Ways to finance an engagement ring

Proposing marriage with an engagement ring is a generations-old practice, but the cost of an engagement ring can be high. While it’s financially wise to set aside some savings up front for that big purchase, it might not be feasible in your situation.

Instead, you can choose to borrow money to buy an engagement ring. There are several ways to do this, such as financing a jeweler or lending an engagement ring.

Costs of an engagement ring

There are no rules forcing you to get an engagement ring of a particular size, shape or setting. However, you may have heard the outdated rule of thumb that an engagement ring should be worth around three months’ salary. Diamond jeweler De Beers popularized the antiquated idea of ​​linking the price of a ring to your monthly income in its 1930s marketing campaign. Yet couples still spend a lot of money on an engagement ring.

The Knot’s 2021 Jewelry and Engagement Study found that the average price of engagement rings paid by consumers rose to $6,000 from $5,900 in 2019. Among respondents, nearly 30% said they exceeded their budget for engagement rings.

Several factors go into the price of an engagement ring. The same study found that the gemstone used in the design of a ring is a notable price factor:

  • Clear diamond ring: $6,800
  • Gemstone: $2,500

Other pricing factors include ring setting, type of metal, diamond or gemstone details like rating and cut, and the region you live in.

Once you’ve figured out your ring budget and found the one that works best for you, you’ll need to decide how to pay for it if you don’t have cash.

Financing a jewelry store

Many large jewelry retailers offer in-house financing to help their customers pay for an engagement ring. This financing option is easily done in store or via the jeweler’s online platform. This is an installment loan where you can walk out of the store, ring your hand, and make additional monthly payments on the loan balance, plus interest.

Generally, jewelry financing offers more flexible credit requirements compared to borrowing a loan from a traditional bank. Some retailers may have financing requirements, such as a minimum purchase amount, and offer various repayment terms.

Best for: Buyers looking for a convenient source of financing and those who may not have strong credit.

Credit card

Using a credit card to fund an engagement ring can be a strategic option for responsible borrowers.

For example, let’s say you have strong credit and qualify for an 18 month 0% APR rewards promotional credit card. In this scenario, you are sure to be able to refund the full cost of the ring during the short-term promotion period. Choosing a zero-rate rewards credit card to pay off your engagement ring may result in paying no interest during your repayment while earning rewards points or miles.

If your credit does not qualify for a promotional rate offer, be aware that credit card interest can be high. When using an interest-free promotional credit card, calculate if you have the budget to pay off the ring during the next billing cycle.

Best for: People who have strong credit or who can fully refund the ring purchase by the next billing statement.

Personal loan

Another classic option is to borrow an engagement ring. Some lenders market this loan product specifically as an engagement ring or wedding loan. Also, some lenders simply call it a personal loan where you can use the loan funds for any purchase, including an engagement ring.

Like jeweler financing, a personal loan is another type of installment loan. You’ll repay the loan in smaller monthly installments over a set period, plus interest and fees. However, unlike financing from a jeweler, since the lender is a third party, you will need to obtain loan approval before purchasing your ideal ring.

Eligibility for an unsecured personal loan varies among lenders, which includes credit requirements for approval. The advantage of third-party loans for engagement ring purchases, however, is that you can compare rates from multiple lenders to find the lowest option.

Best for: Buyers with good credit who want to shop around for a competitive interest rate.

Buy now, pay later

Buy now, pay later (BNPL) loans, also known as point-of-sale financing, have grown in popularity in recent years. BNPL services, such as Affirm, Klarna and Afterpay, are integrated into the online payment process when buying an engagement ring online.

Typically, you must pay a percentage (eg, 25%) of the total purchase upfront. Then you have to make equal payments over a short period to pay off the remaining balance. Depending on the repayment term you choose or your credit, a BNPL loan may be offered to you without interest.

Best for: Online ring buyers who want a seamless financing experience and the ability to pay no interest for a short repayment term.

Home Equity Loan

A home equity loan, also known as a “second mortgage,” is the only type of engagement ring loan on the list that is a secured loan. It allows you to borrow a fixed amount loan which is borrowed against the equity you have accumulated in your home. Lenders have their own equity loan limits in terms of how much you can borrow; generally, it is limited to 85% of the equity in your home.

It usually offers low fixed interest rates and, like a personal loan, you pay it off in equal installments each month. Since it uses your home as collateral, a home equity loan is considered low-risk financing for lenders. As such, it might be easier to get this type of engagement ring financing than a third-party personal loan.

However, the biggest caveat is that if you are unable to repay your loan and fail to repay the loan, the bank may foreclose on your home.

Best for: Those who have built up equity in their home and are looking for competitive interest rates.

At the end of the line

Whenever possible, it’s best to avoid borrowing money to finance an engagement ring and instead plan ahead for this important purchase. Overall, engagements and weddings can be expensive, so it helps to have a solid plan for how you’re going to pay for them.

However, if you need to fund your engagement ring gradually, consider your personal circumstances to decide the best path to take. This includes establishing a realistic ring budget, accessing your finances, and being able to reasonably pay off the engagement ring loan while finding a ring your partner will love.

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