How to finance an engagement ring?

Purchasing an engagement ring is not a small financial commitment. Given the current gold and diamond prices, a nice ring would easily cost you between 1 lakh and 1.5 lakhs rupees. Ideally, you should save up a substantial sum of money to buy an attractive engagement ring for your better half. Sometimes, however, you might not have enough funds to pay the entire amount upfront or do not want to make a significant lump sum payment. In such cases, the best option is to finance an engagement ring. 
 

Engagement Ring Financing Options

 

1. Personal Loan

   A personal loan allows you to purchase an engagement ring without breaking the bank. The maximum loan amount of Rs 5 lakhs ensures that you can give your significant other the most stunning ring available on the market. The personal loan interest rate is based on various factors, including your credit history, income, repayment tenure, etc. Here are a few things you should know about personal loans:
    
   • You can choose a flexible repayment tenure of up to 60 months. 
    
   • The lender considers your debt-to-income ratio before sanctioning your loan. If it is more than 45%, they are likely to charge a higher interest rate.
    
   • You cannot apply for an engagement ring financing online through a personal loan if you change jobs regularly and do not have a six-month employment history with your current employer.
    

Also Read: A Step-by-step Guide to Getting Unsecured Personal Loans
 

1. Jewellery store financing

   Nowadays, many jewellers provide financing schemes that allow you to easily purchase an engagement ring. Such schemes are advantageous for prospective buyers. For example, big jewellery brands allow you to deposit a fixed sum every month for a few months’ duration. After you have made all the payments, you can redeem the amount on maturity by buying jewellery against it. The benefits of applying to such a scheme are the discounts you receive on instalment payments.
    
   Things to consider before opting for a jewellery store financing:
    
   • The quality of gold jewellery is critical in such schemes. The scheme will not be applicable if the engagement ring or other gold jewellery you intend to purchase is less than 18 carats.
    
   • Hidden expenses should not be overlooked, especially if you are financing an engagement ring from a local jeweller.
    
   • Spend some time understanding the interest rate calculation method used by your jeweller.
    
   • Wait for promotional deals, which are usually offered every year when the wedding or festival season approaches, particularly around Diwali.
    

2. Credit Card

   Another great engagement ring financing option is a credit card. You can purchase the ring without paying any interest if you do not delay your payments or skip the due date. Furthermore, based on your previous transaction history, your card provider may offer you a promotional repayment period of 15 months or more. However, credit card financing necessitates various considerations, including the following:
    
   • If the amount of ring financing surpasses 30% of your total credit limit, your credit score will suffer badly. Hence, increasing the down payment amount to avoid this situation is advisable. 
      
   • In the event of late payments, credit cards charge a higher interest rate. As a penalty for late payment, various financial institutions impose a 3% monthly interest rate. It indicates that if you fail to pay your bills on time, your annual interest rate will be roughly 36%.
    
   • Credit card usage may appear simple, but you will be subject to a variety of fees, which may increase your overall expenses. Some of these are renewal fees, transaction fees, joining fees, and taxes. Thus, review them thoroughly before deciding to use a credit card for your ring purchase. 
    
   Also Read: Personal Loan or Credit Card Which one would you go for
    

3. Buy Now, Pay Later (BNPL)

   BNPL is becoming increasingly popular among shoppers these days. Under this scheme, you can buy an engagement ring without spending a single penny from your wallet because the lender would pay on your behalf. The repayment structure of BNPL is identical to that of credit cards. If you pay your bills on time, you will not have to pay any interest. If you do not, the lender will charge you interest. The best aspect of choosing this scheme is that the lender will not require your credit history to disburse the funds.
    
   When you choose BNPL, you can make the repayment in a lump sum or can choose no-cost EMI. Here are a few things you should know about BNPL:
    
   • BNPL may encourage you to make impulse purchases, which will impact both your budget and credit score in the long run.
    
   • In the event of late payment, interest will continue to accrue on the unpaid amount. As a result, the probability of loan default rises.
    
   • The interest rate of BNPL can go up to 24% or even more, depending upon various factors.
    

To conclude

 
Each of the financing solutions described above for purchasing an engagement ring has its own set of advantages. However, personal loans are probably the best option among these. It is because this loan allows you to choose a flexible payback period and avail a larger loan amount that you can utilise for other wedding-related expenses.