Your child is getting married. Congratulations! This is such a joyous time for you and your growing family.
As wedding planning kicks into gear, you’re likely thinking about how much you’ll contribute to the big day, a wedding shower, or the honeymoon, and how you’ll come up with those funds. There are many different ways to pay for a wedding. Some may seem a bit more obvious—like drawing from your savings and using credit cards—while others, like taking out a loan against your whole life insurance policy, could be the perfect option that you haven’t yet considered.
Let’s go over some options so you can determine what the right move is for you.
If you have the funds for your child’s wedding in your savings, this can be an excellent option. Remember, though, to keep an emergency fund on hand in case something unexpected happens. If you don’t have cash on hand to finance a wedding or using your savings would drain your funds below what you’re comfortable with, read on for more options.
Let’s consider home equity loans, personal loans, and loans against your permanent life insurance policy.
A home equity loan is a loan you take out against your home’s equity, or the value you’ve built in your home—this is your home’s current market value minus the remaining amount you owe on the mortgage. Interest rates are typically fixed, with a set repayment schedule. Interest rates on home equity loans are generally lower than many other types of loans, such as credit cards or personal loans. For many parents looking to finance a bigger chunk of their child’s wedding, home equity loans can be a good option.
You can take out a personal loan from banks, credit unions, or private lenders. These function similarly to a car loan or mortgage in that you’d be paying a monthly installment with an interest rate—fixed or variable—dependent on your credit score and current available rates. However, because personal loans are unsecured, the interest rate tends to be higher. The repayment term also tends to be shorter than a home equity loan.
Finally, you could take out a loan against your permanent life insurance policy, such as whole or universal life, if you have one. In addition to providing a death benefit, when you pay premiums on your life insurance, you build your policy’s cash value. If you’ve been building up that cash value for a while, you may be able to borrow against it and secure a loan for your child’s wedding. (Just be aware that if you don’t pay the loan back, you could reduce your policy’s death benefit or have other implications.)
Using a credit card is a quick and easy option—though, if you go this route, take time to choose the right one because interest rates on credit card payments can be high. Some cards will offer a zero percent interest rate for a fixed time when you open a new account, so you have time to pay back the charges interest-free. If travel is important to you, and you anticipate being able to pay the balance off quickly, take a look at cards that will reward you with points that can be redeemed for travel expenses. Consider all your options for credit cards before you swipe.
Before you make your final decision, make sure that you and your child are on the same page. Setting a budget for how much you are willing to spend and being clear about what you will pay for will help you find the best funding and avoid any surprise expenses.
With careful planning and research, you will find the funding that works best for you and your family, whether that’s dipping into your savings, taking out a loan, or using the right credit card.