Financing Through the Jeweler
Most large chain and online jewelers offer their own engagement ring financing, usually through a credit card. They often include a promotional period with no or very low interest, as long as you make a minimum down payment.
If you have the down payment and a good credit score, this might be an attractive option for you. Just keep a few things in mind:
- Paying off your ring within the 0% interest time period is the best option. Once that period is up, these cards usually have a pretty high interest rate.
- Opening a new credit card can actually hurt your credit score, if you already have other lines of credit available.
- If you can’t pay off the ring before the low interest rate ends, calculate how long it will take to do so and how much you’ll ultimately pay in total, with interest included.
Here are a few examples.
- No interest if you pay the balance in 6, 12, or 18 months. If you don’t, interest is charged from the purchase date.
- 9.9% interest for 6, 12, or 18 months and a 29.9% APR after that.
- No special offers.
- Deferred interest if paid in full within 6 months.
- 9.90% interest if paid in full within 24 months.
The catch with in-store financing is that you need approval, and that usually requires a good credit score. If you have poor or no credit, there is another buy-now-pay-later option. That’s progressive leasing.
Progressive leasing is a rent-to-own option. You sign a leasing agreement and make a payment up front. Payment options are usually pretty flexible, so you can choose your schedule. As long as you make regular payments for a specified period of time and pay off your engagement ring in full by the end of the payment period, the ring is yours.
While you’re paying off the ring, however, it still belongs to the store (or the third-party leasing service they use).
Some stores, like Zales, also have a layaway program. This is a great option if you see something in a store that you like and don’t want to miss out on. Basically, you’re putting your ring on hold until you have the money to pay for it in full.
With Zales, you put 10% down on the ring and make 10 equal monthly payments. When the ring is paid off, you get to take it home.
Different stores have different ways of handling layaway purchases, so check their policies carefully.
The upside of layaway is that you don’t need good credit. The downside is that you don’t get your ring until you’ve paid it off in full.
A Credit Card
If you’d rather not go through the store and deal with high interest rates, you can shop around for another credit card.
A credit card not associated with a jewelry store will have a few advantages over going through a jeweler for engagement ring financing. For example, you can:
- Shop around for the best introductory rate, preferably 0%.
- Look for a card with a low interest rate after the promotional period ends.
- Use your credit card for other purchases. (It won’t be restricted to in-store jewelry purchases).
- Benefit from a big purchase like an engagement ring, if you use a card with a points or cash-back program.
Nevertheless, like an in-store credit card, this financing option has its downsides, too. If you don’t pay off the ring before the introductory period ends, you’ll end up paying more in interest. Plus, carrying a high balance on one or multiple credit cards can hurt your credit score.
Many financial institutions offer personal loans. To get one, you can apply for pre-qualification to see what kind of money you can get, given your credit history. (Just keep in mind that getting pre-qualified doesn’t guarantee you’ll get the final loan).
If approved for the loan, you’ll get money up front to pay for your ring. Then, you’ll pay back the loan over a specified period of time. You may have a fixed interest rate (which won’t change) or an unfixed rate (which can vary).
There are two types of personal loans: secured and unsecured. A secured loan means you’re putting up collateral in case you don’t pay back the loan. An unsecured loan means you’re not putting up collateral. So, the interest rate on an unsecured loan may be higher.
Personal loans usually have lower interest rates overall than credit cards or in-store financing. However, if you’re approved with bad or no credit, your interest rate can still be pretty high.
Save the Money and Buy It Outright
If you don’t want to pay interest or worry about your credit score, your best option is to save the money for your ring yourself and pay cash.
To start saving, determine what kind of ring you and your partner want. Choose the center stone, any side stones, the setting, and the type of metal for the ring itself. Then, shop around to figure out how much your ring will cost. Remember, you can always play around with diamond shape, color, clarity, and size to get your engagement ring within a reasonable budget. And if you want something other than a diamond, you have many colorful gemstone options. Finally, decide if you want to insure your ring and factor that into the final price.
Once you’ve done this, start saving. While this option may take longer than the others, you’ll save money by eliminating interest payments.
What’s the Best Option?
There are pros and cons for every engagement ring financing option. Your choice should really boil down to your dream ring, your budget, and how you wish to pay.
Just remember, whatever your budget, you have plenty of ring and stone options.