5 Things To Avoid When Financing Your Engagement Ring

Don't Pay More For Your Engagement Ring Than You Have To.

Financing an engagement ring is easier than ever. But with options and ease come fine print and headaches.

As you hunt for the best engagement ring financing, make sure you understand the benefits and potential hang-ups of each financing model. At the end of the day, finance companies exist to make money – here are some things to avoid if you don’t want to spend more than you have to.

0% APR Introductory Rates

Some credit card companies offer the first six or twelve months interest-free when you open a new card.

Zero-percent interest sounds pretty great. So what’s the issue with zero-percent promotional rates?

Two words: deferred interest.

This type of interest is especially sneaky, because it’s accruing in the background during your zero-interest period. If you end the promotional period with a balance – even one dollar – you have to pay interest on your entire original balance.

Zero-percent offers aren’t a setup – for some shoppers, they work well. If you have ample savings and good money management skills, you can plan your payments to ensure you pay off your balance in time. However, if an unexpected expense like a car repair or trip to the doctor would throw off your payment plan, this type of financing becomes risky.

Low-Interest Credit Cards

In addition to an introductory zero interest offer, many jewelry stores offer a low-interest credit card option. These cards have interest rates well below the national average credit card rate of 17 percent – usually 8 to 10 percent. They also have a much longer promotional period – 24 to 60 months.

These cards come with pitfalls, however. If you make a late payment or fail to pay off your entire balance within the promotional period, your interest rate will jump to 28 to 30 percent.

Another potential problem is minimum payments. Each billing cycle, your credit card company will set a minimum required payment – usually one or two percent of your total balance. Making the minimum payment saves money in the short term, but it could also get you stuck into a perpetual debt cycle. The longer you take to pay off your balance, the more interest accrues. Eventually, your monthly interest can become larger than your monthly minimum payment, so even though you’re paying monthly, your balance actually increases.

No Credit Check “Financing”

Any company advertising “no credit check” financing (as opposed to “no credit needed”) is more than likely a lease-to-own business.

These companies lease your engagement ring to you and give you the option to purchase the ring within 90 days at the original price or pay a huge markup over twelve months by charging you leasing fees. These leasing fees are equivalent to about 200% APR, which is illegal in most states. Because of that, lease-to-own operations cannot legally refer to their setup as “financing.” They can, however, draw in customers with their no credit check promise, since their sky-high fees make up for any risk they take on by leasing to poor credit customers.

Additionally, lease-to-own companies have come under fire for widespread shady practices, like hiding the real terms of the lease, misrepresenting the number of monthly payments and continuing to charge for purchases that have been returned or paid off.

Fees

Fees are a headache, especially if your financing partner doesn’t have a transparent policy. Here are some common fees to look out for:

Late fees

No matter what financing option you choose, carefully plan all your payments before you sign on the dotted line. Will you have the extra money to make this payment each month? Will your other billing schedules get in the way? Creating a “payment calendar” in advance helps avoid late fees.

Be especially diligent with no-interest or low-interest credit cards. If you make a late payment, your interest rate could skyrocket.

Returned payment fees

If your payment doesn’t go through due to insufficient funds, you’ll likely get hit with a returned payment fee. If your payment is debited from a checking account, you may get penalized by both the finance company and your bank.

Origination fees

Some lease-to-own companies and personal loan companies charge an origination fee to establish and process your lease or loan. For example, Progressing Leasing charges a $50 fee up front that doesn’t apply towards your balance.

Aggressive Collection Policies

Unfortunately, some finance companies resort to harassment and intimidation when a customer falls behind on payments.

Perhaps the worst offenders are lease-to-own companies. Customers filed thousands of federal and state complaints against Rent-A-Center, parent company of Progressive Leasing, for unethical collection practices like breaking into renters’ homes, calling renters at work and threatening legal action.

Credit cards companies are not unknown to use aggressive collection practices, as well. Synchrony Bank, one of the largest providers of deferred interest credit cards, has come under fire from the Consumer Financial Protection Bureau for ”heavy-handed collection tactics” like calling cardholders at work, calling up to 20 times a day, and threatening to arrest cardholders.

Wondering whether your finance company would resort to harassment? Online reviews can give you a good idea of a company’s collection practices and transparency. If you see a pattern of negative reviews, find a more reputable company to finance your ring. Consumer Affairs is a great place to start.

Hassle-Free Financing

Gage Diamonds partners directly with their financing partner to offer simple monthly payments with no interest and no fees. What you see at checkout is always what you pay. Gage Diamonds makes its money buying rings wholesale and selling them at competitive retail price, so it doesn’t need to make interest from its financing plans.

Gage Diamonds financing options are especially helpful for shoppers with poor credit, since Gage Diamonds uses a more complete financial evaluation to vet customers – all you need is steady income and a checking account in good standing. Gage Diamonds is committed to helping customers afford their dream ring regardless of their credit history.

Visit the Gage financing page to Learn more or apply.