So, you’re ready to pop the question and ask your best friend to marry you. All you need now is the perfect engagement ring.
You have probably started looking for engagement rings and have realized that they are not cheap. Depending on style, they can range from from a few thousand dollars up to $10,000 or more.
According to a study by TD Bank, the average cost of an engagement ring is $2,016 with 50% of people paying less than $5,000. 7% of people pay over $10,000 for their ring.
How Much Should I Spend on an Engagement Ring?
Some people think that spending more money on a ring impresses other people and that bigger is better. It is tough to avoid those stereotypes when we see celebrities walking around with softballs on their hand.
That said, it is best to be realistic about what you can afford. An engagement ring should not be about impressing other people. It is about showing your love and devotion for your partner.
And, if your partner demands an overly expensive ring that you can’t afford, you may want to talk about your financial priorities.
So, how much should you spend on an engagement ring? A classic rule of thumb used to be two or three months salary. Unfortunately, this was primarily made up by the diamond business to get people to spend more money on their true love.
That would mean that, if you make $60,000 per year, you’d have to spend $10,000 to $15,000 on a ring! Feel free to do so if you want, but that is a little overkill, in my opinion.
Less is More for Your Financial Security
A better option is to assess what you can afford, how much you have saved up, and what your future looks like with your fiancé. If you would like a honeymoon, kids, house, or anything else, it probably makes sense to save your money for that.
At the end of the day, you can save thousands of dollars with a less expensive ring and your spouse will still love it.
Look for the best deals, shop online, or compromise on the 4C’s to get to a price range you can afford. More and more of our friends are opting for different gems other than diamonds. There are certainly options to make sure your engagement ring fits your budget.
Once you set your budget and have found your engagement ring, it’s time to pull the trigger and buy it. Here are a few ways that you can make sure you can afford it.
Pay Cash
The best way to pay for your engagement ring is to just pay cash. Save up until you have enough money to cover it entirely from your savings account.
Paying cash makes sure that you don’t over extend yourself and ensures that you can afford it. By being proactive and saving up before the purchase, you also will make sure to not go into your marriage with debt hanging over your head.
If you are getting serious with your significant other and are thinking about marriage, start a ring fund as soon as you can. Even if it is only a few months, saving as much money as possible will help you buy the perfect ring.
Put It On a Credit Card
If you have enough cash to pay off the engagement ring entirely, I still recommend paying with a credit card. This will allow you to earn cash back or points if your credit card has a rewards system. The key with this is to pay off your credit card statement right away so that you don’t carry a balance.
Let’s say you purchase a $5,000 ring and earn 2% cash back on your purchases. You will earn $100 just by swiping your card. Take advantage of that free money to help pay for the ring or any of your other bills.
If you haven’t saved enough cash to cover the full cost of the engagement ring, you will need to find a way to finance it. A credit card is one of the easiest ways to do that, provided you have a high enough credit limit.
Before choosing to finance your engagement ring with a credit card loan, be aware of your interest rate. Most credit cards have very high interest rates that can be higher than 15%. This type of debt can be damaging to your future financial security, so be aware of the downfalls.
You should also know approximately how long it will take to pay off. 2 months or 2 years? Financing your engagement ring with a credit card could work well if you plan to pay off the balance within a short period of time. However, it starts to get riskier the longer it takes.
Jewelry Store Financing
Buying your ring from a jewelry store gives you the benefit of being able to take advantage of their financing. They often have promotions that allow for flexible, deferred, or installment payments. Financing the ring through a jewelry store credit card may give you a better interest rate than your normal credit card.
If you choose to go this route, pay special attention to the fine print. While there are certainly deals that can make paying for your ring easier, there are some traps that can cost more money.
For example, they might offer a low interest rate for an introductory period. After that runs out, the interest rate may jump. Other financing offers may include fees and penalties if you don’t meet the minimums or pay it off on time.
Types of Jewelry Store Financing
- Installment Plans: This type of financing allows you to choose your preferred term and pay off the ring with monthly payments. The term can often be adjusted anywhere from 3 months up to 2 years. Some jewelry stores offer this at no cost while other will charge interest, so be sure to understand the fine print.
- Lease-to-Own: This is a way to make payments for a set period of time to pay off the engagement ring. During this period, the ring technically is still owned by the jewelry store. Once you pay off the balance, you will officially own the ring. Be aware that this does cost more than paying the retail price of the ring.
- Deferred Interest: In deferred interest financing, you won’t pay any interest as long as you pay off the balance of the loan in the set period of time, usually around a year. Effectively, the interest is accrued during the term, but you don’t pay it unless you don’t pay off the balance on time. If you don’t pay off the full balance, you will then be hit with a sizeable interest fee that will be due at the end.
- Jewelry Store Credit Card: If you open a credit card from a specific jewelry store, they may give you extra perks for signing up. This can include welcome rewards, discounts off your next purchase, or cash back on future purchases. This type of financing works very similar to normal credit cards but is tailored for financing engagement rings and jewelry.
Choosing the right type of jewelry store financing will come down to how much money you have upfront and how quickly you can pay off the rest. Always give yourself a bit of a cushion in case you can’t pay it off as quickly as you first thought. Make sure you won’t get hit by extra fees if you do need to take a little longer.
Use a Personal Loan
Another option to pay for your engagement ring is to take out a personal loan. A personal loan is a way to get access to extra money by paying a set interest rate over a certain term. This will cost more than a 0% financing offer, but could be an alternative.
There are many financial institutions that will provide personal loans, including online lenders like LendingTree. Shop around to find the best interest rate with the shortest term that you can afford. Longer terms will cost you more money in interest, so try to pay off your ring as quickly as possible.
Check with your bank account first to see if they are able to give you a personal loan to cover the engagement ring. By showing that you have collateral in the form of checking and savings accounts, you may be able to get a lower interest rate.
If you belong to a Credit Union, they also tend to have lower interest rates than other institutions. Compare a few different options and try to get a lower interest rate than your credit card.
How to Pay Off an Engagement Ring
After you have found the perfect engagement ring, it’s time to pay it off. This starts with making a down payment on the engagement ring. Use as much of your savings as you can to make a down payment on the ring. This helps to reduce your total debt, along with the amount of interest you have to pay.
Next, choose the financing that works best for your financial situation. Look for the cheapest option that will give you enough flexibility to make your payments. Try to go with 0% interest financing, if it is an option, but make sure you can repay the balance by the end of the term.
As you are picking the right type of financing, make sure that the monthly payment amounts work for your lifestyle. Think about how much extra money you have each month that you can put towards your loan.
Also consider how long you are willing to pay for it. Try setting the goal to pay it off before the wedding, if possible, so that you don’t go into your marriage with too much debt.
Once you have your ring financing set up, make it a priority to pay the minimum every month. If you can, round up and pay extra so that you can pay it off early.
Choosing the Best Engagement Ring Financing
If I were getting engaged and needed to buy a ring, I’d try to be proactive and save for the full amount before buying it. However, that is not always practical or possible.
In those cases, start by finding the ring that you like and get the best deal that you can. If you are buying from a jewelry store, see if they offer any 0% financing for a certain period of time. As long as you can pay it off in that term, that is usually the best choice of financing.
If you can’t get financing from the jewelry store for whatever reason, you can look into a personal loan from your bank. Just make sure that the rate is less than your credit card interest rate and that there are no hidden fees.
Depending on how much you need to borrow, a personal loan may be too much. The minimum is often between $3,000 and $5,000, so it might be too much if you only need a small loan.
In those cases, using your credit card is probably the easiest form of financing. Since the interest rate can be considerable, you will want to try to limit the length of your credit card debt. Try to keep the loan to as short as possible so that you can save on interest.
Getting engaged and picking out a ring is a big step. But, you can start your marriage strong by picking the best financing for your engagement ring. You’ll be ready to start planning to buy a new home!
