Why Use a Personal Loan to Fund a Wedding?

Wedding bills have a way of growing. The hall wants an advance, the caterer quotes per plate, and the jeweller's estimate moves with gold prices. If your savings can't cover all of it, a personal loan can fill the gap. No collateral is needed, and you repay it gradually through EMIs. Is it a sensible idea? That depends on three things: the size of the loan, the interest rate, and whether the EMI fits comfortably within your monthly income. Below, we look at eligibility, interest rates, costs, EMI maths and how to apply.

Think of a wedding loan as a regular personal loan taken for one purpose. Most lenders don't ask for security or collateral. You can spend it on the venue, food, décor, jewellery, clothes for the bride and groom, the photographer or travel for guests.

Once the loan is approved, the money is transferred to your bank account in a single payment. After that, you pay an EMI every month until the tenure ends, whether that's one year or five. Early on, a larger share of each EMI goes towards interest. Later, a larger share goes to the principal.

The eligibility criteria may differ from lender to lender, and it may be different for different applicants, depending on their income, financial status and age. Some common criteria are as follows:

1. Age: The minimum age is usually 21 or 23 years, depending on the lender and loan type. The maximum age of a person looking for a marriage loan can be 60 years if they’re salaried, whereas self-employed persons can avail of a marriage loan up to 65 years of age.
2. Monthly Income: The minimum monthly net income must be around ₹20,000 to ₹40,000 at lenders such as Aditya Birla Capital if one is to avail of a marriage loan. The exact figure depends on which city one is living in, as well as other factors like the lender, age, etc.
3. Employment Type: Both salaried individuals, as well as self-employed ones, are eligible to apply for marriage loans. Salaried persons must usually have at least six months of experience in their current job and have a steady income to be considered for marriage loans.
4. Credit Score: A CIBIL score of 700 and above is quite favourable with lenders and improves your chances of approval. A lower score may also get you a loan but at a higher interest rate.

1. Your savings stay untouched: Fixed deposits, mutual funds and the emergency fund you took years to build can stay where they are.
2. One big bill becomes many small ones: Finding ₹6 lakh in a single month is a real challenge. Paying around ₹13,350 a month for five years (at 12% p.a.) is far easier for most salaried people.
3. Room for surprises: Fifty extra guests. A decorator who raises the rate a week before the sangeet. These things happen more often than you would think, and a loan means you are not scrambling for cash.
4. No collateral: You won't need to pledge gold, property or anything else you own.
5. You decide where it goes: Mehendi, reception, honeymoon. How you split the money is up to you.

Also Read: Planning to Get Married? Are you Prepared Financially?

A marriage is simply a personal loan that is designed to help you pay for any expenses related to your wedding. A marriage loan can be used to pay for expenses like booking a venue for the wedding, the catering services, gifts for relatives, decor, jewellery etc. A wedding loan is an unsecured loan, which means no security or collateral is needed.

There's no single rate for wedding loans. Two people applying to the same lender on the same day can get different offers. Why? The lender looks at your credit score, how much you earn, how much you want to borrow, and for how long.

To give you a starting point, Aditya Birla Capital's personal loan interest rates begin at 10.99% p.a. What you actually pay is confirmed when the loan is sanctioned. Rates also change from time to time, so check the latest numbers before you apply.

A few things shape the rate on your offer letter:

• Income: Lenders like a regular salary. The more easily your income covers the EMI, the better your chances of a favourable rate.
• Credit history: Have you paid past EMIs and card bills on time? That track record counts.
• Credit score: A credit score of 750 or more is considered good by lenders and they offer you better interest rates and favourable loan terms. If your credit score is lower, you might get the loan, but the interest rates might be higher and the loan terms might not be very favourable.
• Employment type: Salaried, with a steady employer? Lenders see that as safer than income that swings from month to month.
• Existing debts: If a big chunk of your salary already goes to a car loan and card dues, expect the lender to price that risk in.
• Loan amount and tenure: Borrowing more, or for longer, can nudge the rate up a little.

You do not have to accept the first interest rate that is offered by a lender. Follow the given tips below and aim to get a lower interest rate for your loan:

• Improve your credit score
• Check for seasonal offers on loans
• Keep a good credit history by repaying your credit card bills and EMIs on time
• Compare the rates offered by different lenders
• Negotiate with the lender for a lower interest rate

The total interest payout on your loan is the total amount of interest you pay for your marriage loan. Here’s how you can reduce the total interest payout:

• Opt for a shorter tenure for your marriage loan
• Since interest is calculated on your loan amount, consider reducing your loan amount by only availing the loan for what you need and cut down on extravagant expenses.
• Negotiate for lower interest rates to ensure reduced total interest payout

Two numbers deserve your attention here. One is the EMI that goes out each month. The other, which people often forget, is the total interest you'll have paid by the time the loan closes. A few habits help with both.

• Borrow only what you need: Interest is charged on every rupee you take. If ₹4 lakh will do, don't borrow ₹6 lakh just because you're eligible for it.
• Think carefully about tenure: A shorter tenure means a higher EMI but less interest overall. Longer tenure means lower EMI but more interest overall. Go for the shortest one you can afford without stretching.
• Compare and negotiate: Even half a per cent off the rate saves money over a few years.
• Prepay if you get a bonus: A lump sum paid into the loan cuts the balance and the interest on it. Do check the prepayment and foreclosure charges first.
• Never miss an EMI: Late fees add up quickly, and a missed payment shows up on your credit report.

Let’s put numbers to it. Take a ₹5 lakh loan at 12% a year. Over 3 years, your EMI is roughly ₹16,607, and you pay about ₹97,900 in interest. Spread it over 5 years, and the EMI falls to about ₹11,122. The catch? Interest climbs to around ₹1.67 lakh.

Also Read: How much does a wedding cost in India?

Lenders work out interest in one of two ways, and the difference matters more than you'd think.

So if one lender quotes a flat rate and another quotes a reducing rate, don't compare the two numbers directly. A flat rate that looks low often works out costlier.

Documents Required for Marriage Loan

Lenders mostly ask for the same set of papers. Scan them once and keep them in a folder on your phone, and uploading becomes much quicker:

• Identity proof: Any one of Aadhaar, PAN, passport, voter ID or driving licence.
• Address proof: Aadhaar, passport and driving licence work here too. So do utility bills or a rent agreement.
• Income proof for salaried applicants: Your last three salary slips, plus Form 16.
• Bank statements: Six months’ worth, from the account your salary or income goes into.
• Income proof for self-employed applicants: ITRs, along with your business registration papers.
• Photograph: One recent passport-size photo.

Depending on your profile, the lender may ask for something more during verification.

Three numbers decide your EMI: how much you borrow, the interest rate and the tenure. You don't have to do the maths yourself. An online calculator gives you the answer in seconds.

• Step 1: Head to the Personal Loan EMI Calculator.
• Step 2: Punch in how much you want to borrow.
• Step 3: Add the rate your lender has quoted (or a rough guess, if you don't have an offer yet).
• Step 4: Pick a tenure, say 3 or 5 years.
• Step 5: Look at the EMI, total interest and total payout. Not happy with the EMI? Change the amount or tenure and try again.

If you'd rather check by hand, this is the standard formula: EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1]. P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100), and n is the number of months.

The loan verification process for a marriage loan consists of 4 stages:

• Loan Application The first step involves filling out the loan application form correctly. The lender requires a loan application to begin the loan process.
• Document Collection The next step involves the collection of all relevant documents. A bank representative may collect them from you in person, or you may submit them online.
• Document Verification Once the lender has all your documents, they will begin the document verification process. Your place of residence as well as your place of employment will be visited by a representative to verify your details and ensure everything is in order. The representative will then forward their findings to the loan officer assigned to your application.
• Sanctioning of Marriage Loan Once the loan officer receives a positive report, they will begin the process of loan disbursement , and you will get the loan amount in your account within 24 hours.

You can avail of a maximum marriage loan of up to Rs.50 lakh, depending on the lender. The amount of loan you can get also depends on:

• Your income
• City of residence
• Repayment capability
• Credit score
• Credit history

Marriage loan EMI can be paid in the following ways:

• Auto-Debit The EMI will be debited automatically from your bank account every month
• Pay by cheque You can pay your EMI via cheques
• NEFT/IMPS Transfer You can also pay your EMI through internet banking.

• Go for a longer tenure
• Decrease Loan amount
• Negotiate for a lower interest
• Get lower interest marriage loans

You can usually apply online and finish most of it from your phone. The steps look something like this:

• Step 1: Check your eligibility: Look at the age, income and credit score rules first. The Personal Loan Eligibility Calculator tells you roughly how much you could get.
• Step 2: Work out your EMI: Play with the EMI calculator until you find an amount and tenure that won't squeeze your monthly budget.
• Step 3: Fill in the application: This is the boring bit: your name, address, employer and income. The lender's app or website works, and so does a branch visit if you'd rather talk to someone.
• Step 4: Upload your documents: Keep your KYC, salary slips and bank statements ready, since you'll upload them here.
• Step 5: Verification and approval: The lender reviews your documents and checks your credit report. You might get a call asking about your job or address. If all looks fine, an offer follows.
• Step 6: Read the Key Facts Statement: Before you sign anything, the lender has to hand you a Key Facts Statement (KFS) under RBI rules. Look for the APR in it. That's the true yearly cost once fees are added, and it's usually a little higher than the headline rate.
• Step 7: Sign and get the money: Happy with the terms? Sign the agreement, and the money is credited to your account.

It varies a lot from lender to lender. What decides your number?

• Income: More income and steadier income usually mean a bigger loan.
• Existing liabilities: Every EMI you already pay eats into what is left for a new one.
• Repayment capacity: Lenders work out how much of your take-home pay can safely go to this loan.
• Credit profile: Lenders feel safer lending more to someone whose credit report shows years of on-time payments.
• Loan tenure: Stretch the tenure, and the EMI drops, which can push the eligible amount up.
• Lender policy: Each lender caps it somewhere. Aditya Birla Capital limits wedding loans to ₹15 lakh, though what you get depends on eligibility.

One more trick if the amount falls short: apply with an earning co-applicant. Your spouse-to-be or a parent may be able to boost what you qualify for.

• Processing charges: The lender may charge processing fees of around 0.5% to 2.5% of the loan amount.
• Verification charges: Before sanctioning the loan, the lender has to verify your credentials, and they also charge a fee for the same. This fee is called the verification charge.
• Goods and Services Tax: For additional services, the loan applicant is also charged GST.
• Penalty for late payment: Late payment of EMIs may attract a late payment penalty.
• Penalty for prepayment or foreclosure: If you opt to repay your loan before the tenure is over, the lender may charge you a prepayment penalty.

Also Read: Gold Gift for Wedding: 12 Thoughtful Ideas for Every Budget

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.