So you’re thinking about financing an engagement ring?

You’re not alone; the average cost of a ring is $3,756, according to wedding blog Brides. That’s more than many Americans have sitting around in a bank account.

But watch out: at some point, you’ll likely be presented with financing options that can put you between a diamond and a hard place. Here’s how you can shop smartly for your engagement ring:

Be on Guard for Deferred Interest

Deferred interest loans and credit cards are standard at retailers that sell expensive products like jewelry, appliances, electronics and furniture. Many businesses offer these loans during the holidays when consumers may be tight on cash while shopping for loved ones, featuring marketing phrases such as “no interest for 12 months” or “same as cash.”

Deferred interest loans are enticing because you won’t pay interest for a set term, whether it’s six months or two years. But, if you don’t pay off the entire balance by the end of the offer period, or if you’re late on a payment, you’ll be on the hook for all the interest that started accruing on the full balance from the day you signed.  So if life throws you a curveball like a medical emergency or an unexpected loss of income, and you’re unable to repay the balance during the promotional term you’ll suddenly see an increase in your balance from interest that was accruing. 

Tread Carefully with Low-Interest Credit Cards

When you go to pay for your engagement ring, you may be offered an especially low-interest credit card.

If so, stop and read the fine print; there are usually a few catches for these.

For one, the low-interest period for these types of cards is often very limited. Sometimes, it only applies to the first year.

Then, after that period, the interest rate may increase to 30% or more! Any gains you made from the first year could be wiped out quickly and then some.

Another low-interest credit card pitfall is the never-ending debt cycle. This is where the monthly payments are so low that you hardly pay anything toward the amount you originally borrowed, known as the “principal.” You could just be paying off interest for months or years, making little to no progress at all at paying off your balance.

Go Beyond Credit Cards

Plastic isn’t everything; there are other options available to you that might be a better fit. 

One funding alternative is a personal loan. If credit health is an issue for you, some personal loan lenders may be willing to work with your specific financial situation. Plus, you might be paying less interest than you would with some cards.

Another option is to just save and pay for the whole ring upfront. It’s a great financial move if you can pull it off.

A third route is just to spend much less, which may be easier than you think. Consider buying your diamond separately, searching for family heirlooms, and exploring diamond alternatives such as opals or amethysts.

Side Note: Forget the “Three Month Salary Rule”

Have you ever heard that you should spend as much on a ring as you make in three months of work?

In actuality, the three-month rule evolved from a depression-era marketing campaign, rather than from some wise sage. These days, not only are people spending far less than they make in three months, but they’re parting with fewer dollars than ever before.

According to a study by wedding blog Brides, the average couple only spent an average of $3,756, down almost 50% from the $7,826 average they were spending in just 2018.

That being said, there is no hard-and-fast rule dictating how nice of an engagement ring you should get, other than spend however much you want and can afford. Just know that if you don’t put down for an extravagant ring, you might not be alone.

Shine On and Finance Smartly

A ring is a big expense that may entail several financing options. Choose wisely and you’ll start your new engagement off on the right foot. Choose rashly and your debt may linger for as long as your diamond.

Deferred interest loans, low-interest credit cards, and personal loans are three options you may encounter if you’re seeking to finance a wedding ring. Whichever you choose, keep in mind that if an option sounds too good to be true, it may be.  

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