The most important day of your life can also be very expensive. According to Moneysmart, the average Australian wedding costs $36,000. While some couples save up for their wedding, you may be looking for ways to finance your wedding. There are a number of loans you can apply for, including personal loans.
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Loans you can use to finance your wedding
How can I finance my wedding?
If you're looking for a loan to pay for your wedding, there are a number of options to choose from. The best loan for you is one that will suit your budget and covers your upcoming expenses. The loans include:
- Personal loans. There are 2 types of personal loans: secured and unsecured. Secured loans generally have higher borrowing amounts, but require an asset as collateral. They also offer lower interest rates in return. An unsecured loan, meanwhile, has lower borrowing amounts but does not require collateral. The interest rates are also higher. These loans don't come with restrictions on how you use the funds. You can use the loan to buy the dress, book a venue and even pay for your honeymoon. You can choose between a variable or fixed rate, and repay the loan between 1 and 7 years.
- Lines of credit. A line of credit is useful if you want credit on a continuous basis, as opposed to a lump sum. You can also opt for it if you're unsure if you will need to borrow money. A line of credit allows you to borrow up to a certain amount, as and when you need it. You will be charged interest on the amount borrowed, and not your entire credit limit. While convenient, interest can be higher for a line of credit compared to a personal loan.
- Credit cards. Depending on how much your credit limit is, and what your upcoming expenses are, a credit card may be an option. You could look into a 0% p.a. purchase card, or a 0% p.a. balance transfer card, depending on your circumstances. Note that interest will apply after the introductory period and that interest on credit cards is generally higher.
- Buy now, pay later. Depending on what you need the finances for, this may be an option. Some purchases, such as airline tickets, may come with a buy now, pay later option. This means that you can stagger your payment over a period of time without being charged interest. While it may not be a suitable option for all your expenses, more vendors are increasingly offering this option.
- Bad credit personal loans. If you have a few negative marks on your credit score, a bad credit personal loan may be an option. This can be either a secured personal loan, a guarantor personal loan, a low doc personal loan or a short or medium term personal loan. Short and medium term personal loans come with high fees and rates, so they work out to be expensive. Your borrowing limit will also range from $2,000 to $10,000.
What should I consider before taking out a wedding loan?
Before applying for a wedding loan, it's important to understand the financial commitment required for servicing the borrowed amount. You and your future partner should sit down and discuss your financial situation beforehand. Here are some of the questions you should be asking:
- How much can we realistically afford? If a wedding in the Bahamas is the dream, you need to consider whether your budget allows it. Look at what you can realistically afford and draw up a budget. This will give you an idea of what you can and can't do for your wedding. A budget can help you figure out how much you need to borrow and it's important that you stick to it.
- How much will the wedding cost? You'll need to do some research and figure out how much each element of the wedding will cost. Consider the cost of the venue, the dress, the ceremony and rings, the photography, flowers, cars, hair and makeup. See if there's something you can do without, like printed invitation cards. If there's anything you can do yourself, or ask a friend or family member, you should consider it.
- Is there anything we can cut down on? If the price is looking too steep, you may want to consider alternatives. You should also ask yourself if you can cut down on some factors to bring down the cost. Spend on what you think is important for you and your partner and cut back where it's not. Remember, you're building the foundations of a marriage, and financial stability is an important factor.
- What can we pay for with savings? Borrowing money comes at a cost – for every dollar you borrow, you pay interest. If you can pay for something from savings, or pooled finances from family, that may work out better than taking out a loan. You may be able to pay for part of the wedding from your own money. This will reduce how much you have to borrow and reduce the amount of debt you'll be in. This means lower repayments and less stress as you start a new chapter in your life.
- How will we pay for the loan? If you're taking out a wedding loan, you need to be clear on how you will pay for it. If you have separate bank accounts, work out how the repayments will be made. It's important to talk about finances and how you will manage the loan.
What costs do I need to consider?
Whether it's a small ceremony or an all-out extravaganza, there are a number of items and services you will have to pay for. Some of these additions may cost more than you originally thought. In the table below are some of the expenses you can expect and their average costs, according to surveys by easyweddings.com.au and truebride.com.au. Note that these costs will differ based on the state you're in. Costs for 2020 and 2021 may also differ due to the pandemic and the lockdowns.
Consider the expenses below:
Average cost in Australia
Average cost in Australia
|Wedding invites, thank you notes and placeholders||$675||Catering and wedding cake||$6,188|
|The wedding dress and accessories||$2,330||Flowers and decorations||$1,565|
|Groom/groomsmen suits and accessories||$1,446||Photography and videography costs||$3,320|
|Bridesmaids dresses and accessories||$854||Entertainment considerations||$1,693|
|Flowergirls, ushers and pageboys||$168||Makeup, hair styling and facials for bride and bridal party||$743|
|Wedding venue||$15,258||Transport to and from wedding||$675|
|Marriage celebrant||$794||First-night hotel stay||$315|
|Alcohol and beverages||$3,377||Honeymoon||$5,603|
How can I compare wedding loans?
When you're comparing your loan options, there are a number of factors you need to think about. Cost is one of them, but there are also a number of other things you should keep in mind. These include:
- How much does the loan cost? Compare interest rates across a number of loans to find the most affordable loan. Apart from interest, you should also consider fees and the comparison rate. A loan could have low interest but high fees, which will increase the cost of your loan. Check the comparison rate, which includes interest and fees. This will give you an idea of how much the loan actually costs.
- Can I afford the loan? Once you've calculated how much the loan will cost you, you need to consider whether you can afford it. Check if your repayments fit comfortably within your budget.
- How much can I borrow? Each lender will have maximum and minimum lending amounts. Does the lender offer the amount you want? How much you can borrow will also depend on your ability to repay the loan and your credit profile.
- What's the loan term? The loan term is how long you have to repay the loan. Loan terms will affect your repayments. Shorter terms will mean higher monthly repayments in the short run. With a long term, you'll have smaller monthly repayments but the loan could cost you more on the whole. This is because you'll be paying interest for the entire time, the cost of which can add up.
- Am I eligible? Do you meet the lender's minimum requirements to qualify for the loan? This can include income requirements and your credit score. Your application could be rejected if you don't.
- What's the repayment schedule and is it flexible? Can the repayment schedule be tailored to suit your cash flow? Can you make free additional repayments to pay off the loan early, or will you face a penalty?
What should I avoid with a wedding loan?
- Getting into debt you cannot afford. Check the cost of the loan and make sure you can afford it. You should be able to comfortably include repayments in your budget. You should also avoid borrowing more than you need.
- Multiple applications. Every loan application shows up on your credit report. Several applications within a short period can have a negative impact on your credit score, making it harder for you to get a loan in the future. Select a single loan that you're eligible for and that suits your needs, and apply with that lender.
- Long-term repercussions and legal issues. Once you sign a loan agreement, you are bound to its conditions. You will have to pay the loan and all the fees. Keep in mind that for unsecured loans, the lender can initiate legal proceedings against you if you don't repay the loan. It can also report the debt to a credit reporting body like Equifax and use the services of a debt collector. For secured loans, your asset could be repossessed if you default.
How can I apply for a wedding loan?
🤔 Work out how much you need to borrow and what you can afford. You can use a personal loan calculator to help you.
🔎 Start comparing lenders and loan products. Don't forget to compare interest rates, fees and eligibility criteria. You can use the comparison table on this page.
✅ Select a lender. Click "Go to site" to be directed to the lender's page, or "More info" if you want to read about the lender.
🖨️ Organise and prepare the required documentation. This will make the application process easier.
📱 Apply. Most lenders have their applications online.