An engagement ring is perhaps the first significant purchase of your life as a couple. Financial decisions like this should not be taken lightly. A recent study showed that 76% of the surveyed couple would spend about $2,016 on an engagement ring, while 17% will spend between $2,500 to $5,000, and 7% will spend more than $10,000. It will be hard shedding out this large amount of money, so most people consider financing an engagement ring.
The first thing you need to do before purchasing an engagement ring is to have a budget. Your budget is a personal choice. It should not be influenced by norms such as the “two month’s rule.” Two months’ worth of salary for a ring is unrealistic for most people.
Like everything else, it is cheaper to save money ahead of time and pay in cash. This will help you avoid unexpected interests and live within your means. However, if paying cash in full is not an option, you may want to finance that engagement ring instead.
We know this struggle, so we curated the best four ways to finance an engagement ring and how much you will pay each month. You can choose from either jewelry store financing options, acquiring a new credit card, or having a personal loan.
Financing an engagement ring and monthly payments
Financing an engagement ring is not a bad choice, so long as you know what you’re doing.
Jewelry store financing
The ring itself may not be a surprise, but looking into jewelry stores has its own advantages. Your future fiance can choose and try on different rings before he/she could find the perfect fit. You can do this during a great sale so the store can offer you discounted options.
Remember to look out for “deferred interest” credit offers. Unless you can pay all your credit on time, this payment plan will charge you all of the interest you have not paid during the deferred period. You are also required to keep up with the minimum monthly payments. If you are late or missed the payment deadline, the deferred period ends, and you will be charged the interest from when you first bought the ring.
How much will you pay: It depends on what type of payment plan/s the store is offering. If it is “deferred interest,” you will only pay the ring’s price but within the promotional period. Some stores offer 3, 6, 9, 12, or 24 months of monthly plans. In this case, the ring’s cost will be equally divided into the months of the plan. However, the “deferred interest” will most likely be available only to the first one to six months. This is to make sure you pay fully before you are charged with high interest.
Open a new credit card
Find a credit card that offers a 0% annual percentage rate promotion. Even if you have the cash to pay partially, it would still be smart to do this option. There are a lot of credit cards that offer an extended 0% APR promotional period. The only thing to remember is to pay for everything before the promotional period ends. If you fail to do so, you will have to face a high-interest rate.
However, this method requires a lot of patience. First, you will need to have and maintain good credit to qualify for any 0% APR promotions. You should also be willing to apply for a new credit card. Lastly, you will have to wait for weeks or even a month for your card to arrive in the mail.
If those inconveniences do not bother you, we highly suggest that you consider this option instead.
How much will you pay: Most credit cards will require you to pay a minimum amount per month. This is typically a fixed, often $20 to $25 or 1% to 3% of your balance. Paying the minimum amount can be tempting. But remember, if you pay less now, you will pay more later. Fully pay your engagement ring before the 0% APR promotion ends, or they will charge you more interest at the end of the year.
Ideally, you would want to avail the 0% jewelry financing or secure a 0% APR on a credit card. However, some things are out of our control – a low credit score, a high-risk financial history, a credit ban, etc.
When all those things did not work, having a personal loan is your last resort.
Look for a personal loan program with a low-interest rate. Something not more than 10% is a good benchmark. Whatever rate you ultimately find, make sure that it costs lower than the average APR on a credit card (in this case, 16%). It is also better to make the loan term as short as possible to save money on interest. Anywhere from 12 to 60 months is okay, shorter than that, much better.
How much will you pay: It depends on how much personal loan you applied. You will generally need these four variables to calculate your monthly payment: the amount of the loan or the price of your purchase, your down payment, the annual interest rate, and the number of monthly payments. Head on to any loan calculators online, and it will show you a rough estimate of how much you will pay per month.
Have you set the budget for your desired engagement ring yet? Check out our engagement ring calculator to help you control your engagement ring finances!