How To Finance Your Dream Wedding Ring

There are several ways to finance an engagement ring, each with its own pros and cons. You could take out a personal loan, use a credit card, opt for a buy now, pay later scheme, or go for in-house financing from a jeweller.

Personal loans can give you a lower interest rate and more time to pay than a credit card, but they are generally more expensive than using 0% financing or paying in cash.

Credit cards can be a strategic option for responsible borrowers with strong credit, but interest can be steep.

Buy now, pay later (BNPL) services like Affirm, Klarna, and Afterpay can break your purchase into smaller instalments, often for zero interest.

Jewellery store financing is best for convenience and those without strong credit. It often requires a hard credit check and usually takes the form of an instalment loan.

Using a credit card

If your credit does not qualify for a promotional rate offer, be aware that credit card interest can be steep. When using a credit card without a no-interest promotion, calculate whether you have the budget to pay off the ring within the next billing cycle.

Some of the credit cards that offer 0% introductory APRs include:

• Chase Freedom Unlimited®
• Blue Cash Everyday® Card from American Express
• Capital One Quicksilver Cash Rewards Credit Card
• Capital One SavorOne Cash Rewards Credit Card
• Citi Simplicity® Card

When buying the ring, try to find a 0% introductory APR. That means that instead of paying cash all at once, you can charge the ring to the card and pay it off over a bit more than a year without having to pay any interest. As a bonus, you may even get a sign-up bonus for opening the card, and cash back on the ring itself.

Make sure you pay off the whole amount before the introductory APR ends and the normal one becomes effective. A great feature is that you have extra flexibility if you go this route. If you come into some extra cash, or decide that you want to just finish the payments from savings, you can pay off the balance in full at any time.

However, note the credit limit on the card; if the ring purchase exceeds 30% of your overall available credit, your credit score may take a hit.

Taking out a personal loan

Borrowers with very good credit scores of at least 740 will likely qualify for the lowest rates, but some lenders accept scores as low as 560. If your credit score is significantly lower, your personal loan may come with a higher rate. Many personal loan lenders let you check your rates online through prequalification, allowing you to get a sense of your offers with no obligation or impact on your credit score. If you're interested in an offer, use a personal loan calculator to estimate your long-term costs of borrowing.

Before borrowing a personal loan, make sure you can afford the monthly payments. On-time payments can help your credit, but missing payments can cause considerable damage and make it difficult to qualify for other types of financing in the future.

Personal loans are best for buyers who have good credit and want to shop around for a competitive interest rate. They are also a good option if you qualify for a low rate and need two or more years to pay off the ring.

Using your personal savings

Decide on a Budget: Determine how much you want to spend on the ring. The average cost of an engagement ring was around $5,500 in 2023, according to The Knot. However, you can find rings ranging from a few hundred to several thousand dollars. Set a budget that aligns with your financial situation and priorities.

Start Saving Early: If you know you want to propose, start saving as early as possible. Decide on a timeline for your proposal and calculate how much you need to save each month to reach your budget. Consider setting up automatic monthly transfers to a dedicated savings account. This will help you stay disciplined and ensure you have the funds ready when you need them.

Compare Ring Options: When you're ready to purchase the ring, shop around and compare options from different jewellers. You may find that certain jewellers offer better prices for similar rings. Additionally, consider lab-grown diamonds, which can cost 50-70% less than natural diamonds without compromising on quality or appearance.

Negotiate and Pay in Cash: When you've found the perfect ring, don't be afraid to negotiate with the jeweller. Paying in cash can sometimes lead to discounts, as the jeweller saves on credit card processing fees. Be open about your budget and see if they can work with you to find a ring that fits your needs and preferences.

Remember Other Costs: Keep in mind that there are additional costs associated with an engagement ring purchase, such as sales tax and insurance. These can add up, so factor them into your overall budget to avoid surprises.

By using your personal savings to finance a wedding ring, you can avoid debt and maintain financial flexibility. It may require discipline and time to save, but it can be a rewarding and stress-free approach to purchasing the perfect ring.

Jewellery store financing

Many jewellery stores offer in-house financing to help customers pay for their engagement rings. These take the form of instalment loans, where you make incremental monthly payments towards the loan balance, plus interest.

Jewellery financing offers more flexible credit requirements compared to borrowing a loan from a traditional bank. Terms will vary by retailer, as will financing requirements, like a minimum purchase amount.

However, there are some disadvantages to in-house financing. You may experience strong sales tactics and pressure. Sometimes, offers may be presented to you that aren't actually the best for your financial situation. Most retailers will also need to run a hard credit check, which can temporarily decrease your credit score.

BNPL services

When checking out online or in-store, you can apply for BNPL, which will usually involve a short application and a soft credit check that won't affect your credit score. If approved, you may be required to make the first payment upfront, with the remaining balance split into equal installments typically due biweekly or monthly.

While BNPL services can be convenient, it's important to ensure that you can make the payments on time. Late fees and interest charges may apply if you deviate from the payment schedule, and the installments may be higher than minimum payments on other financing options. Additionally, BNPL companies typically don't report on-time payments to credit bureaus, so using BNPL may not help build your credit score.

Overall, BNPL services can be a good option for financing a wedding ring if you can qualify for a low rate, make the payments on time, and pay off the ring within a short repayment term.

Frequently asked questions