How to Finance an Engagement Ring

Engagement rings can cost a pretty penny. Whether you plan to spend two weeks’ or two months’ salary, you may be wondering the best way to pay. Here are the most common options for engagement ring financing, with their pros, cons, and some credit score considerations.

Some say that the best way to pay for an engagement ring is with cash. Every dollar you spend goes toward the actual ring – not interest or fees. Besides, you’ll have peace of mind knowing you spent what you could afford, and cash won’t affect your credit score. But paying cash for such a big purchase can be easier said than done.

  
Saving takes time and discipline – and can be especially difficult for couples with other budgetary commitments, like a home, a car, or student loans. If you want to pay in cash, get into the habit of putting a little money aside from each paycheck and watching it grow over time – consider an online high-yield savings account for this. You might also consider raising cash by taking on a side hustle or selling unwanted possessions online.

Consider including your partner in any decision on engagement ring financing. This fosters open communication about expectations, finances, and priorities. Together, you might come up with alternatives – like choosing a less expensive gemstone or buying a smaller ring with plans to upgrade later. Or perhaps your future fiancé is one of the few who are happy to chip in to get what they want.

Most jewelry stores offer purchase financing or a store credit card, and many incentivize their sales associates to plug them during the sales process. Jewelry store financing for your engagement ring may be the right thing for a very careful buyer.

Retailers make the process of applying for credit easy, using short applications with quick answers on whether you’re approved and for how much. Promotional terms, like 0% interest and/or delayed payments, may be attractive if you know you can pay off the balance before the promotional period ends. Further, you may also receive special discounts or promotions for future purchases, such as wedding bands and anniversary presents, when you open a store credit card.

But always remember to carefully read the fine print in jewelry store financing agreements – there may be additional costs in the details, and/or the interest rate could increase if you’re late or miss a payment. Some retail financing includes a deferred interest clause that allows the store to retroactively charge all of the interest you avoided from the promotion if you don’t pay off the entire balance in the agreed time frame. Applying for financing could also trigger a hard inquiry, which can cause a ding in your credit score.

Credit cards are a popular way to finance engagement rings. With careful planning they may be a good option, giving you time to pay and the flexibility to pay more whenever you can. And consistently making on-time payments can help your credit score in the long-run.
With good credit, you may qualify for a 0% intro APR credit card – one that charges no interest on purchases for a set promotional period, typically about 12 months. Lining up the promotional period with your plan to pay off the balance will help you avoid interest charges – and you may even earn rewards or a welcome bonus on some cards. Going this route might make sense even if you can pay cash, so you can keep your money in an interest-bearing savings account.

 
If you plan to use a credit card, keep track of the promotional period. After that period ends, you’ll incur interest charges if you haven’t already paid off the full balance. You’ll also want to ensure that your purchase is within that card’s available credit limit. Calculators like the Spending Power Tool from American Express can help you plan by confirming in advance if the charge will be approved.

Loans are another way for couples to finance wedding costs, including the engagement ring. Increasingly, couples are using loans to finance wedding costs, including the engagement ring. Often called “wedding loans,” these types of loans are technically just unsecured personal loans, usually payable over three to five years.

 
A personal loan may be the best way to finance an engagement ring if your credit profile doesn’t qualify you for a promotional credit card or if jewelry store financing isn’t an option. These loans can be easy to apply for online, and don’t normally require collateral. Your interest rate is determined by your creditworthiness. Some find the predictability of a fixed payment over a set time period to be helpful. And if you make all your payments on time, you may also be helping your credit score, which can increase the amount of financing options available to you in the future.

Personal loans can be a costly option, though, since they may carry processing fees and prepayment penalties in addition to interest charges. And the longer the repayment term, the higher the interest rate is likely to be, which can add significant costs to your ring.

Any type of financing requires an evaluation of your personal finances, including your credit score. The better your score, the more choices you’ll have. For personal loans, a credit score over 700 is usually considered good. Some online lenders might accept lower scores, but will usually charge higher interest rates. It’s a good idea to check your credit score before applying and give yourself some time to try to get that score up, if needed. The higher your credit score, the more likely you are to encounter more favorable interest rates, loan terms, and credit card deals.