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9 Money Saving Questions to Ask Before Financing Your Engagement Ring

Researching the terms of your financing plan is the most effective way to avoid overspending. Researching the terms of your financing plan is the most effective way to avoid overspending.

If you’re looking to finance your engagement ring purchase, it’s important to understand what exactly you’re getting into. Here are 9 questions you should be asking when financing your ring:

1. What Are The Terms?

Researching the terms of your financing plan is the most effective way to avoid overspending. This includes the plan’s interest rate, payback period, and any fine print like minimum purchase requirements.

Use the interest rate and payback period to calculate exactly how much you will pay each month, and for how long. Can your budget accommodate that amount each month without late or missed payments? Ask about minimum purchase requirement to ensure you aren’t pressured into spending more than you intend.

When it comes to interest rates, be wary of lease-to-own options. They refer to interest as a “leasing fee” because, under most state laws, the rates they charge are above the legal limit for APR. Buyers easily can spend twice the ring’s purchase price by the end of the lease – that amounts to a 200% APR.

2. What happens if I can’t pay off my balance in time?

If you use a 0% APR credit card: The good news – this card offers 0% interest for a limited period. The bad news – if you end the promotional period with a balance (even one dollar) you will have to pay all of the interest you avoided, which has been accruing in the background. This is called deferred interest, and it’s a real pain.

If you use a lease-to-own company: Most leasing companies offer a “90 days, same as cash” purchase option. If buyers pay their entire balances within 90 days, they sidestep the leasing fee. Unfortunately, many fail to do so and are hit with – you guessed it – deferred interest. This option is especially risky, as many lessees end up paying for their purchase many times over by the end of the lease’s term.

If you use a personal loan: If you pay off your personal loan early, you may rack up a prepayment fee. If you can’t pay it off in time, you’ll have to deal with late fees, black marks on your credit score, and, eventually, debt collectors.

3. What happens if I make a late payment?

Ask your creditor about its late payment policy. Would you incur a late fee? Would your interest rate change?

This question is particularly important if you use a deferred interest or low-interest, jewelry store credit card. On one hand, these cards offer interest rates well below the national average (0 to 8 percent) and long promotional periods (24 to 60 months). On the other hand, a late or missed payment can cause your interest rate to leap up to 28 to 30 percent.

4. What Credit Score do I need to get approved?

Many financing options require a certain credit score for approval.

For example, all but one of NerdWallet’s picks for best low-interest credit cards require a credit score above 700. This is true of many low-interest cards.

Similarly, many personal loan providers will not approve an applicant with poor credit. If they do offer a loan, it will be at a relatively high interest rate that may hit 30% or higher.

5. Do You Perform A Credit Check?

If a lender or credit card company checks your credit score, this hard inquiry could lower your score by a few points. This isn’t a big deal, but it’s wise to avoid applying for multiple credit cards or loans within a short period.

Beware of companies advertising “no credit check” financing. These are actually lease-to-own businesses, which are notorious for shady practices and sky-high leasing fees (see above).

If a company offers “no credit needed” financing, however, there’s no cause for alarm. These retailers use other factors, like your monthly income, to evaluate your application for financing. Your credit score is only one aspect of your financial health, and “no credit needed” financers take a more holistic approach.

6. Do You Report to The Credit Bureaus?

Make sure to ask if your financing provider reports to the major credit bureaus.

If your partner does report, that can either help or hurt your credit score. If you miss payments, default, or spend a large percentage of your credit limit, your score will go down. Additionally, opening a new card will lower your average credit age, which contributes to lowering your score.

On the flip side, if you make timely payments and use a smaller portion of your credit limit, your score may go up.

7. Do You Require A Down Payment?

Some financing plans require a down payment. Both Kay Jewelers and Jared the Galleria of Jewelry require a down payment of 20 percent. If your retailer offers layaway, your down payment will likely be about 10 percent of your ring’s purchase price, but you may pay up to 25 percent.

8. What Kind of Fees Can I Expect?

No matter how you finance, make sure you’re aware of all the fees associated with your plan. Lenders, particularly retailers, are unlikely to list their fees prominently. Here are a few to ask about:

  • Late fees: Late payments can lead to hefty fees – and even hiked interest rates. Ask about your lender’s monthly due dates and late payment policies.
  • Returned payment fees: If your payment bounces, you may be fined by both your lender and your bank. Ask both entities about their policies.
  • Origination fees: Most lease-to-own companies charge a fee simply for opening your account, usually around $50.
  • Prepayment fees: It’s in your best interest to pay off your personal loan early, but your lender doesn’t want to miss out on those extra interest payments. If you opt for a personal loan, ask if there is a penalty for prepayment.

9. What happens if I return my ring?

If, for whatever reason, you return your ring, it’s important to know what will happen to your financing plan.

Most retailers will refund your completed payments and cancel your existing ones, but it’s unlikely you’ll be refunded what you spent on interest.

Lease-to-own companies allow you to return items with no additional charges and no penalty. However, customers reported that large lease-to-own agents like Rent-A-Center (which owns Progressive Leasing) have failed to stop charging them for returned items.

10. What about Gage Diamonds?

If you asked a Gage Diamonds the questions above, here’s what you would hear:

  • Gage Diamonds offers zero percent interest, payment periods up to 24 months, and no minimum purchase requirements.
  • Gage doesn’t charge late fees, origination fees, or prepayment fees. What you see at checkout is exactly what you’ll pay.
  • Credit score only plays a small role in the approval process at Gage. All you need is consistent monthly income and a checking account in good standing.
  • Gage provides no credit needed financing and does perform a hard credit check on applicants.
  • Gage may require a down payment of up to 50%, but most customers don’t have to put anything down.
  • If you return your ring, your payments will be refunded back to your bank account less any restocking fees.

To learn more or apply for Gage’s true zero-interest financing plan, visit our financing page.