Should You Pay for Your Wedding with a Personal Loan?

Personal loans in Singapore can help cover wedding costs. But is it the right payment option for you?

It’s only natural for you to want nothing but the best for your special day. But before you go crazy with the floral arrangements and multi-tiered cake, you first need to have a solid plan for how to finance your wedding.

Brides and grooms in Singapore have several options at their disposal for bankrolling the Big Day. One of them is a personal loan. When woven seamlessly into your long-term budgeting, using a personal loan for your wedding can bring you a great deal of financial relief. 

Personal Loans are Ideal for Financially Stable Couples

Are you and your spouse-to-be both self-sufficient with a good track record in managing your finances? Then you should be able to handle the responsibility of shouldering new debt without issue.

Above everything else, you need to be financially stable when applying for a wedding loan. For this to happen, you should possess:

• a healthy credit history
• steady employment
• minimal debt
• a robust emergency fund

All of these make you better-equipped than most in repaying your personal loan. These can also increase your odds of getting a lower interest rate on a loan for the long run.    

How Much Can You Borrow for Your Wedding?

Depending on your credit history and the bank's policies, you can borrow as much as 4 times your monthly salary. Most banks require you to have an annual salary of at least  S$30,000 to qualify for a personal loan. So if you earn this much, you’ll be able to borrow approximately S$10,000.

How to Choose a Personal Loan

Interest will be your biggest concern when signing up for a loan of any sort. Your objective is not just to go for the lowest interest rate, but the lowest Effective Interest Rate or EIR. This figure is added to the amount you borrowed from the bank, bringing up the total of what you owe.

Unlike the monthly rate which may appear more prominently in a lender’s marketing materials, the APR serves as a more accurate reflection of the loan’s annual costs. This includes not just the interest, but processing fees and other related costs.

Besides examining the effective interest rate and other fees, check if there are fee waivers or welcome offers that will lighten your monthly repayments.

For example, HSBC Personal Loan has an exclusive online rate as low as 4.55% p.a. (EIR 8.5% p.a.) for a 2- year loan, with a minimum loan amount of S$10,000. On top of that, you get the S$88 processing fee waived and an additional S$50 cashback with your online application. That's at least S$138 in savings compared to other loan offers in Singapore today.

When to Think Twice About Personal Loans

We should stress, however, that the personal loan route is not for everybody. If you're planning to buy your first flat, taking out any loans can decrease your chances of getting a home loan. That's because the lender (whether private banks or the HDB) will be looking at your Debt Servicing Ratio (DSR) - a figure that measures your debt obligations against your income.

If you earn S$4,000 a month, and you have an outstanding debt of S$2,000, your DSR is 50%. Getting a personal loan on top of this will raise your DSR even further. Lenders will typically decline housing loan applications if the repayment will raise the applicant's DSR above 60%.

So unless you are willing to put off buying your first HDB flat until your debts have been cleared, you may want to rethink getting a personal loan to fund your wedding.

Whatever payment option you ultimately go with, keep track of the costs you’ll accumulate as you plan your big day, and try not to spend beyond your means. Married life will incur a lot of major expenses along the way, and purchasing your first HDB flat together is just the start. Singaporean newlyweds delay or avoid parenthood altogether because they can’t afford the loss of their partner’s income when he or she takes time off work to nurture a baby.

Make sure to have a frank discussion about your financial goals beyond your big day. The last thing you want is for your wedding bill to balloon out of control, hindering your ability to plan for life after “I do.”

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