Why you shouldn’t take out a loan for a wedding
Why you shouldn’t take out a loan for a wedding
Everyone wants their wedding day to be the most memorable day of their life, but throwing one comes with a hefty price tag. The more guests and the more grandiose it is, the more expensive. According to a survey conducted in 2018 by Easy Weddings, the average Australian wedding costs $31,368. That’s an expensive celebration for a one-day event.
There’s a ton of reasons why a wedding can cost you tens of thousands of dollars. Here are the average costs for some wedding expenses:
• Venue: $14,512
• Flowers and decorations: $2,949
• Catering: $9,100
• Cake: $508
• Photography: $2,952
• Videography: $2,692
• Invitations: $767
• Hair and makeup: $722
• Wedding dress: $2,552
• Bridesmaid dresses: $813
• Formal wear: $1,411
• Entertainment: $1,578
• Transport: $1,161
On top of the $31,368, there’s an additional expense for the honeymoon which, on average, Australian newlyweds spend $7,603 on. It’s not uncommon that many couples decide to take out a loan to fund their wedding. After all, everyone wants to achieve their dream wedding.
However, taking out a wedding loan is not always a good idea. Here are the top reasons why:
A wedding loan is another expense
Spending over $30,000 on a single night is generally a bad investment. That money can be put into better use such as putting it down as a deposit to buy a house, buy a family car, pay off other existing debts, start a business, or simply save the money for future use particularly for emergency purposes.
It does not make sense to have a wedding you can’t afford in the first place. It’s better to prepare for the marriage than to prepare for the wedding. There are plenty of other ways you can cover the wedding expenses that can suit you and your partner’s situation.
1. You can ask your family and friends
You can do crowdfunding and ask your close family and friends if they can help out financially. You can also ask them if they can gift the cake or flowers. They can also help in other terms such as offering a good property for your reception, or maybe one of them has the ability to take excellent photographs.
2. Move the wedding date so you can save up for it
The more time you have, the more time you can save up for the wedding. Given the time period, take this as an opportunity to earn more. For example, you could take up a weekend job, sell your second-hand items or rent out a free space at home. You can also cut some of your household expenses to save more money.
3. Reassess and cut cost on your wedding budget
You want to make your wedding day extra special, but are the payments that you will have to tackle later will be worth it? Rethink the expenses you will have. Is it really necessary to have an open bar, to hire the most sought-after photographer, to rent the expensive limousine as your transportation, or to invite 300 guests? Prioritise what’s important and necessary. You don’t have to impress your guests with everything luxurious.
Taking out a loan can add up
Taking out a personal loan to fund your wedding when you don’t have a good credit history, means your interest rate could be higher because lenders view you as a risky borrower. Additionally, the interest rate payable on your wedding loan can add thousands to your total wedding bill.
For instance, say you took out a personal loan amounting to $35,000 with an interest rate of 8.20% and a loan term of 5 years. Your monthly payment would be $713, and your loan would accrue $7,782 in interest over the life of the loan. That’s a huge addition to your wedding expense. Think about the other things you could buy with that money by choosing to have a simpler wedding celebration.
Also, don’t forget about the application fees and other charges involved when applying for a loan.
It can affect your credit score
Taking out a loan for a wedding will have an impact on your credit score. Credit scores are important because lenders use them to evaluate your trustworthiness as a borrower.
They use credit scores to evaluate your ability to pay the loans on time, based on the type of credit you have and for how long, the value of your debts, and a number of credit enquiries you made in the past. The higher the credit score, the better, and having a good credit score means there’s a possibility you will get approved for a loan with a lower interest rate.
You may go over budget with wedding expenses
You and your partner may have set up a budget already. Both of you try hard to stick with it as much as possible. But having a grand wedding you hoped for may force you to go over budget. You want everything to be the best on your wedding day.
You want to have the best wedding dress, shoes, and the most opulent venue. All of this luxuriousness may lead to more spending. Learn how to compromise and be strategic with the expenses. Remember, a special wedding doesn’t need to be expensive. You can make good memories even without taking a loan to fund an expensive wedding.
