So, You're Getting Married! Just One Question: How Will You Pay for It?

by Nancy Castleman for Credit.com

Mazel tov! Congratulations! The best of luck to you both!

Unless you're planning to elope, you're going to need a lot more than luck to get through your wedding day – and I'm not talking about surviving all that time with the new in-laws. How you decide to finance your wedding will be one of the first important decisions you make as a couple.

In days of yore, the bride's family picked up a big chunk of the modest wedding tab, while certain specific expenses were handled by the groom's side. Today, the couple getting married tends to pick up more of the expenses, and there are a lot of them.

The average wedding cost $27,852 in 2006, according to the Conde Nast Bridal Media's 2006 American Wedding Study, with about a third of couples financing the whole shebang on their own. Since then, The Wedding Report, a company that tracks wedding statistics, projects that the average 2008 wedding will cost $28,704, with the number going up to $33,552 in 2013.

You may pay less or more for the same wedding, depending on where you live, but on average, the big day is going to cost between $14,366 and $43,098 – not including a honeymoon or engagement ring. Click here to get a more accurate estimate of what the typical cost is in your area.

Your wedding can easily be much less expensive — without you two eloping. There's a lot to be said for careful budgeting, but unfortunately, approximately half of all weddings end up costing twice the budgeted amount, reports Shane McMurray, the founder and CEO of The Wedding Report. So if you are going this route, you really have to watch yourself and not get carried away by expenses that really aren't important to you. Focus on what really matters to the two of you and find ways to save on the rest.

One bride I know and love got her wedding dress at Goodwill, told invitees that she was registered at Citibank, and threw a helluva party on a shoestring. There was plenty to eat, buffet-style, and the reception was a blast – live band and all. But it certainly isn't a wedding that will be remembered for its location, beautiful decorations, or flowers. If this bride's approach makes your eyes cross, there are thousands of articles on the Internet about how to throw a frugal wedding.

If frugal isn't what you had in mind, check out some of these resources:

• Time shows you how to "downsize" the festivities.
• Credit.com shows you how to save $10,000, and still have a classy wedding.
• The Wall Street Journal shows you how to get your guests to pay for your honeymoon.
• USA Today recommends sites that will help you develop a budget and stay on track: WeddingChannel.com, Brides.com, and TheKnot.com. (I do, too!)

But if you've always dreamed of a big, fancy wedding, it can be yours... one way or the other. Hopefully, you have a rich relative who wants to pick up the tab – or your spouse-to-be does. If not, you may be thinking about getting one of those wedding loans you see advertised, with rates "as low as 7.49%."

What's a Wedding Loan?

Once you begin tooling around online looking at wedding sites, it won't be long before you see tell-tale ads: "Have the wedding of your dreams!" "No assets required." "No hidden fees." "Pick up your check tomorrow."

Well-known lenders, as well as some that seem more fly-by-night in nature, are certainly hawking wedding loans – which are really plain, ordinary personal loans when you remove the window-dressing. According to The Wedding Report's Shane McMurray, "Based on current survey results, 26% of couples get a loan to help pay for their wedding."

If they're taking out personal loans, they are probably paying double-digits for them, since Bankrate.com reports that average interest rate on personal loans is 12.65%, although they range from 6.85% to 19.77%. The term on these loans is generally three to five years.

Hopefully you won't have to borrow the whole amount you'll need for your wedding and can draw on savings, income, and family contributions for many expenses, especially the ones where a deposit is expected — for example, for the place where you'll be having the reception and for the caterer, each of which will probably require a 50% down payment.

But no matter how you scrimp and save or divvy things up, say you decide to borrow $15,000. If you take out a wedding (read: personal) loan in that amount, and are charged 12.9% for four years, your 48 monthly checks will be $403 each.

Here's a very helpful chart from BridalLoans.com, which is based on an APR of 12.9%, and shows how much you'd have to pay each month depending on the amount you borrow and the length of time you take to pay it off:

You might be able to chip away at that rate if you have excellent credit, borrow from the bank or credit union where you have your checking or savings account, and allow automatic withdrawal of loan payments.

Other Borrowing Options

You'll get a better rate if you have some serious security to put up, especially your home. In that case, you would be better off getting a home equity line of credit (HELOC), where the average interest rate is much lower. It's only 5.48% as of this writing. Not only would you get a lower rate, but there will probably be some tax deductions you could take, which wouldn't be possible with a personal loan. If you were to take out $15,000 at once, at that 5.48%%, you'd have to send in $349 a month to pay it off in four years (not including any closing costs).

Only you can judge whether it makes sense to put your house or condo on the line to finance this one day. Many personal finance experts will encourage you to not go that route – and virtually all of them will be horrified by the notion of borrowing against your 401(k) or other retirement savings.

All in the Family?
Perhaps there's a family member who could loan you the money. You may be able to create a "win-win" situation: You can offer the "lenders" – say, your parents — an interest rate that's less than you would have to pay a bank or credit union, but more than they are currently earning. Five-year CD's are only paying between 3.3% and 3.46% on average. If you borrow $15,000 at 5% for four years, your monthly payment would be $345.

Approach family and friends with a specific plan, including the interest rate you'd pay them and how much you'll repay each month. Put the agreement in writing so you won't be tempted to put that bill low on your priority list. Propose late charges if you miss payments by more than a certain amount of time, and have a plan for what will happen if you default on the loan. Watch out! You could be putting family relations in jeopardy if you can't live up to the terms.

Charge It?
Another option to consider adding to the mix is a credit card that offers a great introductory APR on new purchases. There are plenty of them out there offering 0% for a year or more. Credit.com makes it easy to find cards that fit this bill.

There are a few important hitches:

1. Never be late with a payment. Otherwise, you'll be paying a lot more than 0% in interest.
2. Be sure you can pay off what you owe by the time the intro period is over, when the rate is likely to go up significantly. (You may be able to find another card to transfer the balance to down the road, but you can't really count on that.)
3. Watch out for your credit limit. If you charge up to 35% of your available credit limit, your credit score could take a sizable hit, which might make other lenders nervous enough to jack up the rates on your other cards.

Credit Card Tips:

• Call your current card issuers and ask for an increase in your existing credit lines.
• Be careful not to use credit cards with high interest rates to finance purchases you won't be paying off immediately.
• Use credit cards as opposed to checks or cash when you can. That way, you'll be able to take advantage of the cards' purchase protection if you should have a dispute with a vendor.

Now What?

If you're feeling as though there are no really good borrowing alternatives for your wedding... good! "Few things can put more stress on a relationship than financial woes," as personal finance author and Credit.com's money expert Gerri Detweiler writes in "Love and Money – What You Should Know Before You Tie the Knot, an article I recommend to everyone thinking about getting married or financing a wedding.
Go back to the drawing board and come up with a way to make your wedding day special, without leaving you with a bill that will only cause trouble over time. After all, you have your debts and your beloved's probably got a few, too. The last thing you need is another big monthly expense.
When Wedding Insurance Makes Sense
While you're taking another look at cutting expenses, you might want to consider adding one – for wedding insurance – especially if you're going to have a pricey party. You wouldn't buy a car without insurance, would you? Yet many a perfectly fine car can cost a lot less than many a wedding. And given all the other wedding-related expenses, this one is fairly modest:
"At roughly the cost of including one additional guest at your wedding, wedding insurance is a smart idea for couples who want to protect the significant investment that this important occasion represents," says the Fireman's Fund to both straight and gay couples. "Inclement weather; flood, fire or power failure at the event venue; lost or damaged attire; photographers and videographers who lose the event images or video; and other vendors who fail to show up can all spell disaster."
According to TheKnot.com, a basic wedding insurance policy costs between $155 and $550, depending on how much protection you want. While some companies are now offering "cold feet" coverage, it's not usually included. But if you pay extra, in some circumstances, you can even get protection from that.
USA TODAY personal finance columnist Sandra Block offers excellent advice on wedding insurance, and I had to chuckle at her down-to-earth examples of what can go wrong as she details the key components of typical policies (but then again, I'm not planning a wedding):

• Liability coverage "will protect you from lawsuits if an exuberant guest slips and falls in the conga line," she writes.
• Sudden death or illness. "If the groom has an appendicitis attack the day before the wedding," Block explains, "wedding insurance will cover the cost of non-refundable deposits."
• Lost or damaged formalwear. "If the bridal store files for bankruptcy before you pick up your Vera Wang gown, wedding insurance will cover the cost of a new dress."
• Photography mishaps. "Your wedding photos are supposed to provide a lifetime of memories, but what if they're all out of focus?" Sandra Block asks. "Or the photographer simply disappears? Wedding insurance policies will cover the cost of reassembling your wedding party and retaking the photos or videos."

As with other forms of insurance, it pays to shop around. Get recommendations from folks who have been recently married. Call your current insurers and see what they are offering. Discuss the "what ifs" that worry you most – for example, are you concerned that one of you may be called up by the military? It may be part of the policy or you may be able to purchase additional coverage.
It all boils down to how much of a gambler you are – and how much additional stress you want to have or avoid. I certainly hope I haven't caused any extra worries for you with this article! I don't mean to rain on your parade – just to help you save some money and grief.
All the best to the happy couple! May the celebrations be grand... and not cost you too much.
____________

Return to Top