Ah, weddings. A day to celebrate your love with your partner and solemnly vow to stand by them in sickness and in health, to love and cherish, until debt do you part. That's right-debt.

With wedding costs on the rise, it's no surprise that many couples turn to loans to finance their big day. After all, many believe that for this once-in-a-lifetime event, no expense should be spared. But what exactly is the best loan for your wedding, and how do you ensure that you find the right loan so that you do not fall into debt?

Understanding wedding and personal loans

Wedding loans

As its name suggests, wedding loans are personal loans specifically intended for wedding-related expenses. These include things like venue reservations, reception costs, transportation, wedding attire, and even honeymoon expenses. 

They are also usually unsecured personal loans, meaning that you do not have to provide any collateral. Other key features of a wedding loan includes:

• Larger loan amounts

The loan amount you qualify for is based on factors such as your income, credit score, and the lender's policies. You can even borrow up to 4 to 10 times your monthly salary, capped to a certain limit.

• Fixed or variable interest rates

Typically, interest rates fall within the range of three per cent to eight per cent per year, though your individual rate will be influenced by your credit score and overall financial situation.

• Flexible repayment periods

Repayment options usually span from one to seven years, and you'll be required to repay the loan through monthly installments.

Personal loans

Personal loans, on the other hand, are more flexible. There are no restrictions on how you use the borrowed funds, giving you the freedom to spend them as you wish. However, it's important to note that personal loans tend to be more expensive than other types of loans due to higher interest rates.

In short, wedding loans can be considered a specialised form of personal loans, limited to wedding-related expenses, while personal loans offer broader flexibility and can be used for nearly anything, including your wedding.

Key differences between wedding loans and personal loans

Aside from their uses, there are several key distinctions between the two types of loans. Here's a handy table that highlights them:

Factors to consider when choosing the right loan

With all this information at hand, how do you actually decide between a wedding or personal loan? It all boils down to your own financial situation and your wedding needs. Here are some questions to ask yourself.

1. How much do you need for the wedding?

This is a no brainer, as you should always borrow within your budget. First, evaluate your total wedding expenses (including venue, food, attire, rentals, etc) and see if it fits within your available savings or if you need to borrow.

Knowing the total amount required will help you determine if a wedding loan, tailored specifically for wedding expenses, is more appropriate, or if a personal loan, with broader flexibility, could be a better option.

For example, if you don't need a large sum for your wedding and are confident in your ability to repay the loan quickly, a wedding loan could be a better option due to its lower interest rate.

2. What is your repayment capacity?

Consider your income and savings to ensure that you can comfortably handle the monthly installments without putting a strain on your finances.

Wedding loans might offer more structured repayment terms, while personal loans could provide more flexibility but may come with higher interest rates.

3. Do you want to keep your finances specific to the wedding?

If you're focused solely on covering wedding-related costs, a wedding loan might be ideal. However, if you think you might need the funds for other purposes (e.g., funding the renovation for your new house), a personal loan offers greater flexibility in how you use the money.

4. Are there promotions happening?

Some banks offer exclusive promotions for wedding loans, such as lower interest rates or waived processing fees. These benefits can help reduce the costs of major expenses like catering, photography, or your honeymoon. When considering a wedding or personal loan, be sure to watch for such deals.

Best personal loans for weddings in Singapore

If you've decided to take out a wedding loan, here are a few options with instant approvals for you to consider:

Alternative ways to finance a wedding in Singapore

What if you've decided that a loan, whether it be personal or wedding, is too risky for your financial situation? Well, here are some alternatives that you can consider instead:

Friends and family

That's right, you can always muster up the courage to ask your loved ones to help finance your wedding. After all, they were so invested in your love life when you were still single, so why shouldn't they pitch in to help fulfil your happiness?

Jokes aside, borrowing from loved ones can be a good option, as most of them charge little or no interest. Just make sure to pay them back promptly to avoid burning any bridges.

Credit cards

While using a credit card to pay for wedding expenses can help with short-term cash flow, it's important to be mindful of interest rates. Make sure to pay off the balance quickly to avoid high interest charges. 

That being said, it might still be worth it to use credit cards as some of them even provide bonuses for wedding packages such as the American Express True Cashback Card.

Personal savings

Of course, if you're really looking for an interest-free way to fund your big day, using your personal savings is the best option.

Saving up in advance is one of the most effective ways to avoid debt. While it requires careful budgeting and planning, it ensures you won't need to rely on loans or credit for your wedding expenses.

Should you even consider taking a loan to finance your wedding in the first place?

It's never ideal to start your future together in debt, which is why it's important to carefully weigh the pros and cons of taking a loan. While weddings are often once-in-a-lifetime events, you don't want to be burdened in the long run just because you went a bit overboard with the expenses.

That said, if you're in a stable financial position, have good credit, and can afford to repay the loan without strain, then taking out a wedding or personal loan may be a reasonable option.

Ultimately, the decision to take out a loan for your wedding is a personal one. The key is to ensure that whatever option you choose aligns with your financial goals and gives you peace of mind as you embark on your new life together.

This article was first published in MoneySmart.