Bad Credit, No Problem: Buying A Wedding Ring

Buying an engagement ring is an important step in a couple's life, but it can be a costly one. The national average cost of an engagement ring is between $5,500 and $6,000, though some rings can cost up to $10,000. With that kind of price tag, it's no wonder that many people turn to financing options to help them afford the perfect ring. But what if you have bad credit? Are there still options available to you?

Personal loans

When taking out a personal loan, it's important to consider the interest rate, monthly payment amount, and repayment term. A short repayment term can put pressure on your budget, while a longer repayment term can significantly increase your overall costs if the interest rate is high. It's also important to be aware of any fees associated with the loan, such as origination fees or prepayment penalties.

To qualify for a personal loan, lenders will generally look at your credit score, income, and debt-to-income ratio. You can pre-qualify for a personal loan to see your potential loan terms without affecting your credit score. Using a personal loan calculator can also help you estimate the loan amount that works with your budget.

While personal loans can be a convenient way to finance an engagement ring, it's important to consider your financial situation and ensure that you can comfortably afford the monthly payments. It may be a better option to save up and pay for the ring in cash if possible, to avoid interest charges and the stress of keeping up with monthly payments.

Credit cards

Choose the Right Card

Look for credit cards with specific attributes that will help you avoid high-interest rates and earn rewards. Consider cards with:

• Low introductory APR: Opt for cards with a low annual percentage rate (APR), even if it's just for an introductory period. This will help you save money on a big purchase like an engagement ring. Cards like the Chase Freedom Unlimited® and the U.S. Bank Visa® Platinum Card offer low introductory APRs.
• Sign-up bonuses: Some cards offer sign-up or welcome bonuses that put money back in your pocket after you spend a certain amount within a stated time period. For example, the Chase Sapphire Preferred® credit card offers bonus points after you spend a certain amount within the first few months.
• Rewards for everyday spending: Choose a card that rewards you for everyday spending rather than specific categories like travel or groceries. The Chase Freedom Unlimited®, for instance, offers a percentage of cash back on all purchases, regardless of category.

Pros and Cons of Using a Credit Card

Using a credit card to purchase an engagement ring has its advantages and disadvantages.

Pros:

• Rewards: You can earn rewards points or cash back for certain purchases. A big-ticket item like an engagement ring can help you rack up hundreds or thousands of points.
• Liability coverage: Your credit card may provide additional insurance in case your ring is stolen or if there's an issue with the product, protecting you from financial loss.
• Introductory period: Cards with a low APR for an introductory period (usually 12 to 18 months) give you the flexibility to pay off the ring over time.

Cons:

• Good credit is required: To qualify for a credit card with desirable rewards and promotions, you'll typically need to have good credit and a consistent history of paying your bills on time.
• High credit utilization ratio: A high balance from your engagement ring purchase can increase your credit utilization ratio (the ratio of your current credit card balance to your total credit limit) and bring down your credit score.
• Potential debt: If you're not disciplined about paying off your balance, you risk falling into debt and dealing with increased interest rates.

Tips for Using a Credit Card

If you decide to use a credit card to finance your engagement ring, keep the following tips in mind:

• Choose a ring that fits your budget: Select a ring with a price tag that you can comfortably afford to pay off without causing financial hardship.
• Pay off the balance before the introductory period ends: If you're taking advantage of a low introductory APR, make sure to plan ahead and pay off the ring in full before the introductory period ends and a higher APR kicks in.
• Compare credit cards: Research and compare different credit cards to find the one that best suits your needs and offers the most favourable terms.
• Protect your investment: Add the ring to your renters or homeowners insurance policy before you propose to safeguard against loss or damage.

In-store financing

Store credit cards are often easier to secure with poor credit and may offer rewards when used in-store. However, many of these cards can only be used at a specific business. If you still have a balance when the promotional period ends, you will start accruing interest at the card's regular rate, which tends to be much higher than traditional credit cards.

Some jewellery stores offer in-store financing options, but these are often only accessible to those with good or great credit scores. However, some stores do offer financing options for those with bad credit. For example, popular jewellery stores like Zales and Kay Jewelers have credit cards available that you can use to purchase a ring outright and then pay off in instalments.

Applying for in-store financing

When applying for in-store financing, you will usually need to provide:

• A valid driver's license or state ID
• Proof of a direct deposit from your primary employer/benefit provider into a three-month-old checking account
• A record of a checking account in good standing
• Your most recent bank statement
• Proof of payment
• Your social security number
• A checking or savings account with direct deposit

Applications are typically approved within 24 hours, with no upfront costs.

Buy-now, pay-later loans

There are a few things to keep in mind, however. You may need to provide a down payment, and the amount of credit extended to you may be limited. Additionally, while the interest-free instalments are beneficial, late payments can be reported to the three main credit bureaus, which could hurt your credit score. It's important to carefully review the terms and conditions of the loan before committing.

Some popular providers of buy-now, pay-later loans include Affirm, Klarna, Afterpay, and ShopEZCredit. These companies often partner with jewellers to offer their services, and you can apply for the loan when checking out online or in-store. The repayment term and interest rate will vary based on the provider, so be sure to compare your options before deciding.

When considering a buy-now, pay-later loan, it's important to evaluate the fees, interest rate, monthly payment amount, and repayment term to ensure it aligns with your budget and financial goals. While these loans can be a convenient way to purchase a wedding ring with bad credit, it's crucial to understand the potential risks and ensure you can make the payments comfortably.

Pawn shops

No Credit Check Required

Layaway Programs

Many pawn shops offer layaway programs that allow you to put a ring on hold by making a deposit. You can then take your time to pay off the rest of the amount over a few months without incurring any interest charges. This can be a more affordable option than taking out a loan, especially if you have bad credit and would otherwise be subject to high-interest rates.

Large and Unique Selection

Customization Options

Some pawn shops have jewelers on-site who can customize rings to your specifications. This could include replacing a gemstone or adding an inscription. This level of customization may not be available at a typical jewelry store.

No Superstition Required

Some people are superstitious about buying a pre-owned wedding or engagement ring, believing it might bring bad luck. However, this is just a myth. Buying a pre-owned ring is no different from purchasing a pre-owned car or house, and it can be a more financially responsible decision.

Save Money

Jewelry stores have huge markups, often adding a 200% to 400% markup on wholesale prices. By buying from a pawn shop, you can save up to 50% on a wedding ring compared to buying new from a jewelry store.

In conclusion, pawn shops can be a clever option for buying a wedding ring, especially if you have bad credit. You can find a wide selection of unique and customizable rings at a fraction of the cost of a new ring, all without worrying about your credit score.

Frequently asked questions