Personal loan: 5 key tips to arrange funds for your wedding

If you are looking forward to a wedding, it is vital to first arrange the funds for it. There are a number of ways to do it. At the outset, you should dip into your savings and investments to meet the wedding expenses. And if this money falls short, you can always raise a personal loan from a bank or a financial institution. This is quite an acceptable way to meet the wedding expenses.

However, one should remember that only a small portion of money should be taken as a personal loan. For instance, if your total expenses in a wedding would come to around ₹10 lakh, and your savings amount to ₹7 lakh then there is nothing wrong in raising a personal loan to the tune of ₹3 lakh. 

However, if your wedding expense is somewhere around ₹10 lakh, and your savings amount to only ₹2 lakh, then it is not advisable to raise a personal loan of this high value.

So, what can you do instead?

Wealth advisors suggest raising an interest-free loan from friends and family especially if you are sure of being able to repay the loan in a short span of time. And if this financial help from your friends is not going to be sufficient then only you can rely on a personal loan.

"If help from family or friends is not sufficient and if you have room to accommodate a new loan EMI, then you should take a personal loan," says Preeti Zende, Founder of Apna Dhan Financial Services. These are some of the key tips that you can follow to arrange money for a wedding.

These are the five key tips to follow

1. Debt funds: Since wedding is typically scheduled a few years later, you can invest your money in debt mutual funds. These funds are safe, secure and give assured returns to investors.

2. Fixed deposits: Just like debt mutual funds, fixed deposits (FDs) are also safe and secure. You can just invest and earn a small interest which -- at least -- helps you beat the inflation.

This is useful when you are closer to the financial goals, which means the wedding is scheduled to take place in a year or so. One can earn anywhere between 6-7 percent per annum on a fixed deposit in a bank.

3. Hybrid funds: You can also consider the prospect of investing in a hybrid mutual fund, particularly when your wedding is scheduled to happen some time later i.e., after a few years.

"When you start earning, you need to create a fund for the short term goals which include wedding. One can invest in large hybrid funds in order to save for the wedding. Also, if the savings are not enough, you can raise a personal loan as the last resort," says Sridharan Sundaram, a Sebi-registered investment advisor and founder of Wealth Ladder Direct.

4. Equity funds: You can also contemplate investing in equity mutual funds, particularly in the large cap (or blue-chip) ones which do not face high volatility and are therefore safer to invest. However, equity is a preferable option when the financial goal (aka wedding) is still some time away.

5. Personal loan: As mentioned above, one can explore the idea of raising a personal loan when there is no other alternative available. But it is recommended to find the lowest interest rate possible. You can procure a personal loan at a low rate of interest only after comparing different rates offered by multiple financial institutions.