Something borrowed – personal loans for weddings

Something borrowed – personal loans for weddings

With most marriage celebrations costing in the tens of thousands of dollars, could a wedding loan be a competitive option for hosting the wedding of your dreams?

Australia’s warmer months are fast approaching, which means we’re also coming up to wedding season. You could pay for a wedding using your hard-earned savings, but once the confetti has settled, you might start wedded life without much money to fall back on if times get tough.

Historically, “something borrowed” implied a bride would symbolically “borrow” the happiness of another bride with a long and successful marriage. However, if you’re looking to secure the wedding of your dreams, without spending your life savings, your something borrowed could be the money you need to afford it.

When are the most and least popular times to get married?

According to the Australian Bureau of Statistics (ABS), the most popular month for Australian weddings is the last month of Spring, and the least popular is the first month of Winter.

In 2017, 11.1 per cent of weddings took place in November, which was almost twice as many as in June, which only had 5.3 per cent.

The ABS also found that the number of weekends in a month influences its number of weddings.

Pros of wedding loans

Quicker than saving

According to MoneySmart, the average Australian wedding costs more the $36,000 – and that’s before the honeymoon!

To put this in perspective, if every week you put $400 in a savings account with a 2 per cent interest rate, it could take around a year and nine months to save up the money you’d need.

With a personal loan, it’s possible to borrow all the money you need to pay for your wedding at once, and to receive this money as a lump sum soon after your successful loan application has been approved.

Simplify your wedding budget

You could pay for your wedding using a combination of:

  • savings from your bank accounts;
  • credit card balances, and;
  • money borrowed from friends and relatives.

However, keeping track of how much money is owed to whom, and for what, can make budgeting a nightmare.

Using a wedding loan to put all of your money in one place could help make managing things much simpler, sparing you a few headaches.

You can slowly but surely pay off your debt

Putting off paying for your wedding can seem convenient in the short term, but lead to problems further down the line. For example, leaving credit card balances outstanding can lead to big interest charges over time, and owing money to family and friends can put pressure on your relationships. 

The benefit of  getting a personal loan means you agree to a regular repayment schedule. This ensures you’ll make steady progress towards paying for your wedding and clearing your debt.

Cons of wedding loans

Debt pressure on a new relationship

While a wedding loan is meant to help deliver marital bliss, it could lead to the opposite effect. Having a big debt hanging over your heads can put a lot of pressure on young newlyweds, adding stress to your relationship.

Having an outstanding wedding debt in your credit history could also affect your credit score, making it more difficult to borrow money in the future. If you applied for a joint personal loan, both spouses could have their credit scores affected.

Wedding loans may cost more than other personal loans

It’s an open secret that many venues, caterers and other party services may raise their prices when the W-word gets mentioned. Personal loans for weddings may also cost more than some other personal loans, but for different reasons than you may expect.

Lenders often charge lower fees and lower interest rates for secured personal loans. These loans are seen as less risky, as they’re guaranteed by the value of an asset – often the product being purchased, such as the vehicle you buy with a car loan. If a borrower falls behind on their repayments and defaults on the loan, the lender can make their money back by repossessing and selling the security.

Unfortunately, a great party and a lasting relationship don’t provide the kind of financial value that can be used to secure a loan. This means that many wedding loans are unsecured loans, meaning they are seen as riskier, and have higher interest rates and fees. 

It may be possible to get a more affordable deal by securing your wedding loan with a deposit, the value of your car, or equity in your home, but you may risk losing this security if you run into trouble paying back the loan.

Your loan amount is fixed, but your wedding budget isn’t

You may choose to minimise your wedding debt and only borrow as much money as you need to cover your wedding’s expected costs. However, according to MoneySmart, around one in three Australians blow their wedding budget, meaning you may need to find some other way to pay for extra expenses.

If you borrow too little with your wedding loan, not every lender will let you “top up” your loan by borrowing more money. Applying for credit elsewhere could also be tricky when you already have a loan currently outstanding.

When applying for your wedding loan, you could try to borrow more than you think you’ll need, to compensate for future budget blowouts.

However, you need to remember that even if you don’t end up needing the extra money, you’ll still need to pay it back, plus interest.

Line of Credit personal loans

Another option to consider is to pay for your wedding with a line of credit – a sort of hybrid of a personal loan and a credit card.

When you successfully apply for a line of credit, you’ll be approved to borrow up to a maximum credit limit. Unlike a typical personal loan, you won’t receive this money as a lump sum up front – instead, you can draw down smaller sums as they’re needed, up to the maximum limit.

You’ll only pay interest on the money you’ve borrowed, which could be helpful for managing your wedding’s individual expenses if you’re organising your event in advance.

Compare your options

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Choosing a wedding venue, florist, or caterer typically means comparing different quotes and deciding which one offers the best combination of affordability and value for you.

The same goes for choosing a wedding loan – use a comparison website like RateCity to look at the costs and benefits of different wedding loans before making a decision that suits your finances.

You can use a personal loan calculator to estimate the cost of a loan before applying, to decide for yourself whether the extra costs will be worth it.

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Learn more about personal loans

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. They have higher interest rates than regular personal loans and are also harder to access.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to pay extra onto your personal loan or medium amount loan could bring you benefits, such as reducing the total interest you’re charged on your loan, or clearing your debt ahead of schedule.

Check your loan’s terms and conditions before putting extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan – however, the process is easier and faster than taking out a mortgage.

Loan sizes usually range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

Can you refinance a $5000 personal loan?

Many personal loans, much like home loans, can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Can I get a $2000 loan on Centrelink?

If more than half of your income comes from Centrelink benefits, it may be more difficult to have a $2000 loan application approved. Many lenders will check if you can afford a loan’s repayments on the income from your job before they’ll approve an application, and many won’t count Centrelink payments when assessing your income for this purpose.

Some lenders will offer $2000 loans to borrowers on Centrelink – consider contacting potential lenders to check before applying.

How long do personal loans take?

Depending on the lender, some personal loan applications can be approved in as little as one hour, or you may need to wait until the next business day. If approved, you may receive your money on the same day, the next business day, or within the week.

Can I get a bad credit personal loan with a guarantor?

Selected lenders will consider personal loan application from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the costs.

How do I find out my credit rating/score?

Credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service will give you a free credit report once a year. You can also get a free report if you’ve been refused credit in the past 90 days.

Credit reporting bodies have up to 10 days to provide reports. If you want to access your report quickly, you’ll probably have to pay.

How long will I have bad credit?

Most negative events that appear on a personal’s credit file will stay in their credit history for up to seven years.

You may be able to improve your credit score by correcting errors in your credit report, clearing outstanding debts, and maintaining good financial habits over time.

How can I improve my credit rating/score?

Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising credit applications, clearing up defaults and paying bills on time.

Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.

If you want to fix an error, the first thing you should do is speak with the credit reporting body, which make take of the problem or contact credit providers on your behalf.

The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be the Australian Financial Complaints Authority (AFCA).

AFCA provides consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.

How do I know if I've got a bad credit history?

You can find out what your credit history is like by accessing what’s known as your credit rating or credit score.

What are the pros and cons of debt consolidation?

In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay a (different) $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 15 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

Can I get a fast loan with bad credit?

Some lenders offer fast loans to borrowers with bad credit. Providers of small payday loans of up to $2000 or medium amount loans of up to $5000 may have no credit checks, though these lenders will usually want to confirm you can afford their loans on your income.

Are there emergency loans with no credit checks?

While many personal loans require a credit check as part of the application process, some personal loans and payday loans have no credit checks, which may appeal to some bad credit borrowers.

Keep in mind that even if a loan is available with no credit check, the lender will likely want to confirm that you can afford the repayments on your current income.