Aside from houses and cars, a diamond engagement ring is one of the biggest purchases most people make in their lives.
As with everything, it’s always better to save money up front and pay cash for a modest engagement ring. This will help you avoid buying a ring you can’t afford and save you from spending money on interest.
Yes, an engagement ring is a meaningful symbol of your love that will hopefully last a lifetime, but don’t be fooled by marketing that suggests you have to buy a ring you can’t afford. The old rule that a ring should cost two months’ salary no longer makes sense. Even though the average marriage age is getting older, many of us are still paying off student loans when we start asking the question!
In fact, people fall in love and decide to get married at different stages of life. I understand that you might consider financing an engagement ring so you can ask a question earlier. If you’re going to fund an engagement ring, here’s how to do it the smart way.
Jewelry Store Funding Is OK, But Be Careful
If you can get 0% funding from a jewelry store, great! Just watch out for terrible terms if you miss a payment or don’t pay for a ring before the promotional annual income expires.
Many jewelry stores offer credit cards or other financing options. What’s more, the shop assistants may be interested in pushing you towards these options. Sometimes these offers can be competitive (eg offer 0% or even 0% and no payments for many months). But after these promotions expire, most of these cards have very high interest rates.
Before signing the dotted line, carefully read the terms of the offer.
- What action? How long does it take? Under what conditions can a promotional tariff be revoked? (For example, if you miss a payment.)
- What is the usual interest rate after that?
- Can I afford to pay for a purchase before the promotional rate expires?
Even if you can afford to pay for the ring before the end of the advertising year, consider whether opening a jewelry store credit account is the right move. In the best case, you will pay for the ring and never be able to use the account again. Or you might be tempted to fund future store purchases that you don’t actually need.
Finally, consider that you can save up to 50% by buying engagement rings online from reputable online jewelers. Maybe this jewelry store is not the best option.
Use our Loan Repayment Calculator to see how different payments and interest rates affect your loan.
How to Use a Credit Card to Buy an Engagement Ring – The Smart Way
While paying for an engagement ring with a credit card might be the worst way to go, I suspect it might also be the most common way to do it. (After all, this is what I did).
Credit cards are the most convenient way to make large purchases and pay off over time, but they are expensive. Not only do credit cards have high interest rates, they also allow borrowers to make small minimum payments, which increase the time it takes to pay off the debt (and increase the interest you will pay).
That’s why the way to use credit cards responsibly is to pay off the entire balance every month.
However, sometimes credit cards offer promotions where new customers can receive an initial 0% interest rate on new purchases for 12 months or longer.
This can work even better if you sign up for a new credit card right before you make a big purchase, like a ring, because cards often give you a signup bonus if you spend a certain amount within the first three months.
So if you can pay off the ring before the end of the advertising year, a credit card might be your best bet.
One could even argue that you could buy the ring with a zero interest credit card even if you had the cash to do so. You can leave cash in a savings account, earn interest, and earn credit card rewards when you make a purchase.
An example of an ideal credit card in this situation would be Pursuit of Unlimited Freedom®. He offers 0% initial APR on purchases within 15 months and on balance transfers from opening an account (annual 17.24% – 25.99% Variable after). In addition, you will receive a $200 bonus if you spend $500 on purchases within the first three months of opening an account. Not only can you put that $200 into your partner’s dream ring, but as long as you pay it during the promotional period, you have an easy-to-manage repayment plan.
There are, of course, a few caveats when it comes to credit cards with 0% APR:
- You must have good credit to qualify for these shares.
- You must be ready to open a new credit card.
- Finally, a little patience is required. You will have to wait a week or two for the card to arrive in the mail.
Read more: Best Credit Cards Offering 0% Initial APR on Purchases
Save more by shopping online
Did you know that you can save up to 50% by buying engagement rings online from reputable online jewelers? If you can find a reputable online jewelry store, you can save a lot.
I know what you’re thinking. There is simply no trust when you buy online. In fact, when you buy from a reputable online store, you know you are dealing with quality products because these companies care about their reputation and take steps to ensure that their products and services are exemplary.
Make sure the online jeweler you work with offers:
Cargo insurance
The wedding ring cannot be sent by regular mail. Get a tracking number, insurance, and a signature to ensure your jewelry arrives. James Allen goes even further by offering a lifetime warranty on the ring itself.
Return policy
Dear Jeweler, blue nile will not ask questions when you want to return. Many will even offer you free return shipping.
Education
Chances are you’ve never bought an engagement ring before, so you don’t have much experience or information about the process.
How to choose a diamond? Setting? What is a carat?
An excellent online store will tell you in detail about their products. And with that kind of money at stake, you won’t regret learning everything you need to know before you make a purchase.
A personal loan can be more expensive, but has its benefits
A more expensive option than financing at 0% is to take out a personal loan for the amount of the ring purchase and repay the loan over three or five years.
If you can qualify for jewelry store promotional funding or a 0% APR credit card and repay the cost of the ring during the promotional period, this is the best way to fund your engagement ring and avoid paying interest.
Obviously, using a personal loan to finance an engagement ring will result in a significant percentage of the total value of your ring. But if the 0% financing offer isn’t available to you, a personal loan may be a better option for funding an engagement ring than placing the ring on a double-digit regular annual interest rate credit card.
Three- or five-year consumer loans are available to most applicants with at least some credit history. Interest rates vary depending on your creditworthiness. Applicants with bad credit should stay away, as the APR on subprime loans can exceed 20%.
However, for borrowers with good credit, APRs can be competitive (less than 10%) and often outperform the best low-interest credit cards.
Read more: Compare personal loan providers and interest rates here.
Summary
When you go shopping for an engagement ring, don’t get carried away. First of all, buy a ring that you can afford.
Pay in cash if possible. Do you really want to go into debt right before your wedding?
Otherwise, this is the ideal situation to use the 0% APR promotion. You might even get lucky and be able to open a credit card that gives both of you 0% APR. as well as cash bonus for signing up immediately after a major purchase.
Do your best to pay the ring in full before the promotional annual income expires.
If you can’t get financing at 0%, consider taking out a personal loan. An unsecured personal loan will allow you to pay off the ring in fixed monthly payments over three to five years.
Buy now: Visit James Allen, our recommended online diamond retailer.
James Allen Special Promotion: 25% Off*
(*Exceptions apply, availability subject to change)
