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Key features of wedding loans

When people talk about a wedding loan, they’re often talking about an unsecured personal loan, typically at a fixed rate of interest. Let’s break that down a little. “Unsecured” loans are based on creditworthiness, rather than the use of property or other assets as collateral. With a “Fixed-rate” loan, the interest rate you’re charged will remain level, or “fixed”, for the full term of the loan, and you can calculate beforehand exactly how much the loan will cost you in total.

Here are some of the key features of personal loans:

• Loan amounts typically between £1,000 and £25,000. While most providers cap their personal loans at £20,000 or £25,000, some lenders will go higher for existing customers, even up to £50,000. The amount you can borrow will depend on factors like your income and credit score.
• Loan terms typically from 1-8 years. A personal loan allows you to spread the cost of your special occasion into affordable chunks over an extended period of time. As a general rule of thumb, longer loan terms will bring your monthly repayments down, but push the total cost of the loan up.
• “Fixed” Vs. “Variable” interest rates. Most personal loans have a fixed interest rate, but make sure to check the terms before taking out a loan to establish whether the rate you’ll be charged is fixed or variable. A fixed rate means fixed monthly repayments – useful when you’re budgeting for your wedding (and life after it). Remember, the advertised APR that you see on a lender’s site isn’t necessarily what they’ll offer you – that’s why it’s called the “Representative APR”. The rate you’re offered will depend on factors like your income and credit history.
• Repayment holidays. A number of lenders give the option to take a “holiday” from repayments. This can give you a couple of months to let the dust settle before you start paying the loan back. The downside is that the debt is still accruing interest during this period, meaning you’ll pay more overall.
• Quick, personalised online quotes. Whilst pretty much all lenders have an online calculator that gives an idea of how much their loan might theoretically cost you, many can now offer personalised quotes that give you a better idea of how much you’ll be able to borrow, and what rate you’ll receive, without leaving a footprint on your credit history. These are sometimes referred to as “soft searches”, and are likely to be a truer estimate of the cost of a loan as they’re based on information you provide about your particular circumstances.
• Quick access to funds. Shotgun wedding? Not to worry – the process is usually pretty quick. Once you’ve been approved for a loan you’ll normally receive the funds via your nominated account within a day or so, and sometimes instantly.
• Overpayments and early repayments. Whether or not you can make overpayments or payback your loan early might seem like an afterthought when taking out a wedding loan. In fact, favourable terms could save you a packet. A large number of UK lenders, especially the larger banks, tend to charge two months’ interest on any funds repaid early. If a lender is boasting that “there’s no penalty for paying back some or all of your loan early”, then that’s great, but it doesn’t mean that doing so will save you any money. You may even be required to notify the lender in advance that you’d like to overpay.

Wedding loan Vs. credit card

There’s more than one way to finance a wedding. A personal loan is a popular option, but some people might simply “put it on plastic”. Is that a crazy choice? Not necessarily, but there’s advantages and disadvantages to both routes, and which of the two is better for you will depend on your individual circumstances. Here are some of the key considerations (this is not an exhaustive list):

• Amount of credit. A personal loan might give you access to more credit than a credit card.
• Interest rates. Credit cards typically charge higher rates of interest than personal loans, however, you’ll only pay interest on what you spend. Additionally you could seek out a credit card with a 0% interest on purchases offer. In this situation, purchases you make using the card can be exempt from interest for a set period. As long as you pay off what you owe within this period then you could avoid paying interest altogether.
• Repayment flexibility. With a personal loan, you pay a set amount back each month to clear the debt over a pre-arranged period. However with a credit card, you’re only obliged to make a relatively small monthly repayment. If you only make this small payment, then you could end up shouldering the debt for a lot longer. You might even go on to make additional purchases beyond your planned wedding expenses. So if you don’t have the financial discipline, a credit card might not be the answer.
• Cash transactions. Need cash to pay the band? Well if you withdraw cash on your credit card, there’s likely to be significant costs involved. With a personal loan you simply receive a lump sum to your nominated account.

Ultimately if you plan on making numerous non-cash purchases for the wedding as and when it suits you, then a credit card could work out cheaper, however if you’re not disciplined about repayments, and you think you might be tempted to make additional purchases on the card in future, then you could easily end up paying more overall.

Financial obligations to consider for your wedding

Whether you want your big day to be homemade and intimate, or a luxury extravaganza, you’ll need consider the cost of the following products and services. It’s important to have a clear budget set out in advance, and a plan for if you exceed this.

Am I eligible for a wedding loan?

You should only apply for a loan if you’re certain you can meet the repayment terms. Most lenders will then require you to meet additional criteria such as:

• Be aged 18 or over.
• Have proof of your current income and employment details (payslips and bank statements).
• Be able to provide three years of address history.
• Have not been declared bankrupt in the last 6 years.
• Have a good credit history.

If your credit history has had a few bumps in the road, then don’t cancel the wedding just yet. There are specialist lenders who focus on loans for bad credit, and who will look at more than just your credit score when considering your application.

Wedding personal loan FAQ’s

• What if my wedding costs more than expected?

  With so many costs involved it can be hard to predict how much you’ll need to borrow. Many providers allow you to top up your existing loan or take out a second loan, but this will be subject to approval. It’s worth taking time to consider each cost you’re likely to incur before you apply for a loan, and having a contingency for unexpected costs.

• Do I have to start paying off my loan immediately?

  It can be difficult to find the cash to start paying back your loan immediately, particularly if you take a honeymoon. Luckily some providers may offer a repayment holiday. This is an agreed period of time in which you don’t have to make repayments, typically offered at the beginning of your loan to help you sort your finances out. Although this can be useful in the short-term, bear in mind that you’ll still accrue interest during this period, so the loan will cost you more overall.