Wedding loans – what finance options are available?

If you’re planning to tie the knot, you may be wondering about how to pay for the big day. A wedding loan is one option, but as with any personal loan, it is worth carefully considering the costs involved, as well as other options that may be available.

If you’re engaged and planning your big day, there are many different ways to celebrate your wedding. You may opt for an intimate backyard party with a few close friends and a string of fairy lights in a tree, or you may wish for a more elaborate affair with a hired venue and a formal-sit-down dinner.

Whatever kind of event you’re planning, you’ll need to keep your budget in mind, so in this article, we’ll answer the questions:

What is the cost of a wedding in Australia?

The average cost of a wedding in Australia is between $36,000, and $53,168, according to Moneysmart and Wedded Wonderland. This figure is not set in stone, because every couple is different, and the price can vary significantly depending on factors such as the size and scale of celebration you want to have.

The COVID-19 pandemic has upended the plans of many couples, and with ongoing uncertainty, it may well be the case that if you’re planning a wedding, you might feel it safer to opt for a smaller affair rather than a large destination wedding.

Nonetheless, there are factors that can typically contribute to the cost of a wedding, and while you may or may not opt for all of them for your special day, many of these may be considerations for you.

Depending on the type of day you wish to have, you may have to pay for:

  • venue hire for the reception
  • the ceremony, including celebrant and possible separate venue hire
  • marquee, table and chair hire
  • a food and drinks package (catering)
  • professional photography
  • entertainment, such as a band or DJ
  • wedding rings
  • clothing such as dresses and suits
  • hair and makeup
  • transport to and from the venue
  • accommodation
  • flowers and decorations
  • cake
  • hens/bucks parties
  • marriage licence
  • invitations and postage (if you are sending them by the post)
  • gifts (e.g. wedding favours and presents for the bridal party)
  • drycleaning
  • honeymoon

What wedding loans can you get and how do they work?

If you plan on borrowing funds to cover some or all of the expenses related to your wedding, there are a number of potential options available, including a personal loan, a line or credit or even a credit card.

Personal loans

A personal loan is an amount of money that you can borrow for a specific purpose. It can either be secured or unsecured. When you take out a secured personal loan, an asset you own, such as a car, will be used as security for the loan, meaning the lender will have the right to sell that asset should you be unable to meet your repayments. When you take out an unsecured loan, there is no asset used as security.

Lenders typically consider secured loans to be less risky, meaning that the amount you can potentially borrow may be higher, and the interest rate on the loan may be lower. If you are looking to borrow money to fund a wedding, a personal loan may be an option, but as with any loan, there are risks attached.

Lines of credit

A line of credit is a kind of loan that comes with a flexible repayment schedule. Typically with a line of credit, you will arrange with your lender to have funds available to withdraw up to a set limit, and you have the option to draw up to this limit, or use none of it at all.

A line of credit differs from a standard loan in that funds can be withdrawn and repaid at the discretion of the borrower, and there is no fixed repayment term. Likewise, you will typically only pay interest on the funds you have actually drawn.

Credit cards

If you already have access to a credit card with a competitive interest rate, you may also consider using this for purchases related to your wedding. If you are looking for ways to reduce your interest repayments on an existing credit card debt, one option may be to transfer your debt from one or more existing cards to a new card that offers 0% interest for a limited time.

How can you apply for a wedding loan?

Depending on the lender, you can apply for a personal loan in person, over the phone, or in some cases online. The lender will consider your financial circumstances, including your income, savings, assets and debts and credit score in order to get a picture of who you are as a borrower. This will determine the amount they are willing to lend you, and at what interest rate.

The process of applying for a wedding loan is similar to applying for any other loan, and Canstar has a guide on how to apply for a personal loan, along with some tips to help get you started and factors to keep in mind. You can also compare personal loans with Canstar to find one with low rates and appealing features for you.

What are the risks of wedding loans?

It is always worth keeping in mind that when you borrow money for any purpose, you will need to consider your budget and whether the loan is affordable for you, as you will be going into debt and will need to repay your lender, with interest. If the term of the loan is long and you have a high interest rate attached, the repayments you make may end up being significant.

If you fall behind in your repayments with a secured loan, the lender will be entitled to sell the asset or assets you’ve used as collateral to reclaim their funds, whereas if you fall behind with an unsecured loan, the lender may take you to court. If you fall behind in your repayments, your credit score may be negatively affected too, making it harder to borrow money down the line.

If you are considering a line of credit, it is worth keeping in mind that the interest rates attached to these can be high, and conditions can be strict, meaning if you don’t read the terms and conditions carefully, you can end up paying a great deal in additional fees and charges and impacting your credit score.

Taking out a credit card also comes with risks attached, and while credit cards may contribute to a temptation to overspend, you will always have to pay the money back, on time and with interest. If you don’t make credit card repayments on time, it can similarly negatively impact your credit score, which can make it more difficult to borrow in future.

If you don’t fit the criteria for a standard personal loan, you could also consider a guarantor personal loan, which essentially means that a trusted person such as a family member or close friend can agree to be responsible for your loan in the event you are unable to make your repayments. These kinds of loans are risky for a number of reasons, one of which is the potential to damage familial relationships or friendships if payment obligations cannot be met.

Some wedding suppliers also work with buy now pay later (BNPL) providers, although BNPL can come with significant risks. The Australian Securities and Investments Commission (ASIC) recently found that 20% of BNPL customers cut back on essentials to make their repayments, and 20% also missed or were late in paying back other bills. It is therefore worth thinking carefully about your circumstances before taking out any sort of BNPL loan, including for the purposes of a wedding.

Payday loans are also an option for people who don’t fit the criteria for standard personal loans, but the Financial Rights Legal Centre has explicitly warned Australians that these kinds of loans are not recommended, as they can lead to unmanageable debt and damage your credit score.

What are some alternatives to wedding loans?

Rather than take out a loan for a wedding, many couples choose to save up to fund their big day. There are a number of advantages to this approach – using savings to fund your wedding could mean avoiding debt and accumulating interest, and it may help encourage you to set a realistic budget, and not be tempted to spend money you do not have.

If you and your partner are planning a wedding in a few years time, one approach might be to start setting money aside in a savings account, where it will grow interest until you are ready to draw on it for your big day. If you are considering starting a savings account for this purpose, Canstar has a guide to the best savings account interest rates on our database.

If you’re thinking about ways to save, Canstar has a list of 5 simple budgeting hacks to improve your financial health that you may find useful. We also have a list of tips on how to help you save money from some of our financial experts. We also have a list of apps that could help you make money and side hustles that you could consider to make money from home.

This content was reviewed by Sub Editor Jacqueline Belesky and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.

Alasdair has more than 15 years of experience as a journalist, and he specialises in property and lifestyle topics for Canstar. He has a Bachelor of Laws (Honours) from the University of Queensland and has lectured at QUT. His work has appeared in outlets including Pedestrian.TV, the ABC and Junkee.

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