6 Pros and Cons to Using a Personal Loan for an Engagement Ring

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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
2 years $228
3 years $159
4 years $124
5 years $104
6 years $90
7 years $80

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 6.99% – 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 6.26% – 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 6.95% – 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!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000

Visit Upstart

6.26% – 14.87%1$5,000 - $100,000

Visit SoFi

6.99% – 35.97%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

4.99% – 29.99%3$10,000 - $35,000

Visit FreedomPlus

5.99% – 18.99%4$5,000 - $50,000

Visit Citizens

15.49% – 34.49%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.