On average, Americans spent $5,764 on an engagement ring in 2017, according to a study by The Knot. While you certainly don’t need to spend that much money, you may still need help financing a ring if you don’t have enough cash saved up.
If you’re thinking of getting a personal loan for an engagement ring, it’s critical that you understand both the pros and the cons before applying. We’ll cover both, as well as share some top personal loan companies to compare.
6 pros and cons of getting a personal loan for an engagement ring
As with any financial product, personal loans can be a good or bad idea, depending on your financial situation and needs.
“[An engagement ring] is a very large purchase for many young people and not one that many can afford, especially in one entire cash payment,” said Alia Dudum, a spokeswoman for LendingClub. “A personal loan can offer better rates than credit cards or jewelry store credit cards.”
But it can also come with higher rates and added fees. To help you think about whether you should get a personal loan for an engagement ring, consider both the perks and pitfalls of using one.
Pros of using a personal loan
Personal loans are unique in that you can use them for just about anything. Here are some other benefits to consider.
1. Personal loans are generally unsecured
While some lenders do offer secured personal loans, most personal loans don’t require collateral. This means that you can get the funds you need without having to set aside cash in a savings or certificate of deposit account to secure the loan.
Other loans, such as a home equity loan or home equity line of credit, may offer lower interest rates than personal loans. But they use your house as collateral, which means you could lose your home if you default on the debt.
2. You’ll get plenty of time to pay it off
Among the best personal loan lenders, your repayment period can range between two and seven years, depending on the company. This means that you’ll have some flexibility in determining your monthly payment.
As an example, let’s say you borrow $5,000 and get a 9% interest rate on the loan. Here’s what your monthly payment may be based on your repayment term:
|Repayment term||Monthly payment|
Of course, some lenders reserve their longer repayment term options for larger loans, so you may not qualify for them. Also, keep in mind that the shorter the repayment period, the less interest you’ll pay over the life of the loan. Use our personal loan calculator to get the numbers for your specific situation.
3. You can get the cash quickly
Once a lender approves your application, you can expect to get the money within a week. Some even send the money the same day. So, if you’re planning on proposing soon, it’ll be nice to know that you’ll get the loan funds in time.
Cons of using a personal loan
No financial product is perfect, and the same goes for personal loans. Here are some drawbacks to consider before applying for one.
1. You may not qualify for a low rate
The average interest rate on a two-year personal loan is 10.22%, according to Federal Reserve data for the first quarter of 2018. But your actual rate depends on a variety of factors, including your credit score, income, and current debt situation.
Unless you’re a model borrower or have a cosigner who is one, you’re unlikely to qualify for the best personal loan rates. And if your credit and financial profiles are unfavorable, the lender could deny your application or offer a rate of 30% or higher.
If you were to get a $5,000 loan with a five-year repayment term and a 30% interest rate, you would pay almost as much in interest over the life of the loan as the original loan amount.
2. Some lenders charge origination fees
Besides charging interest, some lenders assess a fee just for processing the loan. An origination fee can range from 1% to 8% of the loan amount and the lender typically deducts it from your loan funds. This means that you’d need to borrow more just to cover the fee.
That said, there are some lenders that don’t charge origination fees, so stick with them if you can. If not, make sure you know what fees a lender charges before you apply.
3. You can’t get a 0% introductory APR promotion
If you use a personal loan for an engagement ring, you’re guaranteed to pay interest on the purchase, even if you qualify for a low rate. If you use a credit card with a 0% introductory APR, however, you could pay off the debt interest-free.
Some of these cards offer a 0% APR for a year and a half or longer, giving you plenty of time to pay off the ring. But you may not want to if you need more time to repay the loan.
“After these promotions expire, most of these cards have very high interest rates,” said Dudum, “so you should attempt to pay off the card before this happens.” Some of these cards charge interest upward of 20%.
To pay off $5,000 in 18 months, you’d need to pay $278 per month.
Here’s where to get a personal loan for an engagement ring
There are hundreds of personal loans out there from which you can choose, each with varying terms and features. To help you get started and set your standards high, we’ve put together a list of five of the best personal loans available today.
Here’s a summary of each:
|Interest rates||Loan amounts||Repayment terms||Origination fee||Funding time|
|Earnest||5.49% – 18.24%||$5,000 – $75,000||3 – 5 years||None||1-2 business days|
|Citizens Bank||5.99% – 18.99%||$5,000 – $50,000||3 – 7 years||None||Within 2 business days|
|SoFi||6.28% – 14.87%||$5,000 – $100,000||3 – 7 years||None||Within a few days|
|FreedomPlus||4.99% – 29.99%||$10,000 – $35,000||2 – 5 years||0% – 5%||Within 48 hours|
|LendingClub||5.99% – 35.89%||$1,000 – $40,000||3 or 5 years||1% – 6%||7 days|
Should you get a loan for an engagement ring?
In an ideal scenario, you’d have enough cash in savings to pay for an engagement ring. If not, though, a personal loan may be a decent alternative. Before you apply, look for ways to save on your engagement ring and consider whether you can hold off on the purchase until you have enough money saved.
If you’re ready to apply, however, compare multiple lenders to find a personal loan that’s right for you.
“Look at APRs and all additional costs, which can add up quickly, making what seems to be an excellent loan an expensive one,” said Dudum.
Some lenders even allow you to get pre-qualified before you apply and see tentative rate offers. As you take the time to go through this process, it’ll be easier to find the best loan for your engagement ring purchase.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||Rates (APR)||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
|7.73% – 29.99%||$1,000 - $50,000|
|6.28% – 14.87%1||$5,000 - $100,000|
|6.87% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%||$5,000 - $35,000|
|4.99% – 29.99%||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%2||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%||$2,000 - $25,000||Visit LendingPoint|
|5.99% – 35.89%||$1,000 - $40,000||Visit LendingClub|
|5.49% – 18.24%||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%||$2,000 - $35,000||Visit Avant|