A wedding can be one of the happiest, yet, among the most expensive events in your life. Borrowing for your wedding can be an easy way to manage expenses but can be financially risky if not planned well. The start of married life should be on strong foundations, and finances are a cornerstone of that. So, before you apply for a loan for your wedding, here are some things you must consider beforehand.
Borrow only what you can repay comfortably
A personal loan can be a quick funding solution. But, are its EMIs fitting within your monthly budget? Ideally, your total EMIs, including existing loans, should not exceed 40% of your monthly income. Any higher, they can strain your finances and affect your future borrowing capacity.
Compare all financing options
If you’re shopping for wedding or personal loans, don’t be hasty in accepting the first attractive offer. Always compare interest rates, processing fees, tenure options, and prepayment charges across lenders. Because, even a 1 per cent rate difference can save you thousands in interest payments over the tenure.
If you can avail of a top-up on an existing home loan, or already have a credit card that offers a low-interest EMI option, consider those before opting for a new personal loan.
Opt for a short tenure
In loan terms, shorter tenures translate to higher EMIs but lower total interest outgo. Keeping that in mind, try repaying your wedding loan within a short tenure that you can afford, without compromising other costs. On the flip side, while long tenures make repayments cheaper initially, they cost much more in interest.
Maintain your credit score
Your credit score is key for loan approvals, as well as being offered lower interest rates. A score above 750 boosts your negotiation leverage. So, before you apply for that loan, check your credit report and clear outstanding credit card balances or small dues to strengthen your profile before applying.
Don’t fund your entire wedding on credit
Wedding celebrations last only a few days but loan repayments can go on for years. Instead of relying solely on credit to fund your wedding, use a mix of resources like savings, credit, and family contributions. This can help reduce the financial pressure that comes with repayments later.
Plan repayment before you borrow
Before you borrow, have a strategic repayment plan in place for repayments. Have a budget in place to ensure EMIs don’t get delayed, set up automatic EMI payments to avoid late payment penalties, and avoid taking on new credit until you have cleared off this loan.
Weddings are a new beginning, one that should start on steady ground. A solid financial plan to fund your wedding will allow you to not only afford but also enjoy the celebrations stress-free.
(The author is the CEO at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
