How To Finance Your Dream Wedding

Planning a wedding can be a costly affair, with the average cost of a wedding in the US ranging from $28,000 to $35,000. With such a hefty price tag, it's no surprise that many couples turn to financing options to help cover the expenses. While some opt for traditional savings and cash, others explore alternatives such as wedding loans, credit cards, or even borrowing from loved ones. In this exploration of wedding finances, we will delve into the pros and cons of different payment methods and offer strategies for making your dream wedding a reality without breaking the bank.

Pros and cons of wedding loans

Pros of Wedding Loans

Convenience

You'll likely need to pay upfront deposits to book your venue and vendors, and these costs can add up quickly. A wedding loan can give you the cash you need to cover these deposits.

Easy to Get

You can apply for a wedding loan online in minutes once you have your financial documents in order. Your bank or loan provider will review your application, and if approved, will deposit the loan amount directly into your account.

Quick Access to Money

Most lenders can review your application, approve it and deposit the loan amount within a few days. Some lenders even promise funding in 24 hours.

Better Interest Rates than Credit Cards

If you have a good credit score and a strong credit history, you may be able to get a wedding loan with a lower interest rate than your credit cards.

No Prepayment Charges

Some loans will allow you to pay off your loan early without penalty fees, which can decrease interest costs. If you plan on paying off your loan with cash gifts from wedding guests or with help from family members, you may not have to pay any interest at all.

Improved Credit Score

Couples looking to build or improve their credit score can do so by successfully paying off their wedding loan. A higher credit score will make it easier to get loans in the future and keep interest rates low.

Cons of Wedding Loans

Interest Payments

By taking out a loan for your wedding, you'll be paying interest on the loan for years. For example, if you take out a five-year loan for $15,000 at a 10% interest rate, you'll end up paying over $4,000 in interest.

Starting Marriage in Debt

Money troubles are a common cause of relationship stress. Starting your marriage with a monthly loan payment for the next three to five years could add tension and delay other life plans, like buying a house.

Impact on Future Loans

Existing loans can make it difficult to qualify for new ones. If you're planning to buy a new car or home after your wedding, a bank may not offer you the loan amount you want or may deny your loan application altogether.

Encouraging Unnecessary Spending

Having the money from a wedding loan in your bank account could make you feel more comfortable with upgrading various aspects of your wedding, causing you to spend more than you originally intended.

How to save for a wedding

Saving for a wedding can be a daunting task, but with some careful planning and discipline, it is certainly achievable. Here are some detailed and direct tips to help you save for your big day:

Start Saving Early:

The first step is to set a budget and start saving as early as possible. The earlier you begin, the more time you'll have to grow your savings. Consider opening a high-yield savings account or a certificate of deposit (CD) account to earn interest on your savings. These accounts typically offer higher APY rates than traditional savings accounts, helping your money grow faster.

Create a Realistic Budget:

Work with your partner to create a realistic budget that fits your financial situation. Define your priorities and allocate funds accordingly. Be sure to research the average costs for venues, catering, flowers, attire, and other expenses in your area to get an idea of how much you'll need to save.

Cut Back on Expenses:

Examine your monthly expenses and identify areas where you can cut back. This may include reducing dinners out, cancelling unnecessary subscriptions, or negotiating lower rates on your bills. Every dollar saved brings you closer to your wedding savings goal.

Boost Your Income:

Consider taking on part-time work or picking up freelance projects to boost your income. This extra money can go directly into your wedding savings fund. You could also ask for a raise at your current job if you feel you deserve one.

Use Credit Cards Wisely:

Credit cards can be a helpful tool for saving for a wedding, but they should be used wisely. Take advantage of credit cards with rewards or sign-up bonuses, especially those that align with your wedding expenses (e.g., dining, travel, etc.). Just be sure to pay off your balances in full and on time to avoid accruing debt.

Negotiate and Shop Around:

Don't be afraid to negotiate with vendors and venues. You may be able to get discounts or find more affordable alternatives by shopping around. Remember, most things in life are negotiable, and vendors would often prefer some business over none.

Consider Off-Season Dates:

Getting married during the off-season (usually January, February, or March) or on a weekday can result in significant savings. Wedding vendors are often willing to offer discounts during these less popular times.

Rent or Borrow:

Instead of buying everything new, consider renting items like tables, chairs, attire, and jewellery. You can also borrow items from friends or family, especially if they recently had a wedding. This can help reduce costs and give a sentimental touch to your special day.

Extend Your Engagement:

If you're feeling the financial strain, consider extending your engagement. This will give you more time to save and plan without rushing into decisions. A longer engagement can also help you secure your desired venue and vendors, as they may book up quickly.

Seek Help:

If you're unsure where to start or need guidance, consider speaking to a financial planner. They can provide personalized advice and help you create a savings plan that fits your goals. Remember, saving for a wedding is a journey, and it's important to stay focused and disciplined.

Credit cards for wedding financing

While it is possible to finance a wedding using a credit card, it is not always the best option. Credit cards can be a strategic way to pay for your wedding, especially if you can take advantage of the rewards and benefits that some cards offer. However, it is important to be mindful of your spending and only use a credit card if it fits within your broader financial situation. Here are some things to consider if you are thinking of using a credit card to finance your wedding:

• Your financial situation: Using a credit card to pay for your wedding should only be done if it aligns with your overall financial situation. Credit cards can be a useful tool to pay for things in a strategic way, but it is important to have a plan to pay back any debt incurred.
• Rewards structures: Different credit cards offer different types of rewards structures, such as sign-on bonuses, flat-rate cash back, or rotating categories. Understanding the rewards structure of a credit card can help you maximize the benefits and potentially earn lucrative rewards.
• Interest-free credit cards: Using a credit card with a 0% APR promotion can give you more time to make payments without accruing interest. However, it is important to note that you may not qualify for a high enough credit limit, and once the promotional period ends, you will begin to owe interest on any remaining balance.
• Number of credit cards: The number of credit cards you use for wedding purchases depends on how many cards you feel comfortable managing. It is important to only use as many cards as you can keep track of to avoid missing payment due dates.
• Regular spending habits: It is generally recommended to match a credit card to your regular spending habits instead of changing your patterns to fit a specific credit card. This will help you maximize the benefits of the card without altering your lifestyle.
• Timing: Choosing the right credit card should be one of the first things you do when planning your wedding. Applying for a new credit card a few weeks before making any deposits will ensure that you have the card available when you need it.
• Understanding the risks: While credit cards can be a convenient way to pay for your wedding, it is important to understand the risks involved. Using a credit card to finance your wedding can lead to debt, and you may end up paying more in interest and fees than you anticipated.
• Capital One SavorOne Rewards Credit Card: This card offers a one-time $200 cash bonus after you spend $500 in the first three months, 3% cash back on dining and entertainment, 5% back at hotels booked through Capital One Travel, and 1% back on all other purchases.
• American Express Gold Card: This card offers a generous sign-on bonus, a $120 annual dining credit, and a $100 annual hotel credit. It also earns 4X points on dining and US supermarket purchases (up to $25,000 and $50,000 per year, respectively) and 3X points on flights booked directly with airlines or through Amex Travel.
• Chase Sapphire Preferred Card: This card offers a sign-up bonus of 60,000 points after spending $4,000 in the first three months, 5X points on travel booked through Chase, 3X points on dining and online grocery purchases, and 2X points on other travel purchases. It also comes with a $300 annual travel credit and a complimentary Priority Pass Select airport lounge membership.
• Bank of America Travel Rewards Credit Card: This card offers 1.5 points per dollar spent, 3 points per dollar spent on eligible travel booked through the Bank of America Travel Center, and a 0% intro APR for 15 billing cycles on purchases and balance transfers. It also has no foreign transaction fees, making it a good option for a honeymoon abroad.
• U.S. Bank Visa Platinum Card: This card offers a 0% intro APR for 18 billing cycles on purchases and balance transfers, giving you extra time to pay off wedding expenses without accruing interest.

Remember, it is important to do your research and compare different credit cards to find the one that best suits your needs and financial situation. Using a credit card for wedding financing can be beneficial, but it is crucial to have a plan to pay back any debt incurred and avoid starting your married life with unnecessary financial stress.

Borrowing from family and friends

Borrowing money from family and friends to finance a wedding ceremony can be a tricky situation. While it may seem like a simple transaction, it can potentially strain your relationship if payments are missed. Here are some things to consider and steps to take if you are thinking of borrowing money from family and friends:

What to Consider

Before borrowing money from family or friends, it is important to think about the following:

• Impact on your relationship: Being financially linked can affect even the best relationships. Make sure both parties are comfortable with the arrangement before agreeing to anything.
• Alternative options: Borrowing from family or friends may seem like the easiest and cheapest option, but it is not the only choice. Explore other options such as personal loans, credit cards, or saving up.
• Payment structure: Determine a payment structure that is affordable for the borrower and ensures that the lender gets their money back within a reasonable timeframe.
• Interest rates: It may feel unfair to charge interest to family or friends, but without it, the lender loses out. Consider including interest at a low rate that everyone is happy with.

Pros and Cons

There are both advantages and disadvantages to borrowing money from friends and family:

Pros:

• You will likely be able to borrow at a much lower interest rate or with no interest at all.
• There won't be any fees or late payment charges.
• There is no need for a credit check to get the loan.

Cons:

• If you struggle to make repayments, it could damage your relationship.
• The friend or family member may not want to say no, but lending you the money could impact their finances as well.
• You could potentially breach the terms of other borrowings, such as your mortgage, as any loan affects your affordability.

How to Borrow from Friends and Family

To avoid potential problems in the future, here are some steps to take when borrowing from friends and family:

• Work out your budget: Calculate exactly how much you want to borrow and what you can afford to pay back each month without getting into difficulties. Approach your loved one with concrete numbers and a monthly payment plan.
• Terms and repayment plan: Before any cash changes hands, map out the terms of the agreement and the repayment plan. Make it clear whether this is a loan that needs to be paid back or a gift. Detail if any interest has to be paid and what happens if payments are missed.
• Formal agreement: It is important to write up a formal agreement, even when lending money between friends or family. This gives the lender extra peace of mind and helps prevent disagreements that could harm the relationship. The agreement should include the size of the loan, the repayment schedule, and what happens if payments are missed.
• Tax implications: If you decide to apply interest to the loan, even at a low rate, there are tax implications for both the borrower and the lender. The lender must declare any interest received as taxable income, and the borrower may deduct loan interest from business taxable profit if it is a business loan. There are no tax implications if the loan is interest-free.

What to Do if Things Go Wrong

Sometimes, financial problems may arise, and you may not be able to afford to pay back the loan as agreed. In such cases:

• Be open and honest: Discuss the situation with your friend or family member. Explain your financial situation, including your income and expenses. You may even share a copy of your budget to help them understand.
• Gentle reminder: If the lender is having money difficulties, they may feel overwhelmed. A gentle reminder is often the best approach.
• Payment plan: Offer to set up a new payment plan that you can reasonably afford. You may need to amend the original loan agreement to reflect the new plan.
• Budgeting help: Look for ways to help the lender with their budget, such as switching utilities or phone providers to save money.

Remember to keep your cool and avoid using threatening language, telling others about the debt, or adding extra interest onto the debt.

Wedding costs

The average cost of a wedding varies depending on the source, ranging from $19,000 to $35,000. However, it is possible to have a wonderful wedding on any budget. The keys to success are saving, setting priorities, and sticking to your budget. That being said, weddings are notoriously expensive.

The biggest chunk of your wedding budget will likely go towards the venue, which can account for about 37% of your overall budget. Catering is another significant expense, taking up about 29% of the average wedding budget. Live entertainment, including a live band or DJ, can also add to the cost, with couples allocating around 12% of their budget towards performers.

Other expenses to consider include wedding attire (dress, suit, shoes, and accessories), photography, videography, flowers, decorations, transportation, and wedding favours. It is important to create a detailed wedding budget that takes into account your specific needs and priorities.

To save money, consider having a smaller guest list, choosing a suburban or off-peak venue, or opting for a weekday wedding. You can also replace professionals with talented friends or family members and make decorations yourself.

Additionally, be mindful of hidden costs and extras, such as overtime fees, service charges, and gratuities. It is recommended to have a buffer of about 10% in your budget to cover these unexpected expenses.

Remember, a reasonable wedding budget will differ for everyone, and you can tailor your wedding to fit your financial situation.

Frequently asked questions