Compare loans for engagement rings

According to the 2020 Australian wedding industry report, an average couple spends $5,367 on their engagement ring. Whether you're planning on spending a lot less or a lot more, you may still be considering how you're going to come up with the money. Picking the right ring while sticking to your budget can be difficult, especially if you haven't saved up much in advance. If you are considering an engagement ring loan, it's important to consider all of your options.

You have a few options if you're looking into financing for an engagement ring. These include in-store financing, interest-free finance and personal loans. Here is what you need to know about financing an engagement ring.

What are my options to finance an engagement ring?

Sometimes your heart moves faster than your savings. If you don't have cash on hand to pay for an engagement ring, you can consider the following:

• Interest-free finance. Providers such as Zip and Afterpay allow you to shop with various jewellery retailers and repay what you borrow interest-free.
• Personal loan. You can also consider a standard personal loan. Some lenders allow you to apply for as little as $2,000 and most unsecured loans let you apply for up to $50,000. You'll generally have between one and seven years to repay what you borrow. Compare some of your personal loan options on this page.
• Credit card. There is a range of credit cards that offer a 0% purchase rate for an introductory period. That means anything you purchase during that year is interest-free – so just pay it off within the period and you will pay no interest. 0% purchase rate cards can come with introductory terms that typically vary from 3 to 14 months.
• In-store finance. Many jewellery stores, such as Michael Hill, Zamels and Wallace Bishop Jewellers offer in-store finance or payment plans. Remember to check the fees, rates and terms before you apply.

Features to consider when comparing loans for engagement rings

• Interest rate. As outlined above, there are some interest-free options to consider. Make sure to check whether interest applies after a certain period with these options and make sure you'll be able to repay it in that period. For unsecured personal loans, you'll find rates of between 8-17% p.a.
• Fees. You may need to pay upfront or pay ongoing fees, which can add significantly to the cost of the loan. Check for establishment or application fees and monthly or annual fees.
• Loan amount. The amount you can borrow differs between lenders. For interest-free and in-store finance, the amount you can get is tied to the ring's value. With unsecured personal loans, you can generally borrow between $2,000 and $50,000.
• Loan term. Interest-free finance terms are usually between six weeks and one year depending on the provider. Payment plans for in-store finance will differ between stores. With unsecured personal loans, you will have your choice of terms which usually start from one year and can extend up to seven.
• Eligibility criteria. Check the minimum income, age and employment requirements for whichever option you're looking at applying for before you submit your application.

How much should I spend on an engagement ring?

First and foremost, forget the "two-month salary" rule. It's a longstanding marketing ploy made up by established diamond company DeBeers. How much you are willing to spend on an engagement ring is completely and utterly up to you.

Diamondport's survey, which found that couple's spend an average of $5,297.50 (a close match to the Australian wedding industry report) on engagement rings, also noted that 4% of survey respondents spent over $20,000 on their engagement ring and 1.5% spent over $25,000. It also found that while there was a correlation between income and the cost of the ring (understandably), it wasn't a hard and fast rule.

There are only two things you need to consider when figuring out your engagement ring budget:

• Their preferences
• Your financial situation

Your partner might have a specific style in mind and would prefer a less-expensive version of that than an extremely expensive ring in the wrong cut. Try to suss out their preferences before making a big purchase. Diamondport also found that both partners contribute to the cost of the ring 20% of the time, so this may be worth considering if you know that they have a preference that exceeds your budget.

Common questions about financing an engagement ring

• What is an early repayment penalty?

  Some lenders charge a fee if you wish to repay your loan ahead of time. This may be for making too many additional repayments or for paying your loan off in full before the end of the loan term.

• Can I use my engagement ring as security?

  Some non-traditional lenders will let you use assets such as engagement rings as security for loans. Make sure you consider the cost of these loans as they tend to be more expensive than other traditional loan options as they are targeted at bad credit borrowers.

• Is there any catch with interest-free in-store finance schemes?

  You may find restrictive loan terms, late fees or a high interest rate once the interest-free finance period comes to a close. Make sure you know the offer terms before you apply.