Money Management

Weddings come at a big cost, and a personal loan can make them more expensive. Read on to learn why they might be a good choice to fund a wedding. 

In 2022, the average cost of a wedding was $30,000, according to The Knot. If you are spending anywhere near the average amount, you will need a whole lot of money in savings to cover that cost.

If you don’t have the funds in your checking account to pay out-of-pocket, you’ll have to decide if you want to borrow to fund your nuptials. And you may want to consider whether a personal loan is the best approach to doing so.

To help you decide if paying for a wedding with a personal loan is a smart choice, be sure to ask yourself a few key questions.

Can you scale down your wedding plans and avoid borrowing?

Borrowing for a wedding is something you may want to do in order to have an amazing day. But, if you can have just as special of an event without taking on debt, you’re better off doing that.

Consider what’s really important to you. Could you cut your guest list to have only close family present? Do you want the fanciest of food or would simple dishes do? Does the wedding really need to be at an expensive venue or would booking a cheaper place allow you to pay cash?

If you can find ways to keep the magic but avoid the borrowing, you’ll likely end up a lot happier over the long term when you aren’t making wedding debt payments for years to come.

How much will a personal loan cost you?

The average interest rate on a personal loan was 11.48% as of May 2023. If you borrow at the average rate, take a $30,000 loan to cover an average cost wedding, and pay your loan back over five years, you would be looking at a monthly payment of $659.48 and would end up paying back $39,568.62 over the life of the loan. That includes $9,568.62 in interest costs.

Since you’ll end up borrowing, you need to be comfortable with the cost that your wedding is going to be about $10,000 more than the amount you actually paid due to interest charges. And you will need to be OK with the fact that you’re committing to make a pretty large monthly payment for the next half decade of your life.

If you are not comfortable with this, you’ll need to think again about whether you can scale down your wedding to avoid such a big financial commitment.

What other options are available to you?

If you absolutely want a big wedding and need to borrow for it, you can also consider what other options are available to you.

Personal loans tend to be one of the more affordable ways to borrow. By contrast, the average interest rate on a credit card was 20.68% as of July 10, 2023. So, if a card is your only other option, a personal loan would be a better bet.

But, if you could borrow from your family and not pay interest (or damage your relationship in any way by borrowing) then you could save quite a lot of money. Or if you could find a way to work more and bulk up your savings account so you don’t have to borrow, this could be a better option for you.

How will your personal loan payments impact your other monthly goals?

Finally, you need to consider the trade-offs you’re making to take on wedding debt. For example, will you have to put off buying a house because you’re making those monthly payments?

You may decide that these trade-offs are worth it. But be sure to really think about whether starting your married life with wedding debt is the way to go or if you’d rather do something else instead like having a cheaper wedding or saving longer before you get married. Only you know what’s best for you, but don’t jump into borrowing without giving careful thought to the opportunity cost first.

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When someone dies with life insurance, their beneficiaries can make a claim with the insurer and receive the death benefit. Here’s how it works. 

When a person purchases life insurance, they put protection in place for their surviving loved ones. A death can result in a loss of the deceased person’s income or services, which could mean survivors don’t have that cash going into their checking accounts to pay essential bills. Life insurance protects against this fate.

But, what exactly happens when a loved one dies with life insurance? Here’s what surviving family members can expect.

The beneficiaries should obtain a copy of the death certificate

A life insurer is going to require proof of death to pay out a claim. Typically, this comes in the form of a death certificate. Usually loved ones will receive a death certificate from the funeral home or mortuary.

It is also possible to obtain a copy of the death certificate from the vital records office in the state where the death happened. When requesting a death certificate from the vital records office, beneficiaries may need to know the place and date of death and provide information about their relationship to the deceased.

The correct forms will need to be filled out with the insurance company

Insurance companies will also require beneficiaries to go through the claims process to get the life insurance policy’s death benefit. The specifics of how this works can vary by insurer. An insurance agent who provided assistance with the purchase of the policy can usually offer help to beneficiaries in claiming the death benefit. Many insurance companies also provide claim forms online, along with detailed written instructions about how to submit them.

The life insurance company will review the claim

Once the claim forms have been sent in, the life insurer will review the claim. If the policy was valid and active and the chosen beneficiary has submitted the required forms and proof of death, then the claim will move forward.

Insurers may sometimes deny a claim if there is a problem, such as a policyholder dying for an excluded reason (such as death by suicide within a short time after purchasing the policy). In most cases, however, the claim will be processed without issue after the right documents are submitted.

The life insurance company will provide a payout of the death benefit

The death benefit will become available to the deceased person’s chosen beneficiaries when the life insurer has processed a claim, unless an issue comes up. Depending on how the policy is structured, the beneficiaries may able to choose one of several methods of receiving the money, including:

A lump sum payment, which means getting the entire death benefit paid out at once.A set amount of the death benefit on a predetermined schedule.A guaranteed income for life, with the amount determined based on the beneficiary’s age and the size of the death benefit.Only the interest from the death benefit, with the remainder of the money going to a secondary beneficiary upon the death of the primary beneficiary.

It is important to consider all of these available options to decide what makes sense. For those who aren’t good at managing money, for example, receiving the income over time could be a better option.

No matter how the beneficiaries choose to receive the funds, though, the important thing is to use the money wisely since the deceased was thoughtful enough to ensure their untimely death wouldn’t cause financial devastation to those they left behind.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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A 100-point credit score drop could have serious consequences. Read on to learn more. 

In 2022, the average U.S. credit score was 714, says Experian, one of the three major credit bureaus. That falls into the “good” range.

But you should know that no matter what credit score you’re looking at now, a 100-point drop could be quite detrimental to your ability to borrow money. So it’s best to take steps to avoid a drastic credit score plunge like that.

When your credit score nosedives

It may be possible for your credit score to drop by 100 points but still be in pretty good shape. Let’s say you started out with a credit score of 840 and it recently fell to 740. That’s still considered “very good” by Experian. So in theory, you may still be in a decent position to borrow money when you need to and snag a reasonably competitive rate on your next personal loan.

But let’s say you’re starting out with the average credit score of 714. If your score drops by 100 points, it puts you at 614. That score is only considered “fair,” which means you may not qualify for an attractive credit card offer with that type of score. And a 614 is also below the 620 it generally takes to qualify for a conventional mortgage.

Basically, the lower your credit score is, the harder it becomes to qualify for a new loan or credit card. And even if you do qualify, you might end up with a more expensive borrowing rate.

A lower credit score sends the message that you’re a riskier borrower. And lenders might attempt to compensate for that risk by charging you more interest than they’d charge a borrower with a higher credit score.

How to prevent a large credit score drop

There are certain things you might do that cause your credit score to drop modestly, such as applying for a new loan or credit card, or racking up a larger balance on a credit card you already have. For your credit score to drop 100 points at once, you’re most likely talking about being 90 days late or more on a loan or credit card payment you’re on the hook for.

Believe it or not, a single late payment could cause damage in that ballpark, especially if your credit score is higher to begin with. So if you want to avoid a sudden 100-point credit score drop, make a point to pay all of your bills on time.

Of course, your credit score might also drop by 100 points over time, in smaller increments. But you can avoid having that happen by not applying for too many new loans or credit cards in short order and keeping your credit card balances low relative to your total spending limit. Hanging onto long-standing credit card accounts rather than closing them could also help prevent a drop in your credit score.

All told, a 100-point drop in your credit score may or may not hurt your chances of being able to borrow. But even if a decline that large still leaves you with a decent score, it’s best to avoid a massive drop like that if you can.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Canceling an unused credit card may seem harmless. But before you do, read on to learn if there will be financial consequences. 

Every now and then, you might come across an old credit card in your wallet, card holder, or bottom drawer, dust it off, and realize you don’t really need it. Your inner Marie Kondo kicks in and you think maybe it’s time to declutter and cancel all these credit cards you’re not using.

Not so fast. Before you cut up that card, here’s why you might not want to cancel it right now.

It could impact your credit score

If you’re preparing for something financially important — like qualifying for the lowest mortgage rate — don’t cancel your credit cards. Doing so could affect your credit score, even if only by a few digits. For example, here are a few instances when I would resist canceling cards:

Applying for a new mortgage or refinancing an existing oneShopping around for the cheapest car insuranceLooking for the best personal loanApplying for a new apartment

All of your credit cards contribute to your credit utilization ratio, which is a measure of how much revolving credit you’re using versus how much total credit you have. Credit utilization makes up a whopping 30% of your FICO® Score and might hurt it if your ratio is above 30%.

For example, if you have three cards with $20,000 in total revolving credit, and you’re currently holding a $4,000 balance between two cards, then your ratio would be 20%. Now, let’s say you cancel one of those cards (the one that has no balance), which had a credit limit of $8,000. Now, your total revolving credit is $12,000, which means you’re using about 33% of your total credit.

Canceling a credit card could also affect the age of your credit history, which is about 15% of your FICO® Score. This is especially true if you cancel an old credit card, as that could shorten the life of your credit history. However, as writer Ashley Maready pointed out here at The Ascent, canceling your oldest credit card may not have a serious impact on your score, especially if your credit score is in the exceptional range.

You could lose rewards

When you cancel a credit card, you also forfeit any unredeemed rewards. This can be especially tricky if you have a card that accrues cash back and gives it to you periodically, such as the Costco Anywhere Visa® Card by Citi, which gives you cash back as an annual reward certificate when your February billing statement closes.

You might also forfeit benefits on really great travel cards, such as annual flight vouchers and free checked bags. Many of the best hotel credit cards will also give you free stays on your card’s account anniversary, which you would surrender if you canceled the card before that day passed.

If you’re considering closing a credit card, I’d take a step back and reconsider. Even if you don’t use it, it could be propping up your credit score or holding cash back or rewards. However, if you decide it’s best to part ways with your card, first make sure you pay off your balance, redeem all rewards, and update credit card information on your recurring bills (like streaming services). Then, get out the scissors (or pruning shears) and destroy that card.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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