash you need easily and quickly. Besides, the relatively low interest rates and flexible repayment options help to rack up those savings, which is always good. One thing to watch out for are those origination fees. Paying a high fee will increase the cost of the loan and reduce your savings.
How To Apply For A Personal Loan For An Engagement Ring
Applying for a personal loan is straightforward. Start by researching lenders and comparing their minimum requirements, interest rate, and terms and conditions. Keep in mind, that the lenders’ published rates is not necessarily the interest rate you’ll pay. Your interest rate will depend on your credit score, income, credit utilization ratio, and a few other factors. The lender will quote you a rate after doing a hard credit enquiry and checking your credit report.
There are sites such as RaptorFi.com where you can calculate your personalized interest rate with several reputed lenders without triggering a hard credit pull. This is a far better option as it won’t hurt your credit score.
When you’ve identified a lender who is a good fit for you, submit your application along with the necessary documentation. Once you’re approved, you should receive the funds you need within a week. You can put that time to good use looking around for a suitable engagement ring.