Updated February 1, 2017

How to Finance an Engagement Ring

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Thinking about financing your engagement ring? It can be a smart move in some cases. Learn about your financing options and things to watch out for.

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Financing an Engagement Ring

An engagement ring is often the first major purchase of your new coupled life. It's a big financial decision that shouldn't be taken lightly.

The first step in buying an engagement ring is setting your budget. It's an extremely personal choice and shouldn't be influenced by things like the "two months' rule" or the national average. Spending two months' salary on the ring is actually quite unrealistic for most people, so you shouldn't feel discouraged by it. A more realistic approach is to balance her expectations and your financial ability.

Still, you may find that you need some help. Financing a ring is not necessarily a bad idea. It means you don't have to wait to save up before proposing to the girl of your dreams. Plus, it could give you a more manageable payment strategy.

But you have to be smart about it. Keep reading to find out how to make financing your ring work out for you.

Our Recommendation: Only finance a ring if you have a solid plan to pay it back in full before the financing terms run out. Otherwise, you could find yourself stuck with very high interest rates.

How Much Can You Truly Afford?

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Start by being brutally honest with yourself. Factors you should consider when determining your ring budget include:

  • Your income: Obvious, but still worth mentioning.
  • Your expenses: This includes monthly costs like rent, bills, food, student loans and car payments.
  • Your savings potential: If you cut out the extraneous purchases for yourself, how much can you realistically save each month? (Yes, marrying someone will require some sacrifice.)
  • Your future goals: Consider the other things you might be saving for, like a house. Don't let a ring that you can't afford delay that.

Most of us are getting married when we're still figuring out our finances. We're still paying off student loans, saving for a house, and haven't reached our full earning potential. An engagement ring is just one of the many important financial commitments.

Of course, the best option is to save until you can afford to pay for the ring with cash. But if that's not your situation, you should know your options.

How to Finance Your Engagement Ring

Below, we've listed the options in our order of preference, with the first being the most desirable and the last being the riskiest (though not necessarily bad if you know what you're doing).

  • Open up a new credit card with a 0% APR promotion. This is our favorite option. In fact, it could be smart to do this even if you do have the cash to pay for the ring outright. Many credit cards offer a long 0% APR promotional period. Just make sure you have a plan to pay off the ring before the promotional period ends or you'll be hit with a high interest rate.

    One major advantage to this is that many reward cards have a minimum spend requirement you have to meet in order to receive a sign up bonus. Buying a ring will allow you to easily meet that requirement so you get a nice bonus. And if you're using a travel credit card, that could mean bonus miles you can use toward your honeymoon.

    However, you will generally need good credit to qualify for these kinds of rewards cards.

  • Take out a personal loan. This is an option if you want to avoid credit cards. You'll have to pay interest on a loan, but the monthly payment is fixed. This means the terms and rate of your loan can't change over time.

    This option may not be great if you have bad credit. The worse your credit is, the higher the interest rate you will pay. In that case, you may be better off with a low interest credit card.

  • Finance through the jewelry store. Many jewelry stores offer in-store financing options. Some offer 0% deferred interest. But watch out. Deferred interest usually means interest is assessed from your purchase date, and if you don't pay off the balance in full before the end of the promotional period, you will owe a mountain of interest.

    If you're considering this option, ask these questions and make sure you fully understand the answers:

    • How long is the promotional period, and what is the interest rate after that?
    • How is the interest assessed? Does it start from the day of purchase?
    • Will the promotional rate be revoked as soon as I miss a payment?

    Get a loan from family or friends. Many engagement ring buyers turn to family and friends for financial help. A family loan can be helpful if you have bad credit and would likely get a high interest rate if you financed through a bank or jewelry store.

    Be careful though, as money issues with family can be particularly dicey. It's always best to make the agreement as official as possible, even if it's someone you're close to. Agree to repayment terms and sign an official contract. It may sound strange, but it will definitely save you from family drama down the line.

    This option can be good and bad. If you miss payments, it won't show up on your credit report and negatively affect it. But on the other hand, it could ruin a relationship between you and a loved one.

    Keep in mind that with a credit card, personal loan, or jewelry store financing, your credit will be affected if you don't make good with the payments.

It is also becoming increasingly common for the couple to split the cost of the ring. You can also consider starting with a less expensive, simple ring and upgrade it later in your marriage when you're more financially stable.

The most important thing is that you and your future spouse are on the same page. You definitely need to have a candid talk about finances and expectations. It'll do wonders to help you start your new life together on the right foot.

Did you know? Over 40% of brides-to-be want to be involved in the ring selection process. Also, 20% of brides are willing to pick up part of the tab on the ring if it means being able to get exactly what they want.

No matter what financing option you choose, be sure to do your research and read all the fine print before you sign. Otherwise, that sparkly diamond could become a major financial headache.

How Long Will It Take to Payoff Engagement Ring?

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What If You Have Bad Credit?

The good news is that having bad credit shouldn't get in the way of purchasing an engagement ring. It just might make the process a little longer.

Many jewelers offer special financing plans for customers with bad credit. Those plans often involve a higher interest rate and less repayment flexibility. Other jewelers offer layaway programs with a 20%-30% down payment, allowing you to start making payments before you pick up the ring.

If you have bad credit or no credit, some jewelry stores or financers allow someone with good credit (such as a parent) to co-sign on a loan. But keep in mind that this also puts the burden on the co-signer if you aren't able to make the payments.

Avoid Overspending on an Engagement Ring

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Blowing two or three months' salary on an engagement ring is a romantic gesture, but is it really necessary? If you need more convincing, here are 10 interesting, research-backed reasons why a cheaper ring may be the way to go.

  1. You may be less likely to split up. You may get a "yes" when you dazzle your bride-to-be with expensive bling, but it doesn't mean you're all set for happily ever after. In fact, shelling out big bucks for a ring could actually be the kiss of death for your union.

    Researchers at Emory University surveyed more than 3,000 people who have walked down the aisle to see how the ring influenced the odds of getting divorced. They found that men who spent between $2,000 and $4,000 on an engagement ring were 1.6 times more likely to get divorced than grooms who spent $500 - $2,000.

    If you've got your heart set on a happily-ever-after, spending less on a ring may be the way to go.

  2. More money doesn't buy you love. A lot of men think they need to drop thousands on an engagement ring to prove their love. But in reality, most women agree that a more expensive ring isn't proof of their future spouse's love.

    Just 23% of women believe that the more a man spends, the deeper his feelings are, according to a study commissioned by Taylor & Co. The rest seem to recognize that you can't put a price tag on true love.

  3. You're better off investing your money elsewhere. When you buy a diamond ring, you're making an investment in another person, for sure. But don't get fooled into thinking that the ring itself will provide a handsome financial return.

    An investigative report from the Wall Street Journal has tracked the price and value of diamonds for the past three decades. While it's true that diamond prices have been on a steady rise, stones lose as much as 50% of their purchasing power over time due to inflation.

    You're better off sinking your extra cash into another investment that may yield the bigger payoff in the long run.

  4. Diamonds aren't really forever. Yes, diamonds are one of the earth's hardest materials. But that doesn't mean that the stone is actually going to stand the test of time. In fact, scientists have proven that diamonds begin to break down once they've been exposed to high levels of UV light. The change may not be that noticeable, but your splurge will depreciate in value over time.

  5. Your bride-to-be may care more about being asked than the cost. It's true that some women expect a fancy engagement ring. But most women don't that put much financial pressure on their men. According to a study from DDB Worldwide, 73% of women said they'd prefer that their sweetheart go ahead and propose with a cheaper ring (or no ring at all) than wait to ask until they can afford something more expensive.

  6. A more expensive ring can push you over budget. Getting married is an expensive affair, and the engagement ring is just one part of it. According to The Knot, the average wedding came with a total price tag of $ 32,641 in 2015. And that doesn't even include the honeymoon!

    If either the wedding or the honeymoon are important to you, you might want to save more money for that by spending less on the ring.

    Did you know? Just like with engagement rings, an Emory study found that couples who have cheaper weddings actually have happier marriages as well. Couples who spent over $20,000 on the wedding were 3.5 times more likely to get divorced than couples who spent just $5,000 to $10,000. And the best success rate of all were actually the couples who spent less than $1,000. This could be because a less expensive wedding means less financial burdens later in the marriage, or that couples who are on the same page about spending less are more compatible in the long run.

  7. A bigger price tag doesn't necessarily mean a better ring. Diamonds are by far the most popular choice for engagement rings, which means they're also the most expensive. A diamond can cost anywhere from a few hundred dollars to tens of thousands. But there's often a big gap between the stone's price tag and its actual value.

    A study from the University of Manchester looked at the diamond mining industry in Africa and how stones are priced once they hit the open market. The researchers found that once the diamonds are snatched up by jewelers, they're often sold at a serious markup. The lesson? You don't always get what you pay for.

  8. Your future spouse might prefer a home to a ring. First comes love, then comes marriage, then comes... a house. At least, that's the case for many couples. Many newlyweds are in a pretty good position to make the leap into home ownership, but the biggest obstacle is coming up with the down payment. It's especially tough if you've spent a lot of your savings on the ring.

    Surprisingly, many brides say they wouldn't mind a cheaper ring if it would make buying a home easier. A survey from ERA Real Estate found that nearly 50% of women would rather spend the money on a down payment on a home instead.

  9. A romantic proposal could be more memorable than the ring itself. While the ring is certainly a key part of a marriage proposal, it may not be the most important. According to David's Bridal, 56% of women say they'd take a fairytale proposal over a picture-perfect engagement ring any day.

    Did you know? The proposal is one of the most anticipated moments in a girl's life. Women love telling their proposal stories. In fact, about 70% of women remember exactly what was said during the proposal. 50% expect the man to comply with tradition and actually get down on one knee. The proposal doesn't have to be expensive, but one that's thoughtfully planned can go a long way to really show that you care.

  10. You don't even need an engagement ring to get married. Of course, it's the norm to propose marriage with a diamond engagement ring. But this tradition's origins might not be what you think.

    It goes back to the 1940s, when De Beers came out with the famed "A Diamond Is Forever" campaign. De Beers, which controlled the bulk of the diamond trade at the time, is responsible for creating the idea that you need to propose with a diamond ring.

The Best Place to Buy an Engagement Ring

    James Allen

    James Allen: Search for Diamonds

    Shop for diamonds at James Allen, a CreditDonkey #1 recommended partner for the best online experience.

The Bottom Line

An expensive engagement ring won't divorce-proof your marriage. According to the research we found, overspending could actually hurt your relationship in the long run.

If you're committed to going big when it comes to your engagement ring, consider shopping with an online retailer like Blue Nile or James Allen. You'll get a much bigger selection than at stores as well as a much better price. Both retailers offer financing options, but make sure you can pay it off on time.

Whatever you decide, the "yes" will be worth much more than an expensive ring in the long run.

Michelle Kaiser is a retail analyst at CreditDonkey, a diamond jeweler comparison and financial education website. Write to Michelle Kaiser at michelle@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped consumers make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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