A financial advisor breaks it all down.

By Lauren Wellbank
September 26, 2019
Milkos / Getty Images

Wedding loans are personal loans that are taken out specifically to pay for wedding-related expenses. With the rising costs of hosting a wedding, it may seem like a quick and easy way to finance your big day. However, taking out a large lump sum debt for your wedding may not be the best financial choice a couple can make. We spoke with Lauren Anastasio, a certified financial advisor with SoFi, to find out what you need to know if you're considering taking out a wedding loan.

Related: Do You Need a Wedding Planner and a Financial Planner?

They're gaining traction as a way to help a couple finance their wedding on their own.

According to Anastasio, wedding loans provide quick and easy access to cash. "Instead of waiting to have enough money saved up, a personal loan can help couples get married sooner, or can help them plan their dream wedding if the amount they've saved so far just isn't enough," she says. This is especially helpful for couples who are looking to finance a wedding on their own, without help from relatives.

A personal loan is better for your credit score than accumulating credit card debt.

"Whether you're the bride, groom, or a parent contributing to the wedding costs, a personal loan is going to be better for your credit, and likely far less expensive when it comes to interest, than carrying balances on a credit card," Anastasio explains. "A personal loan is for a fixed dollar amount, therefore you won't be tempted to charge too many wedding-related expenses to your credit cards and find that the total costs are getting out of hand." But debt is still debt, and it's important to think carefully before accumulating any to pay for a one-day event.

There are risks associated with wedding loans.

Like any loans, wedding-related loans are associated with risk. "Borrowers fail to realize that the wedding is likely the first in a string of expensive life events," Anastasio says. "There's nothing wrong with borrowing money to have a nice wedding, but remember that depending on the amount you borrow, you may still be paying back that loan on your third anniversary." By then, she explains, you'll probably have other financial goals that you want to prioritize—buying a house or starting a family chiefly among them. "Borrowing too much for your special day may delay some of those other milestones," she adds.

The biggest concern Anastasio has with wedding loans is that the couples she sees taking them out generally expect that they'll make all the money back in wedding gifts. "Money as a wedding gift is not a guarantee," she explains. "If you do take out a loan for your wedding and receive money as a gift, you should plan to repay as much of the loan as you can with it. In many cases, it's very likely a couple won't receive as much money as what was spent the wedding, and even if they do, it's tempting to spend it on other things like their honeymoon or registry items that weren't purchased previously."

What things should you look for in a wedding loan?

First, establish if there are any up-front finance charges or fees. If there are, she says, obtaining the loan could cost more than just the interest you would be paying on the debt. "Look for lenders who do not charge an application fee or any other type of fee to obtain a loan," Anastasio suggests. "Second, you want to determine your ability to prepay without penalties. If you do use wedding gifts or some other type of cash windfall to pay the loan back sooner, you'll want to make sure there is no cost to do so. Finally, you want to ensure you are comfortable with the monthly payment, term, and rate you are committing to."

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