The 26-year-old had already picked out the diamond solitaire from Tiffany & Co., when he happened upon an ad for wedding-related loans while he was checking his credit score on Credit Karma.
“I thought, ‘Hey, I’m going to be making a pretty sizable purchase,’” said Ramirez, a general contractor in Fort Myers, Fla., who proposed on Valentine’s Day. “I didn’t want to be using cash or pulling money from savings or investments accounts.”
It took about 15 minutes to get approval for the five-figure loan. At an interest rate of about 8 percent, it will take more than three years — and $300 a month — to pay it off. And it might not be the last loan he takes out as he prepares to get married.
Demand among Americans, who are already holding record levels of debt, for help financing weddings are giving rise to an industry of personal loans marketed specifically to brides and grooms.
Online lenders say they are issuing up to four times as many “wedding loans” as they did a year ago, as they look to reach a fast-growing demographic: Couples who are picking up the tab for their own nuptials, either by choice or by necessity. Financial technology companies with snappy names like Prosper, Upstart and Earnest are promoting wedding-specific loans with interest rates as high as 30 percent to cash-strapped couples. The loans are often marketed as a way to fund extras like custom calligraphy, doughnut displays and “Instagram-worthy” venues, though some borrowers say they rely on the loans to fund their entire wedding.
“People are carrying more debt, they want to get married but don’t have the funds to do so,” said David Green, chief product officer at Earnest, a San Francisco-based online lender. “These loans are a way to thread the needle.”
Demand for wedding loans has quadrupled in the past year, he said, making it the company’s fastest-growing line of business. Couples borrow, on average, $16,000 and typically pay it off within three years. Interest rates range from about 7 percent to 18 percent, making it a cheaper option than many credit cards. (The company’s tagline: Inspired by Pinterest? Make it happen with low interest.)
The popularity of these loans, experts say, comes amid a shift in how families are paying for weddings. There is less expectation, they said, that the bride’s parents will pick up the tab. Instead, both sets of parents, as well as grandparents, are increasingly contributing. The bride and groom are chipping in, too.
“Couples are getting married later, so they are more willing to pay,” said David Wood, president of the Association of Bridal Consultants. “At the same time, their parents are older, they may be on a retirement income and not have the means to pay for the wedding either.”
The average cost of an American wedding is rising, according to financial advisers. At the same time, Americans have more student loan debt than ever before — nearly $1.5 trillion of it. They are saving less and spending more on basics such as housing, food and transportation.
“What’s driving this growth? Weddings are getting more expensive and people are waiting longer to get married,” said Todd Nelson, director of strategic partnerships for LightStream, a lending division of SunTrust bank. “It used to be, generally speaking, the father of the bride was on the hook for paying for the wedding. That’s not necessarily the expectation anymore.”
So far this year the company has funded three times as many wedding loans as it did a year ago, Nelson said. LightStream considers a combination of factors, including credit history, employment and income, when approving applicants for personal loans.
While borrowing itself is nothing new — credit cards and family members have funded weddings for years — financial advisers say these types of online loans take lending a step further, by directly targeting 20- and 30-somethings on their computers. Ads for wedding loans, they say, have become commonplace on social media, as well as financial planning sites like Lending Tree, NerdWallet and LendEdu. LightStream’s online ads promise wedding loans with interest rates “as low as 5.74 percent.” Upstart, meanwhile, has a partnership with the wedding site the Knot, which frequently promotes its loans.
“Financial companies have become very good at making you feel okay about borrowing money,” said Roger Ma, a financial planner in New York. “In the end, though, they just want you to spend money you don’t have, and that’s never a good idea.”
As for Ramirez, he proposed on Valentine’s Day during a trip to Key West. (She said yes.) The couple is now planning a November wedding for 200 guests, though they have yet to decide exactly who will pay for it, or how.
“We’re asking family members — moms, dad, grandparents — if they can help,” Ramirez said. “But depending on what happens, we might be back for another loan.”
When Mary Naklicki got married in 1977, her parents paid $10 per person for her reception. Naklicki may have to pay 11 times that for her daughter’s November wedding.
“There’s so much more to pay for now,” said Naklicki, 62, who lives in Millsboro, Del. “These kids have photo booths and videographers. There was none of that when I got married. I paid for my gown, flowers and the photographer and that was it.”
Naklicki and her husband recently took out a five-year, $10,000 loan from the online lender Upstart to pay for their daughter’s wedding at a local country club. They had just paid for a family trip to Disney World over Thanksgiving when they got word that their younger daughter’s boyfriend planned to propose.
“We said, oh gosh, that means she’s going to want to plan a wedding,” said Naklicki, who plans to retire from her job as a traffic coordinator for a manufacturing company in three years. “We’d just spent all this money and figured a loan was our best option.”
Financial planners say they’ve seen an uptick in clients who are tempted to take out loans to cover wedding costs. But, they say, they try to steer clients toward less expensive options, or to encourage them to put off the reception while they save.
“The problem is, you don’t want to rely on a personal loan for something that isn’t necessary — and there is nothing necessary about an expensive wedding,” said Stefanie O’Connell, a personal finance expert and author of “The Broke and Beautiful Life.” “Everything about weddings is discretionary, aside from what you pay the county clerk.”
O’Connell, who is getting married in August (and paying for the wedding in cash), said she also encourages couples to think about their long-term plans.
“You have to put it in context,” she said. “You could spend $30,000 on a one-day celebration, or you could use it to put a down payment on a house. These loans sound great when you’re planning your wedding, but afterward, I hear a lot of regret.”
Brad Pritchett and David Chadd had hoped to pay for their wedding with cash. But about a month before their February nuptials, they realized they were $13,000 over budget.
“Quite frankly, we both have a taste level where we weren’t willing to compromise,” said Pritchett, 38, vice president of marketing for the American Heart Association. “It was important for us to have a great party to celebrate our love.”
He and Chadd, 27, took out a loan to cover costs. The process itself was “shockingly easy,” he said.
“Neither of us talked to a person, ever,” said Pritchett, who also has student loans. “The money landed in our account, and we were like, ‘It feels like we just did something illegal.’ It was crazy.”
About 150 guests attended their wedding at an upscale hotel near Dallas. The grooms wore custom bow ties, and their dogs (also in bow ties) walked down the aisle with them. There were confetti cannons and a surprise flash mob dance performance.
“It was just perfect,” Pritchett said. “We had the best time.”
The couple has set up automatic monthly payments to their lender, Prosper, and are hoping to pay off the two-year loan early. Pritchett said he has no regrets.
“But,” he added, “there are times when we think: Maybe in another life, eloping doesn’t seem like a terrible idea.”