Engagement Ring Financing: A Guide

An engagement ring is one of the most significant purchases you may ever make – not just because of the cost, but because of what it symbolizes. Not only is an engagement ring an emotional purchase, but there’s often pressure to splurge on something that represents your lifelong commitment to the person you love.

American Express puts the average cost of an engagement ring today at $5,200. But you could easily spend a lot less or more, depending on the type of ring you’re looking for.

Given the cost involved, you may be wondering: Can you finance an engagement ring? The answer is yes, you absolutely can. But different financing options have different costs and drawbacks, so it’s important to weigh your options carefully.

Here, we’ll walk you through financing an engagement ring so you understand your options.

Financing An Engagement Ring: Options To Look At

There’s no single “best” way to finance an engagement ring. The right choice depends on the ring price, your credit score and how quickly you can repay the balance.

Here are some common options for financing an engagement ring.

Personal Loans

A personal loan allows you to borrow a lump sum and repay it in fixed monthly installments over a set period of time. Personal loans are often used for larger engagement ring purchases because they generally offer:

A personal loan could be a smart financing option if you have a good credit score (usually defined as 670 or higher). That’s because with a good credit score, you’re more likely to qualify for a competitive interest rate, which could make your loan cheaper to pay off.

Personal loans typically have terms of 2 – 5 years. The longer your term, the lower your monthly payments should be. On the flip side, the longer you pay off your loan, the more interest you might pay over time.

Keep in mind that applying for a personal loan will generally result in a hard inquiry on your credit report. However, a hard inquiry should only reduce your credit score by under 5 points. From there, if you make your loan payments on time, the loan could help your credit score improve.

Jewelry Store Financing

Many jewelry stores offer in-house financing or financing partnerships through third-party lenders. The cost of jewelry-store financing can vary depending on the type of offer.

Some stores may offer a promotional period of 0% financing. If you pay off your ring during that time, you can avoid paying interest altogether. But make sure to read the fine print and understand the interest rate and any deferred interest you’ll be charged if you don’t fully pay off your ring within that promotional period.

As with a personal loan, a longer loan term at your jewelry store could cost you more interest but leave you with smaller monthly payments. There is a possibility of a hard inquiry on your credit report, which could have a small impact on your credit score. Most important, though, is that making your loan payments on time could strengthen your credit score and help you avoid damage.

Credit Cards With Promotional APRs

A credit card offering an introductory 0% annual percentage rate (APR) is another option for financing an engagement ring. This strategy can work well if you’re able to pay off the ring before your introductory period ends, so you can avoid paying interest. These periods typically last 12 – 21 months.

However, if you aren’t able to pay off your ring by the end of that introductory period, your balance could then be subject to the card’s standard APR, which may be quite expensive. If you don’t anticipate being able to pay off your ring in under 2 years, a personal loan could end up being a less expensive option, depending on the rate you qualify for.

Any new credit card you apply for will generally result in a hard inquiry on your credit report. You should know that credit utilization, or the amount of revolving credit you’re using at once, is a big factor in your credit score.

A large credit card balance, because of charging an engagement ring, could increase your credit utilization rate and lower your credit score. However, on-time credit card payments could be beneficial to your score.

Buy-Now, Pay-Later

Buy-now, pay-later plans let you split purchases into installments over several weeks or months. Many buy-now, pay-later plans have you pay 25% at the time of purchase and split the remaining balance into three payments over 6 weeks. Some come with slightly longer repayment windows.

Typically, short-term buy-now-pay-later plans don’t charge interest, provided you stick to your payment schedule. If you don’t, you could face interest and fees.

Also, short-term buy-now, pay-later plans usually do not result in a hard inquiry on your credit report. That’s important if you’re preparing to apply for a large loan such as a mortgage and don’t want recent inquiries on your record.

However, if you fall behind on buy-now, pay-later payments, that activity is typically reported to the credit bureaus and, in many cases, could hurt your credit score. You may find it difficult to pay off an engagement ring using a short-term buy now, pay later plan, because it could require coming up with thousands of dollars in a very short time frame.

How To Set A Budget For An Engagement Ring

For years, marketers have spread the message that an engagement ring should cost three months’ salary. In reality, the amount you spend on an engagement ring should only hinge on your income, expenses and financial priorities.

If you’ll be financing an engagement ring, you’ll need to see what monthly payment can fit into your budget. From there, you can explore the option that makes the most financial sense.

Another important consideration is your financial goals for the next few years. Are you and your partner hoping to have a big wedding? Buy a home? The more you spend on an engagement ring, the harder it may be to meet other big goals.

When setting your budget, make sure you understand that financing an engagement ring could cost you more in total than the ring itself.

For example, if you’re paying for a $5,000 ring using a 0% introductory APR credit card and you expect to pay it off in full before your promotional period ends, the total cost of the ring may be $5,000. But if you’ll be financing it with a loan that will cost you $2,000 in interest by the time it’s repaid, your total cost is $7,000.

What’s Your Goal?

Buy A Home

Discover mortgage options that fit your unique financial needs.

Refinance

Refinance your mortgage to have more money for what matters.

Tap Into Equity

Use your home’s equity and unlock cash to achieve your goals.

Hidden Costs Of Financing An Engagement Ring

The price you’re quoted for an engagement ring isn’t always the final cost. Some other costs you may be looking at include:

There’s also an opportunity cost to consider: The money you spend on an engagement ring could go toward a new car, a home down payment or your long-term savings.

Furthermore, if you end up having to finance an engagement ring, it could mean starting your marriage with additional debt, which could put strain on your joint finances. Exploring alternatives could help you and your partner avoid stress early on in your marriage.

Alternatives To Financing An Engagement Ring

If you don’t like the idea of taking on debt to buy an engagement ring, consider some alternatives.

Choose A Less Expensive Ring

Spending less on a ring doesn’t mean you love your fiancé(e) any less. It simply means you have different financial constraints or priorities. You may decide to buy a lower-quality diamond or choose a less expensive stone altogether.

Wait And Save

Saving up for an engagement ring could make it possible to buy one outright without financing the purchase. That could save you money on the ring’s total cost when you account for interest charges.

But you’ll need to weigh the emotional and logistical cost of waiting against the financial savings. If you and your partner are eager to start your life together, you may not want to wait years to get engaged just so that you can save up for a ring.

The Bottom Line: Consider A Range Of Options Before Financing An Engagement Ring

If you can’t afford to buy an engagement ring on the spot, financing it is worth looking into. And you have several options in that regard.

But make sure you understand the costs and the impact on your credit score of each financing option before making your choice. That means running the numbers to make sure any monthly payment you take on fits your budget.

Finally, you may want to talk to your partner about buying an engagement ring so you’re both on the same page. Doing so could help ensure that you don’t overspend for the wrong reason. It could also help set expectations so you’re not pressured to stretch your budget too heavily.

Ready to explore your financing options? Compare personal loan options to find one that fits your budget.

Maurie Backman

Maurie Backman has more than a decade of experience covering personal finance topics that include mortgages, loans, retirement, Social Security, and investing. Prior to becoming a full-time writer, she worked in the financial industry as well as in product design and marketing. Maurie holds a bachelor's degree from Binghamton University, where she studied creative writing and finance. She was happy to combine her two areas of study into a career that allows her to educate consumers on a host of financial topics.

View Profile