Do you yet know how to pay for your wedding? Do you even know how much it’s likely to cost?
According to WeddingWire, “The average wedding venue cost in the U.S. is $5,400, with most couples spending between $2,700 to $10,500.” This includes catering.
How to pay for your wedding
By far the best way to pay for your wedding is to get your parents to cover the costs. According to one Bride’s survey, 42% of couples managed that trick in 2018.
But suppose you’re in the 52 percent who have to pay for their own weddings? In an ideal world, you and your future spouse would cover the bills with your savings, keeping back enough to maintain your emergency fund at a healthy level.
But this is the real world. And unless you want to wait a couple decades to get married, or feed everyone beer and peanuts and have a singalong reception, you may have to borrow.
Personal loan for your wedding reception
If you do finance your wedding reception, a personal loan may well be your best bet. That doesn’t mean you have to forgo rewards on your plastic. After all, those could help enhance your honeymoon.
Using your plastic for convenience or to get rewards is fine. Using it to finance your wedding is almost always a terrible idea. That’s partly because interest rates on credit cards are almost always much higher than (sometimes double or more) those on personal loans.
No; you can still pay suppliers with your cards. Then use the money from your personal loan to zero your balances.
Credit cards and FICO scores
Financing your wedding reception with a credit card can harm your FICO score. Specifically, it affects your “credit utilization,” which makes up 30% of your score. Credit utilization equals the amount of revolving credit you’re using divided by your total credit limits. So if you have $10,000 in credit lines and use $9,000, your utilization is 90%.
People with good FICO scores typically don’t use more than 30% of their available credit.
If you wanted to put an average wedding on plastic (about $26,000), you’d need credit limits totaling nearly $90,000 to avoid dragging down your score.
Credit utilization rules also mean you need to put your personal loan for your wedding reception in place before you start engaging with suppliers. Many will require a substantial deposit or down payment just to hold your chosen day for you.
And, when it comes to your reception venue, that can be a lot of money — often half of your total anticipated spend. So, unless you’re a king or queen of plastic, you could hit credit utilization issues before you’ve hardly started.
And then you risk derailing your whole budget. Because, if your credit score has already taken a hit, you won’t get as good an interest rate when you apply for your personal loan.
Cards with 0% APR
The idea of applying for a card that offers a 0% APR for a fixed introductory period may be attractive. You might even apply for two, though you should stagger applications over a few months.
But don’t carry a balance longer than the introductory period. The interest rate that kicks in later could easily run over 20%. Some savvy borrowers take the zero percent card and pay it down as much as possible during the introductory period. Then they take a personal loan for the remaining balance and pay off the card.
That’s good for your utilization because you replace revolving debt with an installment loan. And you have a definite repayment schedule and (probably) a lower, fixed interest rate. But make the minimum payment on your credit card, and you could still be paying for your wedding on your tenth anniversary.
Wedding loans and budgeting
If your parents were paying for your wedding, they’d likely give you a fixed budget. And, if you were funding it yourself out of savings, you’d similarly cap your spending.
But there’s a real temptation when you’re borrowing to let yourself get carried away. “Oh, my payments will only be $x more a month if I go for the more expensive menu,” you might say. Or “If I just spread the payments over y months longer, I can afford an open bar.”
It’s really important to resist that temptation. Start with what you can comfortably afford and then stick with that budget. If necessary, invite fewer people or serve slightly less exotic food and wine. You really, truly don’t want to start married life with crippling, unmanageable debt.