From the moment you decide to have a wedding, you're faced with a marathon list of questions.
How many people should you invite? Do you need to hire a videographer? To buffet or not to buffet? And the most important question of all: How much is this going to cost?
Though the pandemic reduced the average price of a wedding in 2020 to $19,000, an annual survey by wedding website The Knot shows the industry is expected to rebound. This year’s newlyweds may see a final bill closer to $28,000, the average cost of a wedding in 2019, The Knot says.
And after a year of restraint, the temptation to go big could drive prices up even higher.
Pulling from your savings is the least expensive way to pay for your wedding, but for cash-strapped couples determined to say “I do,” there are financing options that are smarter than others. Key to this option: Look for low interest rates and affordable monthly payments you can make on time until the debt is paid in full.
Should you finance your wedding?
Most financial experts agree it’s best to avoid starting your marriage in debt.
This is especially true for couples facing other generational challenges, like buying their first homes at record prices or tackling sizable student loan debt, says Natalie Slagle, a Minnesota-based certified financial planner at Fyooz Financial Planning, which specializes in advising millennial couples and young families.
“To add unsecured debt with a high interest rate on top of that situation is going to be added stress to an already stressed-out financial generation,” she says.
Slagle recommends her clients take a different approach. Instead of planning the wedding of their dreams, then going in search of the money, they reverse their thinking.
“Our framework is making sure our couples are starting with what their resources are, rather than starting with what their wedding budget is,” she says. “We don’t want the wedding budget to be created, and then somehow we make the resources fit.”
Ways to pay for your wedding
If you can’t pay for a wedding with the savings you have on hand, and you have room in your budget to take on debt, there are a few options to consider.
0% APR credit card
A 0% APR credit card charges no interest on any purchase you make during the promotional period, usually lasting 15 to 18 months. As long as you pay off the card in that time frame, you’ll borrow the money for free. Once the introductory period runs out, interest will be charged at the ongoing APR, which can be as high as 25%.
You need good to excellent credit (a score of 690 FICO or higher) to qualify for a 0% APR credit card.
When to consider: A 0% APR card may be a good fit for couples who want to finance a small portion of their wedding. High credit limits will be harder to qualify for, and charging too much to a credit card can push your credit utilization over 30%, potentially lowering your credit score.
Rewards credit card
A similar option is to pay for some wedding expenses with a rewards credit card and then use the points or cash back to save money elsewhere. For couples looking to honeymoon, a travel rewards card may make the most sense, since the points or miles you earn can pay for flights and hotels.
When to consider: A rewards credit card is a good fit only if you’re sure you can make your payment each month. If you fall behind, you could carry a balance at a high interest rate, canceling out any money you saved with rewards.
For clients determined to finance their wedding, Slagle recommends a 401(k) loan. This loan lets you borrow money from yourself — in this case, your retirement savings — and comes with one of the lowest interest rates available, even if you have fair or bad credit. Also, any interest you pay goes into your retirement account.
But by borrowing from your 401(k), the money is no longer growing in a tax-advantaged account, jeopardizing your future nest egg. In today’s strong financial market, this could be a significant trade-off.
“You have to recognize what resources you are taking from and what that means for the longevity of your financial plan,” Slagle says.
When to consider: Consider a 401(k) loan only if you plan to stay at your current job. If you leave your place of employment, you may have to quickly repay the loan, and if you default, you could incur a 10% penalty, plus taxes.
A wedding loan is an unsecured personal loan you borrow from a bank, credit union or online lender to help pay for your wedding. Loan amounts range from $1,000 to $100,000.
The rate you receive on a wedding loan will depend on your credit profile but can be anywhere from 6% to 36%; the higher your credit score, the lower your rate will likely be.
It’s best to pre-qualify with multiple lenders to make sure you’re getting the most affordable loan possible. Pre-qualifying will show you potential rates, loan amounts and monthly payments and will not hurt your credit score.
When to consider: Since you’ll receive the funds in a lump sum, a wedding loan may be a good option for budget-conscious couples who want to cap their spending and can afford the monthly installments.