Are personal loans for weddings available in Australia?

The average Australian wedding now costs $36,000, according to a survey conducted by the government website, Moneysmart. The same survey concluded six out of 10 couples opt to take out a loan for weddings, while 18 per cent use their credit card.

A personal loan may be an option if your savings won’t cover your wedding expenses, however it’s important to consider the long term impact of taking on additional debt. Here’s our guide to help you weigh up if a wedding loan is the right option for you.

Financial lenders do offer loans for weddings, but they will need to be confident you have the income to repay the loan within the agreed terms.

Costs to think about when planning a weddings include:

• Venue, including the deposit
• Wedding rings and other jewellery
• Entertainment
• Ceremony
• Car hire and transport
• Food and alcohol
• Stag and hen parties
• Wedding cake
• Photography and videography
• Clothing and accessories
• Beauty treatments – hair, makeup, etc
• Flowers
• Wedding night accommodation
• Honeymoon.

If your wish list of wedding expenses is sky high, consider these tips from Moneysmart. They even have an online savings goal calculator. While some couples may cut things back to help save for their wedding, others may opt for a wedding loan to help cover the cost of their big day.

Lenders could include banks, credit unions, peer-to-peer payment providers and more. Some lenders might even provide the option of consolidating your loan with other loans such as a car loan, although this is at the lender’s discretion and considered on a case-by-case basis.

Assuming you meet the eligibility requirements, as an estimate, some lenders could allow you to borrow from $2000 to about $70,000. However, some lenders may have a higher $5000 minimum loan amount. Some may offer up to $100,000 for joint or individual applicants, but may ask for security. Security is an asset (like a home) that is used to guarantee a loan. The lender may then sell the asset to get its money back if the loan is not repaid.

Just because you can loan a six-figure amount, doesn’t mean you should. So have a think about what you can realistically pay back and consider the loan amount you need carefully.

A US study found 79 per cent of couples surveyed expected to go over their wedding budget. Chances are Aussie couples are no different. While many couples use their savings for their wedding, they may still take out a wedding loan for unexpected expenses to help create a buffer.

Some lenders may allow you to borrow a little more on top of an existing loan if you’re eligible to do so and have been paying off the loan consistently. Don’t assume you can delay paying off the loan until after the wedding - lenders will usually expect repayments as soon as you take out the loan. Some may allow you to defer the loan establishment fees, though.

Typically, the term of the loan will be flexible, from one to seven years for repayment. You can usually choose from weekly, fortnightly or monthly payments, however you should check with your lender that they offer your preferred option.

Wedding loans can have fixed or variable interest rates; they could also be secured or unsecured personal loans. A loan for a wedding that is unsecured, won’t need to offer items – such as your wedding rings, car, or other high-value assets – as security.

Some couples opt to use their credit card, line of credit, or home loan redraw facility to help pay for their wedding. A wedding or personal loan hands you a lump sum upfront compared to a credit card that sets a limit for your spending. Interest rates for personal loans tend to be lower than for credit cards.

Be aware that some lenders may knock you back for a wedding loan if you aren’t receiving a regular income, such as full-time or permanent part-time employment.

Make sure you check out the interest rates, fees, comparison interest rate, loan terms and conditions and limits, as well as the lenders’ credit policies.

Typically, wedding loan interest rates can vary depending on the lender, the type of loan and your credit history. They are offered as a fixed rate (the rate won’t change over the life of the loan) or variable rate (it can change depending on what’s happening with the market rate). The comparison rate is usually a little higher because its percentage includes a calculation of most common fees charged by lenders to help people compare.

There can be big difference in rates because the lender will look at your credit history and credit score, income, expenses, and spending patterns. Usually, you’ll get a lower rate if you have a healthier credit score. Lenders often won’t accept your loan application, or will charge a much higher rate, if you have recorded credit defaults, bankruptcies or judgements.

You may decide to access your credit report before you decide to apply for a loan, which you find more information on at the Moneysmart website. Should you go ahead with your application, the lender will then get your permission to complete a credit check. They’ll use your score to help work out if you qualify for a wedding loan, the interest rate and credit limits. When that happens, your credit score may be impacted.

Depending on the lender you may need to pay a one-off application fee to set up the loan, then you may be charged a monthly fee after that. In many cases there can be fees for late payments or for making extra repayments, but that depends on your lender.

Common fees can impact the overall cost of the loan which is why the comparison rate is an important tool to help compare options. The comparison rate includes the interest rate, plus most common fees and charges.

Note that the comparison rate may be based on a loan amount that doesn’t match what you’re looking to borrow, because lenders are obliged calculate the comparison rate based on the requirements of the National Consumer Credit Protection Regulations 2010.

Another consideration is how the lender sets its upfront fees. It might be:

• A flat fee regardless of the loan value
• A tiered fee based on how much you borrow overall
• A percentage fee that takes your credit risk and the total amount you’re borrowing
• A hybrid fee, so a flat fee and percentage of the value of the loan.

These fees could make a massive difference in the amount you will repay overall.

There’s plenty to consider before you say ‘I do’ to a wedding loan. Take the time to take a good look at your personal financial situation.

Also, note lenders will only accept applications for people aged 18 or over. You’ll need to offer verification of your income and identity as part of the application process.

To start you off on your research, you might find it helpful to compare a range of lenders and personal loans with Compare Money.