One of life’s major milestones is deciding to propose to your significant other. But before you hear the celebratory wedding bells, the first step is to find the perfect engagement ring. The old adage said you should spend roughly two months’ income on an engagement ring. While times have thankfully brought this number down a bit, one thing is for sure – rings aren’t cheap.
Before the sticker price of rings sends you into a full-blown panic attack, remember there are financing options available. While you want nothing more than for your partner to love their ring, you also don’t want to completely derail your finances in the process.
The trick is to find the financing solution that will work best for you. Here are six of the most common ways to purchase an engagement ring.
1) Store Financing
As you’ve probably noticed, most jewelry stores offer in-house financing. While this can be through the store directly, more commonly, it’s made available in partnership with a credit card company. Often, promotional offers, such as 0% APR, are touted to lure in price-sensitive shoppers.
Before deciding on in-store financing, you should always read the fine print. It’s common for interest to accrue from day one. If you repay the entire balance before the promotional period ends, you pay $0 in interest. If you fail to do so, you could incur a hefty interest charge. And the standard rates on most of these store credit cards are some of the highest around.
When choosing in-store financing, create a plan to ensure you repay the full balance before the promotional period ends.
2) Credit Card
Credit cards are the most common financing tool because of their convenience. If you decide to go this route, make sure you choose a card with the lowest interest rate possible. While rewards are nice to earn, on high-priced items, such as a ring, you don’t want to get trapped paying excessive interest charges.
One thing to remember with a credit card is that you are only required to make minimum payments. If you don’t create a strategy to repay the balance quickly, it could end up taking years to pay off the balance.
3) Personal Loan
Personal loans are often overlooked as a viable financing option. Because you have to apply for the loan, most people opt for credit cards already in their wallets. However, personal loans offer some of the greatest financial perks for short-term financing.
Fixed Amount: You’ll be approved for a specific amount that makes staying within your budget easier and helps to prevent overspending.
Lower Interest Rates: These loans usually have much lower interest rates than traditional credit cards. Anytime you can reduce the amount of interest you pay, it’s a win for your wallet.
Set Payments: With fixed monthly payments, you’ll typically repay the borrowed amount much quicker than with credit cards.
Personal loans are a great option to consider if you’re looking for lower-rate financing that will keep you on a set repayment cycle.
4) Buy Now, Pay Later (BNPL)
BNPL options are available at most retailers today. This type of financing is especially popular at jewelry stores since purchases tend to be higher priced. As the name suggests, you’re able to take home your purchase today, then make the payments later. Typically, you’ll be required to make a percentage of the payment upfront, and the balance is spread out over a set time period as equal monthly installments.
One of the biggest perks of the Buy Now, Pay Later option is that most of these programs offer a 0% interest rate and no fees - as long as you make your payments on time. However, if you miss a payment, the fees and interest charges are hefty and could ultimately affect your credit score.
5) Home Equity Loan
A home equity loan is a secured loan that allows you to use your home’s equity to pay for almost anything. So, if you’re a homeowner and have built equity, this may be a great option. Since home equity loans use your house as collateral, the interest rates are typically much lower than personal loans or credit cards.
However, it’s important to note that home equity loans use your home as collateral. So never make a purchase if you’re unsure whether you can repay on time. Another important note is that home equity loans do have closing costs. While the closing costs are a fraction of those on first mortgages, it’s wise to use the funds from a home equity loan only if you already have the loan (or a home equity line of credit) established.
Paying cash is the most affordable option for purchasing an engagement ring. While this option isn’t possible for everyone, if you plan your engagement and have the time, it’s in your best interest to start saving immediately.
It’s easy to open a separate savings account to start putting money aside. You may even consider utilizing Payroll Deduction to help automate your savings. With Payroll Deduction, you can set a certain amount to be deposited directly into this savings account each time you get paid. And, you’ll have even more money to put towards your wedding or honeymoon by not paying any interest or fees!
If you’re considering popping the big question soon, we’re here to help you finance the perfect ring. From personal loans and low-rate credit cards to special savings accounts, we have the tools you need to make your engagement memorable.
Please stop by any of our convenient branch locations or call 248-322-9800 extension 5 to determine which financing option will work best for you.
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