Will My Credit History Affect Wedding Loan Interest Rates?

Your credit history - for better or for worse - will affect interest rates on a wedding loan for that special day. To get the best loan, it's important to understand what wedding loans are, how you develop your credit history, what that history means for your wedding loan and what you can to do help yourself. 

What Are Wedding Loans?

The average wedding in the U.S. costs $28,000 and can easily average $50,000 depending on the city. There are almost as many types of wedding loans as there are types of loans. You can get a personal, unsecured loan, also known as a signature loan if you have great credit. You can get a secured loan by putting up collateral. You can use a home equity line of credit.

But there are lenders who specialize in wedding loans, and for these loans, your credit history will certainly affect the wedding loan interest rates you will be offered.

Developing Your Credit History

When applying for a wedding loan, you likely already have a credit history that affects it. Your credit history is a record of all your borrowing, plus any negative activity such as late payments. Lenders report this to the three main credit reporting bureaus, Equifax, Esperian and TransUnion.

Your credit history is used to develop your FICO score, calculated by the Fair Isaac Corp. FICO scores range between 300 and 800. The U.S. median is 720. A score of 760 is excellent; 620 and below is poor.

How Your Credit History Can Help

Wedding loan interest rates will almost always be higher than conventional loans which means it might make sense to borrow in some of the alternative ways mentioned above. But if you take out a traditional wedding loan, the better your credit score the better an interest rate you can be offered.

Additionally, a good credit score puts you in the position of allowing lenders to compete for you. They want less-risky customers and will negotiate on rates to get you.

How It Can Hurt

Just as a good credit history helps you get lower wedding loan interest rates, a poor history means you'll be paying higher rates. But that is not the only negative. You might find it difficult to get wedding financing at all. Loan terms could be more restrictive, too. As an example, the higher rate means higher monthly payments which could be reduced by extending the payout period of the loan. However, with a poor credit history, lenders might be unwilling to extend the terms as they view longer loans as riskier.

How You Can Help

A big wedding typically doesn't come together overnight. The time to work on your credit history and credit score is six months to a year before you need a wedding loan. Get your free annual credit report and fix any mistakes you find on it. That's the only quick way to improve your score. Also, use the time to save so that you can either reduce the amount you need to borrow or use the cash as collateral to improve your loan terms. Finally, use the time to develop a budget you can live with that includes the cost of your wedding loan.

 


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