Wedding Loans: Funding the dream

Wedding Loans: Funding the dream

Wedding Loans: Funding the dream
Studies have shown that people born in the late 80s and early 90s are different from the rest of us. The all-pervasive Internet, with its constant stream of information has left the millennials exposed to media in more ways than any previous generation and in turn, has shaped their opinions about subjects which they might not have experienced first-hand.

Also prevalent in this day and age are the income levels, which seem to be higher than the rate of inflation, pointing to the fact that the affordability of some products and services is greater than it was before. This is evident in industries like the airlines where a ticket, which used to cost several months of an individual’s income, can now be purchased at a fraction of the cost.

Spending is as much of an art as is investing, and just as it is important to time one’s investments, it is also wise to time one’s spending. The current period presents an ideal opportunity for individuals to get more bang for their buck, with interest rates being relatively low and the affordability of certain services or products being significantly high. It is therefore an appropriate time to avail loans for purposes other than conventional ones, such as purchasing housing or automobiles. One such end use, which has steadily been increasing in demand are weddings.

As per a wedding loan survey conducted in 2016, more and more youngsters prefer having a simple yet memorable wedding followed by a honeymoon to an exotic destination rather than an elaborate wedding. Experiential aspects, such as personal photographers for a candid wedding album, a smaller gathering of close friends and relatively unique locations constituted the more desired elements of the wedding. This is in stark contrast to the conventional wedding, dominated largely by copious amounts of food, elaborate decorations and emotionally charged interactions between large groups of invitees.

For the ‘Facebook generation’, relatively fewer things matter as much as the memorability of key events. Given that weddings are arguably among the most important experiences in a person’s life, the survey came up with some interesting findings. For instance, over 40% of women prefer weddings that are ‘intimate and stylish’, twice as much as the 20% who prefer ‘lavish’ weddings. This number rose to 57% for women aged between 26 and 30 years, which appears to be the sweet spot for the experiential group. Close to 30% of the people also preferred domestic destination weddings in cities other than their residence.

Additionally, 50% of all engaged individuals preferred to spend between Rs 5 lakh and Rs 15 lakh on their wedding. More importantly, the survey also demonstrated that only about 25% to 30% of people have saved enough to pay for the wedding that they aspire for. Most individuals actually ended up overspending on their weddings to the extent of Rs 1 lakh to as high as Rs 5 lakh!

Funding in the form of wedding loans can help such couples achieve their dream wedding. A wedding loan is just a personal loan that is designated to cover wedding-related expenses. It is collateral free and can be paid as per the convenience of the borrower. Most financial institutions, including local and nationwide banks, credit unions, non-banking financial institutions and even some online banks, offer wedding loans. And the good news is that anyone can apply for one. What matters the most is the borrower’s credit score, credit history and debt-to-income ratio. If these three components indicate that the borrower is dependable, then no lender will hesitate to offer financial assistance.

However, before choosing the lender, the borrower should zero-in on the amount needed from the financial institution after taking into consideration the budget, financials and the amount already set aside by the families or individuals in question.
The eligible amount for wedding loans varies from lender to lender on the basis of the borrower’s profile and the previous repayment track record. Most financial institutions need a minimum CIBIL score of 750 to process the loan. Prior to approaching a lender, the borrower should chalk out a list of everything needed on the basis of priority, so in case the final amount goes beyond the budget, the list can be reduced with ease.

The most important factor is to decide the maximum amount the borrower can repay every month after the wedding. In an ideal scenario, a wedding loan should have a three-year repayment tenure.  Since this is an unsecured loan, the lender might ask for additional documents over and above the traditional personal loan documents before formalising the marriage loan application. These may include bank statements, proof of income, lawsuit settlements, tax returns, list of credit accounts in some cases, and proof of marriage (wedding card, etc.).

As so many satisfied personal loan customers have realised, loans which are availed to purchase tangible goods provide temporary gratification, while the memories of special occasions like weddings, last forever. Therefore, a low interest wedding loan, which has the potential to shield such couples from additional, unexpected expenditures could help make their dream wedding come true.

(The writer is COO — Retail Business and Housing Finance at Tata Capital)