Once you find the one and decide to propose, you’ll need to find the perfect ring. But that can come with a sizable cost — about $3,700, according to Brides’s most recent American Wedding Study. If that’s more than you want to pay out of pocket, you may be able to break up the cost over time. Here’s a look at four different engagement ring financing options and the pros and cons of each.
How does financing an engagement ring work?
Engagement ring financing involves borrowing an amount of money in order to pay for an engagement ring, then repaying that amount plus applicable interest and fees over time. The main benefit is that you can get the ring you want now and pay it off incrementally in a way that fits your budget.
But there are multiple ways to borrow money for an engagement ring. A few of the most popular engagement ring financing options are credit cards, personal loans, jewelry companies that offer financing, and “buy now, pay later” loans. Learn more about each and which is best for you.
Using a credit card for an engagement ring
When you finance an engagement ring with a credit card, the cost of the ring will be added to your outstanding balance, and reduce your available credit proportionately. If you pay it off before your billing cycle closes, you won’t be charged any interest. However, if you don’t, the outstanding balance will accrue interest according to the annual percentage rate (APR) on the card.
Since interest rates can be high, over 30% on some cards, using a credit card to finance an engagement ring may not be the best option. There are some exceptions, however. If you qualify for a 0% promotional offer on a credit card, that could be an excellent way to finance a ring, especially if you can pay it off within the promotional period. Or, if you expect to have the money within a short period of time — say a few months — it could make sense to put the purchase on your card and pay it off entirely when the money comes through.
Pros
- Convenience: If you have a credit card with enough credit available, you can simply go ahead and make the purchase. If you don’t, you can apply online within a few minutes (look for a card with a 0% or low promotional APR).
- Flexible repayment: You only need to make the minimum payment each month, which is often a modest fixed amount or flat percentage of around 2% to 5% of your account balance.
- Rewards: If the card comes with rewards and the ring purchase qualifies, you can earn kickbacks, such as cashback, points, or miles.
Related: Personal Loan vs. 0% APR Credit Card
Tip: Large purchases can be a great way to rack up credit card rewards points, just make sure you can pay them off quickly to avoid excessive interest charges.
Cons
- Approval challenges: To get approved for a credit card with a large enough credit line, you’ll often need good credit.
- High costs: Credit cards can have high APRs, well over 20% in some cases, plus fees. Since they don’t have a scheduled payoff date, you could potentially pay a high interest rate for many years.
- Credit score drop: Carrying a balance on a credit card increases your credit utilization, which causes your credit score to drop.
If you decide to go the credit card route, look for cards that offer low APRs, no annual fees, and competitive rewards. You can also keep your costs down and potentially improve your credit score by paying off the balance as soon as possible.
Using a personal loan for an engagement ring
Personal loans are another viable option to finance an engagement ring. A personal loan provides a lump sum that you can use for almost any purpose. You repay the money through monthly payments over a set term, such as five or seven years.
Many banks, credit unions, and online lenders offer them, and most let you prequalify. Prequalifying with multiple lenders is a great way to compare loan terms and rates you might qualify for before applying.
Important: Prequalification won’t hurt your credit, but your score may drop by a few points temporarily once you formally apply for a personal loan.
Pros
- High loan amounts available: A wide variety of lenders offer personal loans. Available amounts vary from under $1,000 to over $100,000, depending on the lender.
- Multiple repayment terms available: Repayment terms are available for as short as a few months to as long as 7 years for most loan purposes, depending on the lender.
- Good credit not necessarily required: While it’s easiest to qualify for the best rates with excellent credit, it’s still possible to find personal loans for fair credit and bad-credit borrowers.
- Fixed interest rates: Most personal loans have fixed interest rates and fixed monthly payments, which can make them easy to budget for.
- Competitive APRs: The average interest rate on a 2-year personal loan was 12.33%, according to the Federal Reserve, which is nearly half what it was on a credit card (21.86%).
Cons
- Less favorable terms for fair and bad credit: If your credit is fair or poor and you get approved, the amount you’re eligible to borrow will likely be lower than someone with good credit, and the APR may be high (as in over 30%).
- Fees: Many lenders charge origination fees, which could be up to 10% of the loan amount (or more), depending on the lender.
- Approval challenges: You may not get approved if you have bad credit and/or limited income.
Learn More: What Is the Difference Between APR and Interest Rate?
How to find the best personal loan
Learn how to compare personal loans to improve your odds of finding the best personal loan by shopping around. To start, look for lenders with eligibility requirements that are a good match for your credit and income situation. Among those, find the lenders that best suit your needs. You may want to consider the following:
- Minimum credit score requirements
- Minimum income requirements
- Funding times
- Loan amounts available
- Repayment terms available
- Fees (origination fees, late payment fees, and insufficient funds fees)
- Discounts (autopay and direct deposit)
Once you’ve narrowed the scope, prequalify with multiple lenders to compare loan amounts, APRs, and payment schedules you might qualify for.
Tip: Different lenders cater to different borrowers. For example, Lightstream focuses on borrowers with good to excellent credit, while Avant considers credit scores as low as 550. (Both Lightstream and Avant are Credible partner lenders.)
Jewelry store financing
Jewelry stores may offer financing in-store and online, in the form of installment loans and/or revolving credit lines (loan products vary by company). In many cases, jewelers also offer perks with their financing offers like no-interest promotions, welcome gifts, and discounts.
Pros
- Interest-free periods: Many jewelers offer interest-free financing for a certain period after the purchase, such as up to 18 months.
- Perks: Borrowers may get other perks like free shipping, sales alerts, birthday gifts, cleaning reminders, and discounts.
- Various repayment periods: Terms from 6 months up to 3 or 4 years are often available, but vary based on the amount you spend and the jeweler.
Cons
- Hard credit checks: While prequalification via a soft credit check is the norm for personal loans, many jewelers require a hard credit check right away.
- Exclusive to the store: Jewelry store financing means you can only use the borrowed funds to buy merchandise at that store.
- High APRs: Normal APRs may be high (around 30%) and interest may be backdated if a balance isn’t paid off by the end of a promotional period.
You can go online and research jewelry store financing programs before going to shop in person. To find the best deal, review the loan types (e.g. installment loan or revolving credit line), minimum purchase requirements, interest rates, fees, down payment requirements, and perks of at least three stores.
Tip: You can often apply for financing with a jeweler online. Your credit report may take a hit, but it can be worth it to find out the amount you can borrow ahead of time. Then, you can negotiate in-store without the store’s decision-maker knowing your budget.
Buy now, pay later (BNPL)
BNPL loans through companies like Affirm, Afterpay, Klarna, and PayPal have gained popularity in recent years. They involve a BNPL lender approving you for a loan amount that you can use at the store of your choice, often through a virtual one-time-use credit card. The loans are typically structured as installment loans, with interest and fees built into a fixed repayment schedule.
- Quick approvals: Find out if you qualify within minutes via a soft credit check.
- Interest-free options: Many providers offer an interest-free, short-term financing option — with Affirm for example, payments are interest-free for up to 8 weeks.
- Bad-credit borrowers more likely to qualify: BNPL lenders may approve bad-credit borrowers who have trouble getting approved elsewhere.
Cons
- High APRs: If you don’t repay the amount during the interest-free period, you could end up with a high APR (well over 30%) especially if you have bad credit.
- Short terms: Loan repayment terms tend to be on the shorter end, relative to personal loans, maxing out at one to two years.
- Down payment: A down payment may be required before the lender agrees to finance the remainder of a purchase.
BNPL can be a good financing option if you only need to split a purchase up over a few paychecks. It can also make sense if you are having trouble getting approved elsewhere. On the downside, costs can be high and the repayment terms can be short. However, you can improve your odds of getting the best deal by comparing a few different BNPL providers. Consider loan amounts, APRs, fees, and repayment terms.
Tip: AfterPay offers terms of up to one year, while Affirm, PayPal, and Klarna offer terms of up to two years on some loans.
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
FAQ
How can I qualify for engagement ring financing with bad credit?
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Is it better to finance an engagement ring or pay in cash?
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What happens if I decide to return the engagement ring after financing it?
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How long does it take to get approved for engagement ring financing?
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