Your wedding promises to be a wonderfully memorable day, but it can also come with a wonderfully hefty price tag. There are the major expenses like the venue, food and entertainment. But little things can add up, too. And that can lead you to ask questions: Do we really need party favors? How important are flowers, really? Wait, I have an Aunt Marge? As the day draws near and bills come due, one question will continue to linger: How are we going to pay for this wedding?
Here are important considerations about paying for a wedding, and the potential impact on your credit:
Start with a wedding budget
No matter how you pay, it’s important to create a wedding budget you’re both comfortable with. From there, you’ll have a foundation on which to manage expenses and expectations as best you can.
Of course, cash is the best way to pay for a wedding. Ideally, you and your partner should create a rough estimate of expenses for the ceremony and celebration, then divide that number by the number of months until the wedding. That becomes a monthly savings goal.
However, it may not be possible to cover all your wedding expenses with this strategy, especially as costs are high and expectations higher still. Personal loans or credit cards may be your next approach. Before taking out a loan or pulling out your wallet, however, take time to understand the pros and cons of these options.
Loans for weddings: Top considerations
You may see the term “wedding loan” in your search for funding, but in reality a wedding loan is a personal loan. Similar to a mortgage or auto loan, a personal loan is a type of installment loan. This means you’re agreeing to pay back a specific amount of money over a specific period of time.
Your monthly payments are based on the principal balance, or what you borrowed, and your interest rate. Interest rates for personal loans are typically lower than rates for credit cards. You can see a sample payment schedule and how each month breaks down for a potential loan with TransUnion’s Simple Loan Calculator.
Unlike mortgages or auto loans, personal loans are unsecured loans. You don’t have to put up any collateral as a part of the loan terms. With mortgages or auto loans, your house or car may act as collateral.
You and your fiancé may have already started co-managing your finances. If you’re considering a personal loan as a way to pay some wedding expenses, make sure the expected monthly payment fits within your new household budget. If you haven’t discussed how you will manage money as a couple, this is a good time to start.
Also take time to understand the potential impact on your credit. When you apply for a personal loan, your lender will pull your credit report, which will likely result in a hard inquiry. Hard inquiries can have a minor, temporary impact to your credit score.
Because credit reports and scores are individual, you will want to have a conversation about who is applying for credit, as they’ll be the person ultimately responsible for the debt. That is, unless you plan to cosign on the loan together. In that case, both of you take on the obligation of paying for that account, so the account history will be reflected on both of your credit reports.
Paying for a wedding with a credit card: Key factors
Credit cards, especially those with introductory offers of 0% interest, can be an enticing way to pay for wedding expenses. And they too can have credit implications. Like personal loans, new credit card applications will result in a hard inquiry. Even if you can defer costly interest with a promotional rate, carrying a high balance can affect your credit score. Your credit utilization rate, which looks at how much of your available credit limit you’re actively using, is one of the major credit score factors.
Credit card interest rates tend to be higher than personal loans. So if you’re not using a card with a promotional offer and it takes a while to pay off, it could make the wedding significantly more expensive. This is especially true if you’re only making the minimum payment.
Debt and weddings: Keep it in perspective
Your wedding is a special day and you’re bound to remember it forever—there’s no disputing that. But how long do you want to be paying it off? By saving as much as you can before the big day and keeping expenses in check, you can make the wedding expenses manageable. This powerful combination, paired with knowledge of the potential financial and credit impacts of taking out loans or credit cards, can help you be fully prepared.
How you feel on your wedding day is what you’ll remember most. Fabrics, colors, flowers—these are fun extras that can add to the mood, but memories of them will fade in favor of the joy of seeing your spouse and loved ones in high spirits.
As you start down this new path together with your partner, it’s important to be open and honest about the state of your finances overall, not just your wedding budget. You want to know where you both stand, not as a way to judge, but to help establish reasonable goals. This should include your credit as well as household finances. Take time to review your credit reports together. Get your free credit report, then refer to our interactive tool that shows how to read your credit report to learn more.