So you want to buy an engagement ring but you don’t have enough cash. You’ve heard about the dangers of financing engagement rings, and you want to stay safe. Today, we’re here to help. Here’s how to finance an engagement ring.
An engagement ring is one of the biggest purchases you’ll make in life. You shouldn’t feel bad for financing an engagement ring. A recent study showed that 63% of Americans wouldn’t be able to handle a $1000 emergency expense. Considering the average engagement ring costs between $4,000 and $6,000, it’s easy to see why financing is a popular option.
Obviously, the cheapest way to buy an engagement ring is to pay cash. If you don’t have enough cash today, then the second cheapest option is to wait a while, putting away a little bit of money every week until you can afford to buy an engagement ring in cash.
But we get it: you’re in love. You don’t want to wait to get married. You understand the risks of financing, and you’re prepared to deal with the consequences.
Still, that doesn’t mean you should buy a ring you can’t afford. Don’t get caught up in marketing campaigns like the “two months’ salary” thing, which was invented by a diamond company in the 1940s to boost slumping sales. In the 1940s, people didn’t have debt like we do today. People weren’t paying off student loans or buying expensive houses. The financial realities of the 1940s and vastly different from the financial realities of today.
Okay, you get it. Financing an engagement ring isn’t the cheapest option, but you’ve decided it’s the best option for you right now. With that in mind, let’s take a look at the financing options available to you.
Before you buy, find an online jeweler you trust—preferably one that specialized in engagement rings, like James Allen.
Jewelry Stores Offer Different Financing Options
Jewelry stores, just like car dealerships, offer in-house financing options that vary widely in terms of quality. Some jewelry stores offer promotions like 0% financing with no payments for the first 6 or 12 months, for example.
Not all jewelry stores, unfortunately, offer good financing options. Some stores are notorious for offering high-priced financing by luring in customers with promises of a low monthly payment. When you add up the costs however, you realize you’re paying 50% more for the ring than if you were paying cash.
Today, some jewelry stores offer store credit cards as a financing option. The salespeople who work at jewelry stores seem to particularly push customers towards these financing options. Why? Well, if you have a credit card from a jewelry store, then you might be influenced to buy more stuff from that store in the future – like your wedding band or an anniversary present.
If you’ve visited a jewelry store lately, then you probably saw advertisements for 0% financing and other borrowing incentives. What’s the catch behind these financing options?
Typically, the “catch” is that the offers are competitive for a few months: you might pay 0% for the first 12 months, for example. But once that promotional period expires, you’re paying high borrowing fees that wipe out all your savings.
In general, jewelry store financing plans are known for offering very high interest rates. With that in mind, be sure to ask some questions before you sign up, including:
- What’s the catch behind the promotional period? After the 0% interest period ends, how much interest will I be paying?
- What happens if I miss a payment?
- What’s the regular interest rate for this financing option?
- Are there any fees for paying off the ring early?
If you can’t afford to pay cash for your ring, then consider signing up for a jewelry store with a competitive financing program. Then, pay off your ring within the promotional period, so you pay 0% interest for the duration of your loan.
Should You Use Your Credit Card to Finance Your Engagement Ring?
If you have a credit card, then you already have a source of financing in your pocket. Credit cards make it easy to pay for big purchases – but they often come with high interest rates if you miss a payment.
Nevertheless, credit cards are the best engagement ring financing option for some people – especially if you’ll have enough cash within the next 1 to 2 months.
Using your credit card to pay for an engagement ring you can’t afford isn’t the smartest thing you can do. However, there are certain things you can do to ensure you’re responsibly using your credit card to make the purchase.
One tip is to sign up for a new credit card with a 0% interest promotional period. Some credit cards offer 0% interest promotional periods for the first 12 months, for example.
Additionally, some credit cards will give you a sign-up bonus if you spend a certain amount of money within the first few months.
When you consider these things, then it seems like engagement ring shopping is the best time to apply for a new credit card. Some people might claim it’s a better option than paying cash. If you’re paying 0% interest on your credit card for 12 months, then you can save your cash, earn interest in a savings account, and pay off the ring at the end of the promotional period, before the low interest rate expires.
Ultimately, the most responsible way to use your credit card to pay for an engagement ring is to pay the entire balance each and every month. However, there are ways to responsibly use your credit card to finance an engagement ring – assuming you fully understand the terms and conditions.
Consider Personal Loans
Out of all the options on this list, personal loans are probably the most expensive option. If you qualify for a new credit card or for the jewelry store’s financing program, then it’s in your best interests to sign up for one of those options.
However, if neither of those two options are available, the personal loans can be your backup plan. Using a personal loan to finance an engagement ring will add a significant amount of money to the cost of your engagement ring. You’ll need to pay a lot of money in interest.
If you have some credit history, however, you should be able to get a personal loan. Depending on your credit rating, you’ll either have a high or low interest rate. The stronger your credit rating, the less you’ll pay in interest. You should be able to get a 3 to 5 year personal loan ranging anywhere from $1,000 to $35,000 or more, assuming you have some credit history.
If you’re a subprime lender, and you have a poor credit rating, then personal loans are probably not your best option. Banks will charge you interest rates exceeding 20%, which can easily add thousands of dollars onto the cost of an engagement ring – even a cheap one – over the course of your loan.
However, if you know you have a strong credit rating, then personal loans may offer interest rates cheaper than the jewelry store’s financing program or low-interest credit cards – like rates under 10%.
Basically, You Have Three Ways to Responsibly Finance an Engagement Ring
- Take advantage of a jewelry store’s in-house financing program, and pay off your ring before their 0% interest promotional period expires
- Sign up for a credit card that offers low interest (or 0% interest) for the first 12 months, and pay off your credit card bill before the promotional period expires
- Sign up for a personal loan, and take whatever interest rate the banks give you based on your credit score
You Can Always Ask Friends and Family
Sometimes, the best sources of financing are from friends and family. If you don’t feel too embarrassed to ask, then friends and family may be able to help you finance the ring.
One of the best parts about asking friends and family is that you might be able to get smaller amounts of money from multiple people.
With friends and family, the emotional connection is what’s most important. If your family has seen that you genuinely love your future fiancée, and that you’re willing to do anything, then they’re more likely to be compassionate to your request.
On the other hand, if you’re looking for financial help for an engagement ring for your fourth future ex-wife, then you may not get the same generous treatment from your family.
Requesting money from friends and family to pay for an engagement ring isn’t as unusual as you think. Don’t be afraid to ask – especially if your loved ones have seen how much your fiancée means to you.
Before you buy, find an online jeweler you trust—preferably one that specialized in engagement rings, like James Allen.
What to Look for in a Jewelry Store’s Financing Program
A quick Google search for “engagement ring financing” will reveal dozens of local jewelry stores that all offer different in-house financing options. These jewelry stores are all competing for your business, and one of the best ways to compete is by offering better financing options to customers.
Jewelry store financing programs all offer some common features, including:
Easy Application: You typically fill out an application in store, and then they process the claim while you’re still waiting. Jewelry stores are often able to assess your credit worthiness in as little as 15 minutes.
Down Payments: Most, if not all, jewelry store financing programs require at least some amount of down payment. 20% is the most popular and common amount found in financing programs.
Promotional Periods: Jewelry stores often offer promotional periods for 6 months or 12 months, during which you pay no interest. Look for features like “no payment, no interest, no down payment until 2020”, for example.
Minimum Purchase Amounts: Some financing programs require a minimum purchase amount to qualify for certain financing programs. For example, you may need to spend $2000 to qualify for “do not pay for 12 months”. If you don’t meet the minimum payment amount, then you may have to go to the standard financing plan, which doesn’t come with a promotional period.
Processing Fees: Most jewelry stores offer “processing fees” ranging from $30 to $100. These fees aren’t large, but they do tack costs onto your engagement ring purchase. Make sure you understand the processing fees attached to your financing program.
Fine Print: Like all financing programs, there’s a significant amount of fine print attached to your jewelry store financing plan. Make sure you read through it carefully, and pay close attention to the APR and any stipulations.
High Interest Rates: Jewelry stores are notorious for offering some of the highest borrowing rates in the lending industry. Most jewelry stores offer rates between 25% and 30%, which is higher than most credit cards and other financing options. If your financing agreement causes interest to accrue from the date of purchase, then a 30% interest rate can quickly send your costs spiraling out of control.
Ultimately, jewelry store financing programs are designed to connect you with credit as quickly as possible. That’s why most jewelry stores offer easy applications, fast processing, and a smooth borrowing process. Ideally, your jewelry store will offer a financing program that charges no interest if you pay off the amount within 12 months, given a 20% down payment. If you can pay it off within 12 months and avoid the high 20 to 30% APR financing, then you’ve saved a significant amount of money.
Should You Finance your Engagement Ring?
In a perfect world, you would pay cash for everything and never owe interest to anyone. Unfortunately, we don’t live in a perfect world, and sometimes you need to borrow money to buy an engagement ring.
Before you explore financing options, shop around and make sure it’s really in your best interests. Take a look at ring prices online, for example. Rings are typically 40% to 50% cheaper online than in brick-and-mortar jewelry stores. Even if you can’t quite afford the ring online, you may be able to save money for a few months to make the price within reach. Your proposal can wait that long, right?
However, if financing is really your best option, and you understand the risks, added costs, and other downsides, then use the strategies above to make sure you’re getting the best possible deal when financing your engagement ring.