By the Pachyy Editorial TeamThe Pachyy Editorial Team comprises a diverse and experienced team of writers, researchers and subject matter experts whose aim is to provide you with useful insights, guidance and commentary on all matters related to your personal finances.
When you’re ready to take your relationship to the next level, it’s natural to want a special ring that symbolizes your commitment. In 2022, the average cost of an engagement ring was $5,800.1 If you’re worried about bad credit but still want to afford the perfect diamond ring, don’t worry! We’re here to help. Keep reading to learn more about personal loan financing options and how they can make your dream ring a reality.
Financing Your Engagement Ring
Choosing the perfect engagement ring can be an expensive purchase, no matter what option you go for. If you have bad credit, it can add extra stress to the process. You might be wondering how you can afford it without the financing options that good credit provides. Is it possible to get engagement ring financing? In this article, we will explore what it means to have bad credit and share some ways you can still purchase the perfect engagement ring that fits both your partner’s desires and your budget, even with a less than ideal credit score.
Understanding Your Credit Score
Before embarking on the journey to purchase an engagement ring, it’s important to have a clear understanding of your financial situation. One crucial aspect is your credit score. Your credit score serves as a financial risk assessment of you. Essentially, it provides potential lenders with valuable insights into your ability to manage your finances, including how responsibly you handle borrowed money. We all know that having good credit is preferable to having bad credit, as it greatly impacts your financing options. Credit bureaus such as TransUnion, Equifax, and Experian are the main companies lenders rely on to calculate credit scores. These bureaus evaluate your creditworthiness based on five key factors:
1. Payment history
This factor takes into account your track record of making monthly payments to your creditors, both on time and late. Late fees and unpaid bills carry the most weight, so it’s crucial to consistently pay your bills by their due dates to maintain a positive impact on your credit score.
2. Credit utilization ratio
Your credit utilization ratio measures the amount of available credit you are currently using. For example, if you have a $200 balance on a credit card with a $1,000 limit, your credit utilization ratio is 20%. The lower this ratio, the better it is for your credit score.
3. Credit history
This factor examines all the accounts you have had or currently have open. Having a strong history of accounts in good standing positively influences your credit score.
4. New credit
If you apply for financing for one item while also opening relatively new accounts for other purchases, it may indicate some inconsistent spending behavior, which can impact your credit score.
5. Credit mix
This factor assesses the variety of accounts you have, including different types of loans, lines of credit, or installment loans. Successfully managing a diverse range of accounts demonstrates good financial habits.
Do I Have Bad Credit?
Based on the information gathered, credit bureaus assign a score ranging from 300 to 850. Consider the following breakdown:
*Please note that these ranges can vary slightly depending on the credit scoring model used. The ranges provided here are generally accepted standards.
From the chart, you can see that scores of 600 and below are considered bad credit. If you are uncertain about your score, you don’t have to wait for a potential lender to perform a credit check. The major credit bureaus—Experian, Equifax, and TransUnion—offer free access to credit scores and information on how to improve them. Considering the national average cost of engagement rings is close to $6,000, many people turn to financing options to make this purchase possible.2 Let’s explore some popular avenues for engagement ring financing:
Need Some Extra Cash? Consider Personal Loans!
Don’t worry if your credit score isn’t perfect! You can still qualify for a personal loan, which can help you fund your desired engagement ring purchase without delay. In fact, there are two types of personal loans to choose from: secured and unsecured. If you opt for a secured loan, you’ll need to provide collateral, such as your home, car, or money in your bank account. On the other hand, an unsecured loan doesn’t require any collateral; it’s solely based on your creditworthiness.
Choosing Between Secured and Unsecured Loans
A secured loan often comes with a lower interest rate, but remember that if you struggle to repay it, you might end up losing your collateral. In contrast, unsecured loans might have higher interest rates, but they’re generally easier to get approved for. For instance, payday loans—the most accessible type of loan—can be approved and disbursed within a couple of hours.
Need Cash Quickly? Try Quick Cash Loans!
If you have less-than-ideal credit, don’t worry—bad credit loans and other online loans are available for people in your situation. These options provide access to money that traditional lending institutions may not offer. It’s important to keep in mind that these loans are best when repaid within the loan term. One of the fastest ways to get the cash you need for your ring is by exploring the benefits of a personal loan.
Discover the Benefits of Point of Sale (POS) Financing
Have you ever come across those enticing advertisements that shout, “Buy Now, Pay Later!”? These ads are all about point of sale (POS) financing, a convenient way to make purchases. Similar to an installment plan, point-of-sale financing allows buyers to buy items from a merchant and pay for them through a series of manageable monthly payments. The unique aspect of this financing method is that the merchant acts as the main lender, rather than a traditional financial institution. All you need to do is agree to the lending terms and make a small down payment. The specific down payment requirement may vary depending on the lender.
How Does POS Financing Work?
Merchants offer POS financing options, also known as POS loans or in-store financing, exclusively to customers who open a store credit card. This card can only be used at the merchant’s store and perhaps some affiliated or partnered retailers. For instance, renowned jewelry stores like Zales and Kay Jewelers have their own credit cards that you can utilize to purchase the ideal ring outright. Subsequently, you will make monthly payments on that credit card, just like any other account with a remaining balance. However, it’s important to pay attention to the details when dealing with merchant-based credit cards. These cards usually come with high interest rates, and financing terms may change if a balance remains on the card for an extended period, typically exceeding a year or two.
A Revolutionary Way to Borrow?
Store cards often require a good credit score for approval. Nevertheless, if you stumble upon the engagement ring of your dreams (or your beloved’s dreams), conducting thorough research is crucial. If you have the means to promptly pay off the card, this option might be a good fit for you. The surge in online retail has expanded the opportunities for the “buy now, pay later” model. Third-party apps and websites collaborate with prominent retailers to provide products like engagement rings to their members. Through these services, customers can set up payment plans that cover the total cost of the item within two to four equal payments. Generally, these online options offer greater convenience compared to traditional brick-and-mortar retailers.
Consider Borrowing from Friends & Family
If you’re looking for an alternative way to finance your engagement ring, reaching out to your loved ones might be a great option. Asking for a loan from a friend or family member can spare you from dealing with high interest rates and strict loan conditions imposed by traditional lenders. Those close to you may have funds readily available in their savings or checking accounts, which can be swiftly transferred to you without the hassle of a lengthy application process. However, it’s advisable to establish a written agreement and adhere to it if you decide to go this route. Keep in mind that maintaining strong relationships should always take precedence over financial matters.
Discover Your Perfect Choice
Did you know that there are alternative options to traditional diamond jewelry? You have the power to express your love without breaking the bank. Explore the vast online auction sites and marketplaces where individuals sell their pre-owned jewelry. You can also support independent jewelry makers and designers who craft unique engagement rings using precious stones and metals. For a truly personalized touch, websites like Etsy provide a platform for connecting with talented craftspeople who can create custom engagement rings. They can even engrave names or special messages for you. The best part? These options are available at a fraction of the cost you would pay for traditional jewelry. So go ahead and make a unique choice that suits your style and budget!
Consider Alternatives Before Getting a New Credit Card
While it may seem tempting to use a credit card with a 0% APR to finance an engagement ring, it’s important to weigh the potential drawbacks. Many of these cards only offer the promotional rate for a limited amount of time after approval. Once this special introductory period ends, the APR can increase significantly, ranging from 14% to 24%. This means that any remaining balance on the ring will be subject to these higher interest charges. Additionally, it’s worth considering that each new credit approval can potentially add to your existing debt, creating new financial obligations for both you and your future spouse.
Answers to Common Questions About Financing an Engagement Ring
How does my credit history affect my options for financing an engagement ring? Your credit history is an important factor in determining what financing options are available to you. Lenders review your credit history to assess your reliability as a borrower. If you have a history of making timely payments and using credit responsibly, you will likely have more options to choose from, even if your credit score is not high. Is it possible to finance a diamond engagement ring with poor credit? Yes, it is still possible to finance a diamond engagement ring with poor credit. There are various options available, including personal loans, point-of-sale financing, and loans from friends or family. However, it is crucial to carefully consider the interest rates and terms associated with these options. What is progressive leasing and how can it help me finance an engagement ring? Progressive leasing is a lease-to-own or lease purchase program offered by some jewelers. It allows you to bring the engagement ring home immediately while making regular payments over a specific period. At the end of the lease term, you will own the ring. Approval for progressive leasing is typically based on income and employment rather than credit history, but keep in mind that the interest rates can be high. How can I improve my credit score to access better engagement ring financing options? To access more favorable financing options for an engagement ring, improving your credit score can be beneficial. You can enhance your score by making timely payments on all your debts, keeping your credit utilization low, avoiding unnecessary new credit accounts, and regularly checking your credit report for errors. Can I finance an engagement ring without a credit check? Some lenders or jewelers may offer financing options without requiring a credit check, such as a lease purchase program. However, it’s important to note that loans without a credit check often come with higher interest rates and fees. Take the time to carefully review the terms and consider if this is the best option for you. What factors should I consider when selecting a financing option for my engagement ring? When choosing a financing option, it’s important to consider the interest rate, length of the repayment term, monthly payment amount, and any potential fees. Additionally, think about how this new debt will fit into your overall financial situation, especially if you have poor credit. Selecting an option that you can manage without causing financial strain is crucial.
A Friendly Note from Pachyy on Engagement Ring Financing
Congratulations on finding that special someone and embarking on this incredible journey of love! We understand that getting engaged is a truly significant moment in your life. It’s only natural that you want to express your love and devotion with the perfect engagement ring. Did you know that most couples spend around 3% of their total wedding budget on wedding rings?3 It’s important to find the right engagement ring financing option that can help you create a memorable proposal for both of you to cherish forever. However, before you make any decisions, it’s crucial to consider the full financial responsibility involved in purchasing jewelry. Take into account factors such as the monthly payment amount, interest rate, and any additional fees. Remember, the perfect engagement ring doesn’t have to break the bank. What matters most is that it comes from the bottom of your heart. Feel free to check out these references for more information: