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How to Buy an Engagement Ring with Bad Credit

Buying An Engagement Ring With Bad Credit Just because you have bad credit doesn't mean you need to pay high interest rates for your engagement ring when 0% interest financing is an option

An engagement ring is a beautiful symbol of love and commitment. So don’t let bad credit stand between you and the ring that’s right for you, your partner, and your finances.

Gone is the traditional expectation that a buyer should spend two months’ salary on an engagement ring. Nonetheless, the average shopper spends between between $1,000 and $5,000.

For customers with limited credit options, financing such a large purchase can be daunting. Luckily, there are plenty of financing choices for borrowers with less-than-stellar credit in the market for a ring. Not all the options are created equal, however.

Check out these engagement ring financing options to determine which is the best fit for you:

Save Money

Few people have enough cash on hand for an engagement ring. So if you want to buy a ring without borrowing, your best option is to save up. On one hand, it’s always nice to avoid debt. On the other hand, this option can pose some challenges.

If you haven’t met “the one” yet, it’s tough to put money aside for a ring instead of something concrete like retirement. Plus, you could find yourself saving for a long time like this guy.

If you have decided to propose, who wants to wait around for months – or even years – to get that ring and pop the question?

When it comes to saving for a ring, do what’s best for you and your finances. While the waiting game may be a buzzkill, keep in mind that you can always use some of your savings as a down payment.

Secured Credit Card

For shoppers with less-than-stellar credit, a secured credit card can help fund an engagement ring purchase and provide an avenue to build credit.

Here’s how they work: Secured cards require an initial deposit, generally at least $200, and this figure serves as your credit limit. One advantage is that these cards report to the major credit bureaus, so if you use them responsibly, they will improve your credit. Another is that unless you have a recent bankruptcy or an open lien, you’ll almost certainly be approved.

The major disadvantage is that it doesn’t make much sense to use a secured credit card to finance a large purchase like an engagement ring. Because your line of credit is essentially prepaid, leaving a balance on the card would be like loaning yourself money and then charging interest.

Jewelry Store Credit Card

Some jewelry stores give subprime borrowers the option to finance a ring through a branded store credit card. Customers are approved for a certain amount based on a credit check, and that amount is immediately applied to their purchase.

Some stores advertise “no interest” financing, which means customers receive 0% APR for one year after their purchase. If you pay your ring off within the year, you don’t pay interest.

What a deal, right? Not necessarily.

What these companies mean by “no interest” is actually “deferred interest.” If you miss a payment, fail to make the minimum payment or end the year with a balance (even $1), you will owe interest on the full amount, usually at a higher-than-average rate of >25%.

For example, if you use a jewelry store credit card to buy a $6,000 ring at 27% APR after twelve months, you could walk away owing zero interest if you make all your payments on time. However, if you end the year with a balance of just $1, you will immediately owe interest on the entire original amount – in this case, that’s $1,620.

Lease-to-Own

With lease-to-own options, a third-party leasing company partners with a jewelry store to offer buyers fast approval and 90 days to pay off their balance.

Many customers with bad credit are drawn to this financing option because of its ”no credit needed” marketing. While these customers are likely to get approved, they could also find themselves in hot water. If they fail to pay off the balance within 90 days, they end up paying two to three times their original purchase amount in leasing fees. That’s a 200-300% APR!

Lease-to-own companies like Progressive Leasing, Snap Finance, Acima, Zibby, Crest Financial and Future Pay only make money when borrowers get hit with leasing fees, so they have no incentive to be transparent with borrowers about the terms of the deal. Additionally, their partner retail stores want to make the sale, so they, too, are unlikely to disclose the downside.

Installment Loans

An installment loan, like a mortgage or auto loan, has a set number of scheduled payments. There are personal loan companies that cater specifically to customers with poor credit, and the low interest rates and large borrowing limits make this a good fit for buyers who plan to pay off their rings over a long period of time.

Be warned, however: a lengthy loan is a costly loan, no matter the interest rate. The longer you take to repay an installment loan, the more time there is for interest to accrue. That low monthly payment might look good, but you will pay more in the long run.

Gage Diamond Financing

At Gage Diamonds, we think there’s a better way to finance your engagement ring. Compared to other financing options, we offer a true 0% interest loan.

We offer interest-free financing for 12 or 24 months on everything from engagement rings and diamonds to jewelry and wedding rings. We have an exclusive in-house financing partner and we make our “interest” by buying products at wholesale prices and selling them at a competitive retail price. This allows us to provide a straightforward financing option for shoppers with low credit scores.

Our financing is “no credit needed,” which means we use a holistic approach to determine if a customer is a good candidate for financing. We know that your financial health is made up of far more than your credit score, so we look to see if you have a steady source of income (at least three months of employment) and can spend responsibly (having a checking account in good standing with few overdrafts and negative balances).

Our application is painless, and applicants typically get an approval decision within one business day.

So skip the fine print and predatory financing, and visit our visit our financing page to learn more and apply.