Engagement Ring Financing

When you're ready to pop the question, your mind is likely filled with romantic thoughts and nervous excitement. However, it's essential to consider the practical aspects of this significant life event, particularly the financial implications. Engagement rings, along with the weddings that follow, are among life's most substantial purchases. Starting on the right financial footing is crucial for your future together.

The Cost of Commitment

According to recent data from wedding website The Knot, the average cost of an engagement ring in 2023 was $5,500. This significant expense can be a challenge for many couples, especially those already saving for their wedding or other life goals.

While using savings is the most economical way to pay for an engagement ring, not everyone has thousands of dollars set aside for this purpose. If you find yourself in this situation, don't worry – there are several financing options available to help you purchase the perfect ring without breaking the bank.

Financing Options for Your Engagement Ring

There are several avenues to explore for financing an engagement ring, each with its own set of advantages and considerations. The key is to find a solution that balances affordability with financial responsibility. Ideally, try to prioritize options that offer no interest or low interest rates, as these can significantly reduce the overall cost of your purchase. Let’s break down what the most popular and common of these options look like.

Zero-Interest Credit Cards

One of the most cost-effective ways to finance an engagement ring is by using a credit card with a 0% introductory APR on purchases. These cards typically offer:

Interest-free periods ranging from 15 to 21 months: This gives you a substantial amount of time to pay off the ring without incurring any interest charges. For example, if you purchase a $5,500 ring and have an 18-month 0% APR period, you could pay about $306 per month to clear the balance before interest kicks in.
Potential travel rewards that could contribute to your honeymoon fund: Many of these cards offer sign-up bonuses and ongoing rewards. For instance, you might earn 50,000 points (worth around $500 or more in travel) after spending $3,000 in the first three months, plus 1-2 points per dollar on ongoing purchases.
Flexibility in repayment: Unlike loans with fixed payments, credit cards allow you to pay more when you can and less when money is tight, as long as you meet the minimum payment.
Potential credit score boost: If you use less than 30% of your credit limit and make on-time payments, you may see an improvement in your credit score.

Keep in mind that you generally need a good to excellent credit score (690 or higher) to qualify for these cards. It's also crucial to pay off the balance before the promotional period ends to avoid high interest rates, which can often be 15-25% or higher. And for this option, you’ll want to plan in advance since it can take up to two weeks to receive the new credit card, potentially eating into the timeline of a proposal or wedding date.

“Buy Now, Pay Later” (BNPL) Services

BNPL providers like Bread (our financing partner), Affirm, Klarna, and Afterpay offer another flexible financing option. These services allow you to:

Split your purchase into smaller, more manageable installments: Typically, this means four equal payments over six weeks. For a $5,500 ring, that means you might pay $1,375 every two weeks. We partner with a BNPL service that offers 12, 18, or 24 month plans, making monthly payments much more affordable.
Longer repayment plans are structured on a small interest fee, but it's usually lower than credit card interest rates.
Apply easily at checkout, either online or in-store. The application process is usually very quick, needing only basic information and doesn't require a hard credit check, meaning your credit score won't be affected by applying.
Get instant approval decisions: Unlike traditional financing methods, you'll know immediately if you're approved, for how much, and what the interest rate and future monthly payments would be.

Many popular jewelry retailers partner with BNPL providers, making this a convenient option. However, be aware that while on-time payments may not always build your credit, late payments could negatively impact your credit score. Also, some BNPL services charge late fees, which can add up if you miss payments.

In-Store Financing

While not offered by Ken & Dana Design, some jewelry stores, mostly nationwide big box stores, offer their own financing plans, which may include:

No-interest or low-interest promotional periods lasting up to three years: This can be particularly beneficial for expensive purchases, giving you ample time to pay off the ring without accruing interest.
Flexible payment options: Some stores may offer deferred interest plans, where you don't have to make payments for a certain period, or fixed monthly payments.
Potential discounts or perks for using store financing: For example, some stores might offer an additional discount on the ring or free resizing if you finance through them.
Special events or promotions: Jewelry stores often run financing promotions around holidays or special events, offering even better terms than usual.

Be cautious with these options, as interest rates can skyrocket (sometimes up to 33%) after the promotional period ends. Some stores may even charge retroactive interest on the full purchase amount if you don't pay off the balance during the promotional period. Always read the fine print and understand the terms before committing to this method.

Personal Loans

For those who prefer a more structured repayment plan, personal loans from a commercial bank can be a good choice. These loans offer:

Fixed interest rates and monthly payments: This makes budgeting easier as you'll know exactly how much you need to pay each month.
Repayment terms typically ranging from two to seven years: This flexibility allows you to choose a term that fits your budget. A longer term means lower monthly payments but more interest paid overall.
Potential for lower interest rates compared to credit cards: APRs can start as low as 6% for well-qualified borrowers.
Quick funding: Many lenders can deposit funds into your account within a few business days of approval.
No collateral required: Unlike secured loans, you don't need to put up any assets as collateral for most personal loans.

APRs on personal loans can start as low as 6% for well-qualified borrowers. However, those with lower credit scores may face higher rates, potentially up to 36% or more. It's crucial to shop around and compare offers from multiple lenders to find the best rate. Also, because of the shopping around and types of paperwork you may need to provide, this will not be a beneficial choice for most people.

An engagement ring's setting is a factor that will impact your ring's overall cost

Your center stone size is a major input into your ring's cost

Choosing the Right Financing Option

When evaluating the various financing options for your engagement ring, it's crucial to consider several key factors that will influence both your short-term affordability and long-term financial well-being. Assessing these elements will help you make an informed decision that aligns with your financial goals and circumstances:

Your Credit Score

Your credit profile plays a pivotal role in determining your eligibility for different financing options and the terms you'll be offered.

Individuals with excellent credit scores (typically 750 and above) are likely to qualify for the most favorable terms, including lower interest rates and higher credit limits.
Those with good credit (generally 700-749) may still access most options but might face slightly higher rates.
Fair credit scores (650-699) may limit some options and result in higher interest rates.
Poor credit scores (below 650) could significantly restrict financing choices and lead to much higher costs of borrowing.

Repayment Timeline

Consider how long you'll need to repay the financed amount and how this aligns with your other financial obligations.

Shorter repayment periods often mean higher monthly payments but less interest paid overall.
Longer repayment periods can lower monthly payments but may result in paying more interest over time.
Assess your monthly budget to determine what payment amount you can comfortably manage.

Interest Rates

Compare the effective annual percentage rate (APR) and calculate the total cost of the ring under different financing scenarios.

For 0% APR offers, ensure you can pay off the balance before the promotional period ends to avoid retroactive interest charges.
For personal loans or standard credit cards, compare the total interest you'll pay over the life of the loan or repayment period.
Consider any fees associated with each option, such as annual fees for credit cards or origination fees for personal loans.

Overall Financial Health

Evaluate how financing an engagement ring fits into your broader financial picture.

Consider your current debt-to-income ratio and how additional debt might affect it.
Assess the impact on your ability to meet other financial goals, such as saving for a home, planning for the wedding, or building an emergency fund.
Think about potential changes in your financial situation, such as job changes or other major life events, that could affect your ability to repay.

Terms and Conditions

Carefully review the fine print of any financing agreement.

Look for any penalties for early repayment, particularly with personal loans or in-store financing options.
Understand the consequences of missed payments, including late fees, penalty APRs, or potential impacts on your credit score.
For store financing or BNPL options, be aware of any limitations on where the financing can be used.

While the emotional value of an engagement ring is priceless, it's important to approach its purchase with a clear financial strategy. By carefully considering your options and choosing the right financing method, you can start your engagement on solid financial footing, setting the stage for a prosperous future together.

Remember, the most important aspect of an engagement ring is the commitment it represents, not its price tag. Choose a ring and a financing option that aligns with your values, your budget, and your shared financial goals as a couple.