5 factors to consider before taking out a wedding loan
A wedding loan is a kind of personal loan exclusively used to fund wedding-related expenses. The wedding is the most common reason people use a personal loan. It is because the wedding is expensive. Despite a considerable size of money, you fall short of cash. However, the ease of availability and large amount of money are also reasons why people prefer these loans to meet their expenses.
It is easy to be tempted to take out a loan to meet your wedding expenses, but you should be wary of the risk of falling into a debt trap. You need to be extra cautious if you are looking to apply for wedding loans in the UK with bad credit because these loans carry very high interest rates.
Wedding loans are not the same as small as payday loans. They could be up to worth £5,000; however, some borrowers have been observed to borrow a small amount of money. Small amounts are paid back in fell one swoop. Because interest rates add up the total size of the debt too quickly, you may find it a bit challenging to pay off the debt.
It is always suggested that you deliberately scrutinize your repaying capacity before taking out wedding loans.
5 factors to ponder upon before applying for a wedding loan
Given are the factors that you should consider before applying for a wedding loan:
- Your credit score
The paramountcy of a stellar credit report cannot be ignored when taking out a wedding loan. Even if you are to borrow a smaller sum of money, your lender would peruse your credit report. It is because your past payment behaviour speaks volumes about your repaying capacity. A poor credit file will bring your affordability into question.
Wedding loans are subject to credit checks. They are generally expensive because of a lack of collateral. The risk on the part of a lender is always high as they cannot claim any assets of yours to cover their money.
In case of a lack of the desired credit rating, you will be charged high interest rates. Consequently, the total cost of the debt will be high. You should always keep your credit rating good to avail yourself of affordable interest rates.
Small wedding loans do not seem to be expensive despite a high interest rate, as you think you will only have to make one payment, and you will be free from debt. Unfortunately, the payment is to be made within a month. You may not have enough cash to discharge the debt. This eventuates in rolling over the loan.
- Wedding expenses
It is easy to overspend money on your wedding, especially if loans are convenient. But remember that interest will be paid on top of what you borrow. In order to avoid struggling with a wedding loan, you should ensure that you create a budget. Figure out ways to reduce your expenses. Your first priority should be fitting all your expenses into your current budget. If it involves slashing the guest list, do not mind being ruthless.
Create a realistic wedding budget and make sure to stick to it. It is too easy to go beyond your budget when you desire to celebrate a grand wedding, but there is no point in raising your expectations if you are dependent on funding sources.
- Repaying capacity
The next thing you need to focus on is your repaying capacity. It is likely that you need a wedding loan worth £3,000, but your repaying capacity will serve as the basis for the approval. Of course, no lender would feel disposed to sign off on your application if you seem to be unable to settle the debt.
Do not make a decision only based on the principal amount because interest is to be paid, too. As these loans are quite expensive, you will see the total cost of the debt quickly snowball. Check your budget and carefully review whether it has wiggle room to pay off your debt.
If not, you should reduce your wedding budget. Consider diminishing expenses on catering, decoration, and venue, which are responsible for using up a significant amount of money. If you owe other debts, it is always admonished not to borrow a larger sum of money.
In case of multiple loans, consider combining your existing outstanding loans. Having multiple credits on your credit file is not a good sign. Some lenders will be indisposed to lend you money, while others if they approve, will charge you high interest rates. Check your debt consolidation loans eligibility before putting in the application. Combining your loans is a good way to reduce a debt burden.
- Explore other alternatives
Wedding loans are an appropriate choice if you are looking to borrow a larger sum, but at the same time, keep in mind that these loans come with high interest rates. Before applying for wedding loans, you should explore other alternatives too.
For instance, if you need a small amount of money to fund the gap in your savings, credit cards can be a good alternative. However, you must ensure that you will be able to settle your balance on time. Likewise, you can also consider using bad credit loans when you need a small amount of money.
- How grand do you want your wedding?
A wedding is a once-in-a-lifetime moment, so it is likely that you have desires to make it perfect, special, unique and grand. Of course, you will need to spend a lot of money then. There is nothing to meet your wedding expenses through a loan, provided you can repay the debt on time. Otherwise, you should find ways to reduce your wedding expenses.
To sum up
Wedding personal loans can come in handy regardless of your wedding expenses, but it is always admonished that you carefully examine your repaying capacity. Regardless of the size of personal loans, they are expensive. Make sure you do not fall behind on payments.
