Wedding loans have become more common as couples find they must pay for their own wedding as opposed to previous years when the bride’s, and possibly groom’s, family paid for most of the wedding. However, with the economic downturn and the uncertainty of the future economy are wedding loans really a good idea? Not so much.
Several years ago when the economy was booming and the job market was flush, couples often felt they would be able to pay off their wedding loans with bonuses or future promotions. Unfortunately not only have many of the bonuses become a distant memory but many companies are eliminating positions altogether. Most wedding loans range from about ten thousand dollars up to six figures. While an extravagant wedding would certainly be a great deal of fun and provide years of happy memories, it will only last a few hours. Spending tens of thousands of dollars on a few hours would seem like a bad idea for just about any other occasion, especially if the money used to provide those few hours had to be paid back with interest. A wedding really shouldn’t be considered as having special financial rules.
Instead, couples who cannot afford to pay outright for the wedding of their dreams should perhaps look at ways to make those dreams more affordable. Instead of a designer dress, perhaps a handmade dress from a local seamstress. These can often be had for a fraction of the cost and be created to the exact specifications of the bride. A smaller guest list, a more limited reception, and a more modest honeymoon can all reduce the overall cost.
Let’s get back to the financial point of view for a bit. The average cost of wedding is about $20,000. This does not include a honeymoon which could easily add another $10,000. If a couple borrows money on a personal line of credit from their bank or put the entire bill on their credit card they could pay anywhere from 5% to 11% interest. For simplicity’s sake we’ll say the interest rate is 7% and the loan is for five years. This would make payments 396.02 each month and would result in a total repayment of about $24,000.00 if all payments are made on time.
Ultimately, only the individual couples know how much additional money they can afford to lose out of their monthly budgets. Most, however, could find better use for an extra $400 a month, or more, than paying for a few hours.