Personal Loan vs Wedding Loan: Is There a Difference?

A wedding loan is a type of personal loan. they work the same as personal loans, meaning they are not fundamentally different. Only the way of their marketing is different.

What is a personal loan?

A personal loan is an unsecured loan that can be used for a variety of purposes except for business. A wedding is one of them. Here are some reasons why people take out personal loans:

To refurbish their house
To purchase a car
To pay for medical bills
To consolidate debts
To buy an electronic gadget

Personal loans are classified into small and large. The former includes those that come with a very small amount of money, not more than £1,000 and are required to be repaid with one stroke. They are ideal to meet small emergencies such as unexpected medical bills.

The latter is aimed at funding large expenses such as weddings, home refurbishment, and buying a car and gadgets. These loans start from £5,000. They are paid down in fixed instalments over a period of five years. Since they are not secured against collateral, the repayment term cannot be more than five years.

What is a wedding loan?

A wedding loan is a personal loan which is aimed at exclusively funding wedding expenses such as catering, decoration, venue and photography and videography. They are also structured as personal loans.

If the loan amount is so small, a lump sum payment plan will be offered, and
If the loan amount is more than £1,000, an instalment repayment plan will be offered to you.

Key differences between personal loans and wedding loans

Aspects	Personal loans	Wedding loans
Purpose	They can be used for all types of personal expenses like vacation, kitchen remodelling etc.	These loans are exclusively used for wedding expenses. You cannot use them for any other personal reasons.
Eligibility	Approval depends on your credit score, affordability and income sources.	The approval criteria remain the same as for personal loans.
Interest rates	Interest rates vary by affordability and credibility. They start from 9%.	Interest rates for wedding loans are also high, but can be lower if the borrowed sum is not large.
Loan amount	The loan amount varies between £100 and £10,000. Some lenders may allow you to borrow up to £15,000.	The loan amount cannot be the same as that of personal loans. Most of the time, it is not more than £5,000.
Documentation	Bank statement and pay slips, income tax return if you are self-employed	Bank statement and pay slips; lenders are more flexible than personal loans.

Reasons why wedding marketing loans are marketed as a distinct product

A personal loan for a wedding in the UK is marketed as a distinct product because most people look for loans to cover wedding expenses. Marketing this way helps them draw the attention of users who look for wedding loans.

There are various people who feel reluctant to take out a personal loan, as they are notorious for being subject to high interest rates. When lenders promote wedding loans, the perception of people shifts, and they start showing their interest in them.

Apart from this, psychological reasons are also there. When people find wedding loans distinctively available, they will more likely prefer them to personal loans, even though they know they are no different from the latter.

Risks related to wedding loans

Since these loans do not offer you a large amount of money as personal loans, it does not insinuate that they are more affordable than personal loans. Throwing caution to the wind can result in a debt spiral.

High interest rates

Despite a good credit score, wedding loans charge high interest rates. Interest rates can range between 9% and 14%; however, they range between 20% and 26% for subprime borrowers. You might plunge into an ongoing cycle of debt upon payment failure.

Do not be under the impression that small wedding loans are manageable. Many people find it challenging to repay the debt in one shot, which results in a debt rollover. This keeps accumulating the cost of the debt.

Opportunity costs for wedding loans are quite high

If you had not taken out a wedding loan, you could have utilised payments for long-term goals such as arranging a down payment for a mortgage and an auto loan and stashed away for retirement.

What is the best alternative for a wedding loan?

No loan is better than savings. Wedding expenses do not crop up out of nowhere. This is a planned event, so you should start stowing away money several months before you become serious about your marriage.

Since the wedding day is not so near, you should consider investing in a fixed deposit to earn compound interest. This will protect your money against the impact of inflation. You should try to have wiggle room in your budget in case actual expenses exceed your anticipated budget.

Yet, you might feel the need to borrow money. Consider using a credit card. They might prove to be more affordable than wedding loans for small money requirements, provided you discharge the credit card bill within the stipulated timeframe.

Those who have a 0% credit card can avoid paying interest if money is repaid within the interest-free period.

The final statement

Wedding loans are no different from personal loans. When personal loans are allowed to be used only for wedding-related expenses, they are called wedding loans.

FAQs

1. What credit score do you need to apply for a wedding loan?

There is no set credit score requirement for wedding or personal loans. Subprime borrowers are also eligible to qualify for these loans. Lenders’ decisions are heavily reliant on your credibility and affordability.

2. How much money can you borrow by a wedding loan?

It depends on a lender’s policy, but most lenders do not offer more than £1,000. If you need more than that, you must have a very attractive credit profile and strong income sources.

3. Can you use wedding loans to cover honeymoon expenses?

Yes, you can use wedding loans to cover honeymoon expenses. Lenders do not impose restrictions on the use of loans as long as expenses are related to the wedding.

4. How to choose between a personal loan and wedding loan?

You should compare interest rates, APRs, processing fees and upfront payment, if any. Repayment flexibility should also be taken into account to make a decision. It is likely that personal loans offer better rates than wedding loans.