How to Pay for Your Engagement Ring

How to Finance an Engagement Ring

You will have many stories to tell in your life.

The story of your first kiss on the beach during a frigid January.

The story of your first car and how it never kept air in the tires, so you had to fill it up every time you wanted to go anywhere.

But one story—your proposal story—will be one that everyone will want to hear.

So, if you’ve decided to propose to the person you love, then first, congratulations! And, second, you probably now realize you’re going to need an engagement ring.

Well, there are numerous financing options that may be able to help you pay for that engagement ring, and it’s important to weigh your options and do your research before deciding which is best for you.

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Wondering how to pay for an engagement ring? One way is to save up and pay with cash to avoid paying interest. Other ways include financing through a jewelry store, paying with a credit card or taking out a personal loan. Each has its advantages and disadvantages. Just remember, diamonds are forever, but you don’t want your debt to be.

Different financing options

There are a number of ways to finance the cost of an engagement ring.

Here are the financing options we’ll look at:

Personal loans

Jewelry store financing

Credit cards

Family and friends 

Now, let’s jump right in and explain how each works and their unique pros and cons.

Using a personal loan

An unsecured personal loan could be a great option to help you pay for an engagement ring for many reasons. Let’s take a look:

What is it?

First, an unsecured personal loan is typically a fixed-interest loan that you can get from banks, credit unions, and through online lenders. It does not require you to put up items you own, such as your car or home, as collateral to qualify for the loan. Instead, an unsecured loan is issued based on the borrower’s creditworthiness and ability to pay.

How does it work?

Unsecured personal loans have more uses than for just an engagement ring. You could even use them to help pay for your upcoming wedding. You, the borrower, get a specific lump sum of money up front, then usually pay it back in equal payments over an agreed-upon term.

Benefits

With a fixed interest rate and a set repayment term, you could use a personal loan to borrow exactly the amount of money you need to pay for the ring and know exactly how much each loan payment will be for the life of the loan.

If you’re someone with good credit, you may be able to obtain a more favorable interest rate with a personal loan than with a credit card, meaning you’ll pay less in interest for the loan than you would for a higher-interest credit card.

For these reasons, a personal loan could be a great option for making higher-ticket purchases.

Things to consider

When on your search for a personal loan, be on the lookout for a loan with no fees. Some lenders charge hidden fees, so it’s important to do your research. Plus, no one likes being charged extra fees.

Using a credit card

Arguably, using a credit card that’s already in your wallet is the easiest way to pay for that ring for your fiancée-to-be. But it may not be the most cost-effective. Let’s see why:

What is it?

Credit cards are a form of unsecured credit. Cardholders are typically issued a physical plastic card that can be used as an easy way to make purchases.

How does it work?

In case you don’t know how credit cards work, here’s a quick run-through. 

Unlike a personal loan, a credit card is a form of “revolving” credit, meaning that you don’t borrow all of the funds up front, but instead you borrow as you spend. On your credit card account, you have a certain amount of available credit, known as your credit limit. You borrow against that limit as you make purchases and are required to pay back the borrowed sum over time.

Benefits

If your card comes with rewards, paying for a large purchase such as a ring with your credit card could mean gaining more flight miles or credit card points. This could be useful, especially if you need some miles to fly to Hawaii for the honeymoon.

Things to consider

If your credit card has a high interest rate, putting a rather large expense, such as an engagement ring, on the card could mean putting more money toward the ring than you would with other financing options. And if you make only the minimum payment each month on that high-interest credit card, you’ll be paying even more in interest for the purchase.

Jewelry store financing

This option is one of those where, if you walk into a jewelry store, the clerk will probably pitch to you right off the bat.

Many jewelry stores may offer in-store financing. Here’s what you need to know: 

What is it?

Many major jewelry stores offer financing plans, which typically require you to sign up for a retail credit card as a means of financing an engagement ring purchase.

How does it work?

Once you have opened a retail card with a jeweler, you can use it to purchase your engagement ring. However, many retail cards can only be used to make in-store or online purchases from the retailer that offers it.

Benefits

Sometimes, you can find a store that offers financing with a 0% interest rate for an introductory period. This may sound nice at first, but there are a few things to be aware of.

If you finance with a 0% introductory rate through a jewelry store and you’re able to pay back the amount of the ring’s cost within the introductory period, you may be okay. But if you can’t, when the introductory period ends, you could be charged interest dating back from the date of purchase.

Things to know

Now, remember, at the end of the day, a store credit card is just another credit card.

When you open a new credit card, it can have positive or negative effects on your credit score. If you’re looking to work on your credit score, then opening a retail card could be helpful in establishing or building some credit history, provided it’s used wisely and you make timely payments. But if you open this store card on top of any cards you already have, you also risk lowering your credit score.

Part of your credit score is based on the average age of your credit, which is the average of your credit as measured from the opening date of each account on your credit report. Opening a new card could lower this average age and, ultimately, lower your score.

If you leave a high balance on the card relative to your available credit, it could increase your credit utilization ratio. This is the ratio of your credit card balances to your credit limits, and it comprises a significant part of your credit score. If the ring’s cost uses up a lot of your credit limit, your credit score could be negatively affected.

If you believe that you’d be able to pay off your balance within the introductory period without it negatively affecting your credit score, this option may be right for you.

Quick Fact: If you’re looking to save a little extra time and money, some jewelers sell sets with matching engagement rings and wedding bands for your soon-to-be spouse. If you can find a good deal, this may save you some money down the road and save you another visit to the jewelry store. 

Asking family or friends for money

This financing option can be a little complicated depending on whom you’re asking to help pay for the ring.

What is it?

Well, it’s a little self-explanatory, but asking family or friends for money could be a way to finance your engagement ring. But you may want to have a really close relationship with the person of choice for this to work out.

How does it work?

Basically, you would need to go to your family member or friend and ask for a lump sum of money, set up how much you’ll owe in interest and figure out when you’d need to pay them back by—and how many days you’ll need to watch their dog in return.

Quick Tip: If you do decide to receive funding from family or friends, consider entering into a contract with them. Outlining in writing what you owe them, how much you’re expected to pay each month and what the interest is could help you stay on track to paying off the loan.

Benefits

By getting a loan from a family member or friend, you may be able to negotiate the terms and, possibly, not have to pay any interest or fees, in which case you would only have to pay back the amount of the principal. Another advantage is that these loans don’t appear on your credit report, so your credit score will be safe if you miss payments or fail to pay the loan back altogether.

Things to know

So what’s the downside? Well, the main disadvantage of borrowing the money from friends or family is that forgetting payments or not paying at all could lead to resentment or anger, resulting in a broken relationship.

And you really don’t want to do that with your mom or dad. They did raise you, after all.

What is the best option for you?

There is no one perfect way to finance your engagement ring purchase.

What’s really important is crafting a future for the two of you and paving a new path for you to walk as partners.

Yes, there are pros and cons to each option, but at the end of the day, you have to decide what’s best for your financial future together. And, of course, what’s going to make that moment you propose absolutely perfect for both of you.

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This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.