How to pay off a wedding loan faster after the big day?

A wedding can be a wonderful occasion, maybe one you’ve been dreaming of for years. You might get your friends and family together for a celebration of love, hope and joy. But a wedding can also be very expensive, and some people choose to take out a personal loan to help with the cost.

If you’ve borrowed money to pay for your big day, you might be wondering how to deal with the loan. Here are a few things you should know if you would like to pay off your debt faster and achieve financial freedom.

Start with a clear post-wedding financial reset

Before you get started, it’s a good idea to take some time to determine what the situation is.
Once the decorations have been cleared and the last of the champagne tidied away, sit with your finances and do a stock take. How much of a loan do you have? What interest rate are you paying, what is the loan term and what repayment schedule have you agreed to?

At this point, it’s also a good idea to check in on what rules there are around early repayment of the loan. Some lenders will charge additional fees if a loan is paid back early, or if you repay more than a certain percentage each year. Chat with your new spouse about what your goal is. Are you happy to clear the debt on the repayment schedule that has been set? Or do you want to get rid of it more quickly? How does it fit with your wider financial plans and dreams? 

Rebuild your budget after the wedding

As you’re moving into the next phase of married life, one of the adjustments you might have to make is from the “spend” mode of wedding planning, where it feels like every day comes with a bill for something, to more normal household budgeting.

You might be thinking through some questions, like how you manage your money as a couple, if you hadn’t been doing so before. Do you keep finances separate, or combine everything? Or is the right answer for you a bit of both – maybe separate accounts but also pooled funds where appropriate?

There is no right answer to this; you’ll need to find something that works for you. Some spending will naturally drop after the wedding, potentially freeing up part of your budget to go to clearing your debt. Once the pressure to prepare for the big day is off, you may find there are a number of ways you can trim your day-to-day costs to allow a bit more money for your loan repayments.

Make extra repayments where possible

Provided any early repayment penalties you might face do not make it uneconomical, there are a few strategies you could use to pay off your debt more quickly. Even small extra repayments on your loan can significantly reduce the amount of interest you pay and how long it takes to repay the loan in full, because additional payments go straight on to repaying the principal owing.

Sometimes, you may be able to pay off your loan faster by making fortnightly payments. Repayments are often calculated on a monthly basis, but if you divide this in half and make the payment fortnightly, you’ll make an extra monthly payment each year because there are 26 fortnights across the 12 months. However, this only works if the loan was set up as monthly payments initially, and the lender will allow you to pay half your monthly payment each fortnight.

If you received money from guests at your wedding, you might be able to put some of that towards debt repayment, too.

Use windfalls to knock down the loan faster

From time to time, you might have some extra cash to put towards paying off the loan. If your lender permits it, you could put things like work bonuses, tax refunds, income from side hustles, or even selling items around the house towards paying down what you owe.

It could be helpful to discuss this with your spouse ahead of time. Could you introduce a rule for what you will do with any unexpected money, from now into the future? You might decide, for example, that half can be spent, and half will go towards financial goals like saving or debt repayment.

Consider refinancing or restructuring the loan

If your circumstances change after your wedding, you might be wondering whether it’s a good idea to refinance or restructure your loan. We can help you to work through what your options might be. If you are having trouble with the loan, the first step is usually to talk to the lender you borrowed from and look at what solutions might be possible.

Some solutions that lenders offer in cases of hardship may include extending the loan term or offering interest-only payments for a while. It’s important to note that in both those cases, you may end up paying more interest overall. If your situation has improved, maybe because your credit score has lifted or your income has increased, you could find you have more lending options.

At better finance™️, our expert team can help you to assess your loan and determine whether it is appropriate for your circumstances or whether there might be alternative solutions for you.

Avoid common post-wedding debt traps

There are a few things that it might pay to avoid if you want to get your financial life as a married couple off to a good start.

Debt

When you’ve been in the habit of spending on wedding prep, it can be easy to keep that going. It’s important that you think carefully about any new debt you take on, such as for travel or items for your home. Keep your overall financial goals in mind and ensure that your decisions align with those.

BNPL and other short-term debt

While you’re repaying your loan, it may be a good idea to keep other short-term debt to a minimum. Buy-now-pay-later debt and credit cards can be a handy tool, but they can also make it harder to balance your budget in future.

Lifestyle inflation

If you had been living separately, or operating separately financially, but are now pooling your money, you might feel like you have a lot more income.  It might help to do a budget to help you live within your means.

Balance loan repayment with other financial priorities

Paying off your loan is important, but it probably won’t be your only financial goal.

It is often a good idea to build – or rebuild – an emergency fund so that you don’t have to rely on other debt if something unexpected happens. This is the case even when you’re paying off a loan, because it can stop you from falling behind on your loan repayments or turning to credit cards.

Keep an eye on your longer-term goals, too. You might have plans for travel, to buy a home or start a family. While you’re making your wedding loan repayments, see if there are small ways you can work towards these.

As you manage your money through the loan repayment process, you’ll often have to prioritise. You and your spouse could discuss which purchases deliver you the most benefit and ensure they remain top of the list, so that you cut only the things that give you the least enjoyment. This can help you to avoid feeling financially restricted while you’re working on debt reduction.

How does faster repayment improve long-term borrowing power?

Provided you’re able to, repaying a loan faster can help your borrowing power in the long-term, too.

Your credit score: Paying off a loan will generally improve your credit score. The history of on-time repayments is also reassuring for other lenders.

Other borrowing: If you’re aiming to buy a house or car in the future, paying off other debt can help a lot. Not only does it show that you can do it, but it also means your income is not committed to the debt repayments. 

Debt-to-income ratios: Banks are required to include all lending when they assess a home loan application under the debt-to-income rules. These limit how much lending banks can approve for owner-occupiers with total debt that is more than six times their annual household income.

Reducing financial stress: You’re starting the next stage of your lives together, and you probably want to be thinking about things other than paying down debt. Paying off your loan will take it off your worry list.

How it might work?

If you have a $15,000 wedding loan over five years, at an interest rate of 12.95 percent, you’ll probably repay about $360 a month or $21,600 in total.

But if you can increase your monthly payments to $500, you’ll clear the loan almost two years early, and only pay $19,461 in interest, according to better finance™️’s calculator. It’s important to check that you understand any early repayment fees that might apply, which could affect the net savings you could make.

Frequently Asked Questions (FAQs)

Can I repay my wedding loan early without penalties in NZ?

It depends on the terms of your loan. It is always a good idea to check what fees might be charged, so you can assess whether it is worthwhile.

Should we prioritise the wedding loan over saving?

It is usually a good idea to build an emergency fund at the same time as you’re repaying debt. This means that if something unexpected happens, you’re less likely to need to take out more debt to cover it.

Does paying off a loan early improve credit score?

Paying off a loan can improve your credit score.

Can we consolidate a wedding loan with other debts?

You might be able to. The better finance™️  team can help you to determine what might be available and whether debt consolidation is appropriate for you.

What if one partner earns more than the other?

If you’re borrowing together, your income is usually assessed jointly. You’ll need to determine between you how you manage your finances as a couple.

Are you ready to get going?

If you’d like to talk about how you can get debt-free faster, or structure your loan so it works with your life, get in touch with the team at better finance™️. We’re personal lending experts and can help with any questions you may have.

Get in touch with the team at better finance™ today 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.