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How to Finance an Engagement Ring

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Lyle Daly is a personal finance writer who specializes in credit cards, travel rewards programs, and banking. His work with Motley Fool Money and The Motley Fool has appeared syndicated in USA Today and Yahoo! Finance. He was born in California but currently lives as a digital nomad with a home base in Colombia.

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If you're getting ready to pop the question, a personal loan could help you stretch your budget. In this guide, we'll talk about how to finance an engagement ring, whether it's a good idea, and go over alternative options.

How much an engagement ring costs

Forget the three-months' salary rule, because most people aren't spending that much. The average cost of an engagement ring is $5,500, according to The Knot.

It's worth mentioning that the average engagement ring cost is higher because of big spenders. The Knot found that nearly half of its respondents spent between $1,000 and $4,000. There are beautiful engagement rings for every budget, so don't feel pressured to spend more than you can afford.

Getting an engagement ring loan

With a personal loan, you can get an engagement ring you love and pay it off over time. Personal loans are flexible, as you can use them to cover practically any type of expense, including engagement rings. You also have control over the length of your loan and the monthly payment amount, allowing you to set up a loan that fits your budget.

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680
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$2,500 - $40,000
660
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$1,000 - $50,000
300

How a personal loan for an engagement ring works

A personal loan is money you borrow from a lender and repay over time. You get the money you need to buy an engagement ring. In return, you repay the lender with interest.

Since personal loans can be used for all kinds of expenses, there aren't any specific loan categories. If you want an engagement ring loan, you can get a personal loan and use it to buy an engagement ring.

Pros and cons of personal loans

Before you apply for a personal loan, you should know about the pros and cons. Here are the benefits of personal loans:

  • You get a lump sum upfront to use how you want.
  • Personal loans tend to charge much lower interest rates than credit cards.
  • They have a fixed payment amount and term.
  • You don't need to wait long to receive your money, and some lenders even offer same-day funding.

Now, let's look at the drawbacks:

  • If you have a low credit score, you may only qualify for loans with high interest rates.
  • Some lenders charge extra fees, such as origination fees or a prepayment penalty.
  • Unlike credit cards, personal loans don't have flexible repayment terms.
  • You're taking on debt and adding payments to your monthly bills.

Personal loans can be a fast, convenient financing option. But watch out for extra fees, and make sure not to overborrow and end up deep in debt.

Getting a low-interest engagement ring loan

Your credit score is the most important factor in getting a low interest rate on a loan. Lenders run a credit check on you to get an idea of how much risk you represent. Applicants with high credit scores are considered to be lower-risk borrowers, so they are rewarded with the best personal loan rates.

It's a little frustrating if you're working on your credit, or you're building it for the first time. Getting approved for a loan will be harder, and you might want to look at personal loans for bad credit.

On the bright side, anyone can get a high credit score, so anyone can also qualify for a low-interest engagement ring loan. Here are a few steps you can take to improve your credit before you start looking at loan options.

Check your credit score with a free tool online

There are lots of free credit score tools online. Experian CreditWorks is what I use, but if you have a credit card, your card issuer may offer its own tool for cardholders. These tools also let you know what's affecting your credit score and how you can improve it.

Always pay your bills on time

It's good to do this with all your bills, but especially credit cards and loans. These get reported on your credit file, which means they impact your credit score. If you pay them on time, you'll build a strong payment history, which is the biggest credit-scoring criteria.

Pay down credit card debt

The amount of credit card debt you have also heavily influences your credit score. If you're carrying balances on your credit cards, work on paying them down to boost your credit.

How to apply for an engagement ring loan

When you're ready to get your engagement ring loan, follow these steps.

1. Set your ring budget

It's great if you already have the ring picked out, but if not, decide on the amount you'd like to spend. Subtract the money you already have saved, and you'll know how much you need to borrow.

Let's say you want to buy a $5,000 ring. If you already have $2,000 saved for it, then you can set your sights on a $3,000 personal loan.

2. Figure out how much you can afford for a monthly payment

You have some control over your loan's monthly payment. If you go for a longer loan term, you'll have a smaller monthly payment. The tradeoff is that you'll pay more total because of the interest charges.

What's most important is that your loan payments fit into your budget. If you can't make your payments, it could lead to late fees and damage your credit score.

3. Compare rates and choose a lender

Go rate shopping by getting quotes from multiple personal loan lenders. Most lenders let you check rates with no impact on your credit score.

Once you've compared loan options from at least three to five lenders, you can pick your favorite. It usually makes sense to go with the lender offering you the lowest interest rate, although this isn't the only factor to consider.

4. Fill out the loan application

Most lenders let you do this online. Here's the information you'll likely need to provide:

  • Proof of identity
  • Proof of address
  • Proof of income
  • Information on any debts you have

Go through the application process and enter the required information. Once you're done, you may get an immediate decision, or the lender might need more time. If your loan is approved, all that's left is to wait for it to be funded.

Alternatives to a personal loan

Other ways to finance an engagement ring include 0% APR credit cards, a payment plan with the jewelry store, and buy now, pay later. Here's how each of these works.

0% APR credit cards

With this type of credit card, you get a 0% intro APR on purchases. During the intro period, you can carry a balance without getting charged any interest. Some of the best 0% APR credit cards have intro periods of 18 months or longer, giving you a lot of time to pay off an engagement ring.

A 0% APR card is an excellent choice if you're confident you can pay off your balance within the intro period. Make sure you can do that, because the APR goes up quite a bit once the intro period ends.

Jewelry store financing

Most jewelry stores offer engagement ring financing in the hope that you will shop with them for the big day. Many offer special promotions, such as 0% interest for a set number of months.

Look at the financing terms carefully and watch out for deferred interest offers. With deferred interest financing, you can be charged interest in full going back to the purchase date if you don't pay off the entire balance during the promotional period. If you decide to use this type of financing, it's crucial to have the full charge paid off before the promotional period ends.

Buy now, pay later

Many retailers now partner with buy now, pay later (BNPL) services. The standard BNPL plan is four equal payments made every two weeks, but there may be longer options available. Some of these plans charge zero interest, as well.

If you're looking for how to finance an engagement ring with bad credit, BNPL could be the solution. The credit score requirements are much more lenient than they are for 0% APR credit cards and low-interest personal loans.

Final thoughts

Everyone wants to get their partner a special engagement ring. It doesn't have to be expensive, but you probably don't want to decide which ring to get based solely on the price.

Saving up so you can pay for the ring in full is often recommended, and you'll avoid interest charges this way. But if you want to give your ring budget a boost, there are affordable engagement ring financing options.

FAQs

  • Yes, there's little doubt that you'll be able to land an engagement ring loan. The issue is how much that loan will ultimately cost you. If your credit score is low, you can count on paying far more due to a higher interest rate.

  • Not at all. You can easily find a beautiful ring for less than $1,000. Remember, it's your partner who will wear the ring and catering to their taste is much more important than impressing outsiders.

  • You can save up, take on a side hustle for a few months to fund the ring, or sell items you no longer need or want and put the proceeds toward the ring purchase.

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