Weddings can often be a costly affair. Hence, many couples tend to take out wedding loans to be able to finance their wedding celebrations. It may be noted that ‘wedding loans’ per se may not be a specific financial product that is offered by banks or other lenders. Wedding loans are usually personal loans taken out by couples who will then use it for the purpose of carrying out their wedding ceremonies.
Personal loans are unsecured loans and couples do not have to put up any collateral to avail it. It is usually disbursed by banks and other financial institutions on the basis of the creditworthiness of the borrowers. Couples who take out wedding loans/personal loans will need to repay the loan (principle + interest + fees) every month for a pre-decided set term.
Personal loans/wedding loans may be offered along with variable or fixed interest rates. Variables interest rates change as per the changes in the market rate. Hence, couples will not know beforehand the exact amount that needs to be repaid every month. Fixed interest rates are often higher as compared to variable rate of interest when you are first seeking a wedding loan. However, fixed rates tend to not vary and remain stable through the course of the term of the wedding loan/personal loan. Later, when there is a hike in variable interest rate due to increase in market rate, the fixed interest rate that you have on your loan may be lower than that new variable rate of interest. Additionally, the monthly repayment amount for the loan stays predicable for borrowers.
Borrowers with positive “debt to income” ratio and good credit history will often be offered wedding loans with interest rate that is lower than the APR of credit cards. It may however be noted that the loan term, interest rates, application criteria, and amount of loan available for disbursal to a borrower widely vary from one lender to another.
Why take out a wedding loan?
Weddings are a joyous occasion, but they can be really expensive. Hence, taking out a wedding loan can help couples avoid potentially bad financial scenarios such as using credit cards with very high rate of interest or depleting your savings or emergency funds to cover the costs of the wedding. Wedding loans can help couples in spreading out the overall cost of the wedding over a set term without being charged loan origination fees or interest charges.
One of the key things that couples need to remember is the fact that if a big wedding ceremony/celebration cannot be afforded by them in the first place, then there may be the risk of them not being able to afford to repay the wedding loan as well. Also, opting for a personal loan to finance the wedding may have a negative effect on the amount of money that can be borrowed for a home mortgage. Relationships are difficult and it would be a bad decision to place a financial strain like an ongoing personal loan debt repayment from the very moment that a couple starts their journey into a married life.
It is advisable for couples to take stock of their finances and verify whether they can afford to take out a wedding loan before applying for one. You go get the wedding day of your dreams!