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

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

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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 5.99% – 17.24% $5,000 – $75,000 3 – 5 years None 1-2 business days
SoFi 5.99% – 20.01% $5,000 – $100,000 3 – 7 years None Within a few days
FreedomPlus 5.99% – 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?

LendingTree allows you to compare rates from multiple lenders by filling out one easy form. Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

RATES (APR)loan amount
5.99% – 20.01%1 $5,000 to $100,000
6.14% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
compare rates on Lendingtree now
NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 20.01% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 15, 2019 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 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 4.93% 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.
  2. 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.
  3. 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.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. 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 Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.

3 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.
4 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 5.99% 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 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

** 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.

Published in Loans, Personal Finance

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