Financial Mistakes You Should Avoid While Funding Your Marriage
Marriage by itself is a wonderful feeling and a one time experience that should be as sweet as it can be. Funding a wedding also involves a lot of money and sometimes you may not have that much money or simply wish to fund your marriage.
However, while funding your marriage, make sure that you do not get tied into different knots that will be as hard to untie as your marriage knot.
Consider taking a loan for funding your marriage only in case it is essential and there is a shortfall. Add to that make sure that you take a small one too for that matter because this will prove to be an expensive choice otherwise.
Typically, the wedding expenses are borne by the parents but there can be exceptions. No matter who bears the expenses, creating fund for marriage ideally starts long, long before the actual marriage sometimes even spanning over ten to fifteen years of fund creation in different forms.
The cost of marriage can be varied and extensive as it all depends on different factors such as
- The culture and traditions
- The processes to follow
- Floral and other decorations
- Venue and
- All other wedding trousseau.
Mostly, people do not want to take a loan for marriage, though this is a lavish affair and an important milestone in everybody’s life. However, those who cannot bear the expenses for funding a wedding on their own or pool in money often resort to taking out a loan for it.
Various financing options
There are various financing options available to fund your marriage. There are several banks and non-banking financial companies such as libertylending that offer loans. Usually these loans come in two distinct types: unsecured and secured.
An unsecured wedding loan is more of a personal loan where the rate of interest can be as high as 22% per annum, depending on several factors. These factors include:
- The financial institution
- Eligibility of the borrower
- Income level and
- Repayment capacity
The tenure for these loans usually is up to five years and may also come with a prepayment penalty as well.
A secured loan on the other hand is much similar to a loan against property or collateral such as a mortgage an immovable property.
You may also give any financial asset as collateral. In this type of loan the factors that are considered are the same as above with an inclusion of LTV or the LoanToValue ratio. The amount of loan you may get will vary according to the collateral, where you stay and others.
Use of credit cards
However, in this age of plastic money, you can also resort to your credit cards to bear the expenses of your marriage which is also a specific type of unsecured loan which carries a very high rate of interest if you do not repay it within the specific and predetermined interest free period.
However, there are other features and aspects of credit card loans that you need to consider.
- You can change the revolving credit into cheaper option by converting the payments in equated monthly installments. The usual rate of interest in credit card debts often ranges from 36 to 42% per annum depending on the business policy of the credit card issuer.
- Moreover, if you transfer your outstanding amount to an EMI option, this high rate of interest can be halved depending on the tenure you wish to carry the EMIs. In the end, it will be less stressful for you to pay off the debt this way.
- Apart from that, when you use credit for such high value expenses it will surely have an effect on your credit score. It will bring down your credit score significantly. Therefore, it is prudent to convert your outstanding expense into EMI as it will regularize and bring down the monthly payments thereby benefiting your credit score in the process.
However, the credit card option for funding your marriage is not suitable for everyone even if the outstanding balance is transferred into EMIs.
If you are already struggling with your credit card dues and do not foresee any additional source of income in the near future, this is a major financial mistake you should avoid when you need funds for your marriage.
Moreover, this option should only be used when your credit score is good or else it will be a real challenge that you will face right from the next day of your marriage. It is also advised that you check out the foreclosure charges and processing fees before taking a call.
What to do
Experts and financial planners are all unanimous against taking a loan for wedding expenses unless it is a very small proportion.
Instead they suggest that you should prepare for big day just like you follow your other financial goals.
They suggest a few specific steps for planning your wedding expenses such as:
- Planning in advance and accurately
- Arrive at a realistic estimate
- Ask close friends and family for rough estimates, especially those who have got married recently
- Have a detailed category of cost such as cost for venue, accommodation, transport, F&B, and others
- Consider suitability and balance with your affordability and
- Keep options open to trim costs if the budget overshoots
It is required that you focus on the wealth creation corpus or that matter. Considering the risk taking capacity of you as well as the instruments involved, you can even place your money in equity provided you start planning for wedding way ahead of time. This is the best way to go ahead especially if you are planning to fund your wedding yourself.
You must avoid taking out money from a few specific sources for your future benefits. These sources are:
- Emergency funds
- Loan closure provisions
- Education for the second child
- Retirement plans and
- Long term investment instruments
There are multiple other ways to fund your wedding. You can apply for a personal loan, avail a marriage loan, opt for a secured loan and even start a crowd-funding page to get your target amount for funding your marriage. Most importantly, discussing your finances and goals with your partner is important to build a happy marriage and enjoying marital money bliss.
Want to have a happier, healthier marriage?
If you feel disconnected or frustrated about the state of your marriage but want to avoid separation and/or divorce, the marriage.com course meant for married couples is an excellent resource to help you overcome the most challenging aspects of being married.