Meet the company betting up to $10K on your marriage

Woman photographing bride and groom
A start-up is betting $10K your marriage fails   

In a world where fewer people are getting married and more couples are opting for prenups, one start-up is daring to redefine what's truly not for the faint of heart.

Seattle-based SwanLuv (named after the eternal bond of mating swans in the wild) is offering up to $10,000 to couples looking for a little extra cash to spend on their wedding — with just one catch: Should a couple take the money and wind up getting divorced in the future they will have to pay back the wedding gift — with interest. If that wasn't enough, the interest rates and offer are said to be calculated using "algorithm software technology" utilizing data from the couple's application. (Tweet This)

Yet, even in the face of lovers hedging their bets, SwanLuv expects those in it for the long haul to double down. And they are. Co-founder Scott Avy told CNBC that demand from couples looking to take the bet ahead of the company's official launch Feb. 15 has been so overwhelming that he had to upgrade his servers.

Woman photographing bride and groom
Todd Pearson | Digital Vision | Getty Images

That much isn't entirely surprising considering the average cost for a wedding continues to creep higher, up 4 percent in 2014 to $31,213, according to a survey conducted by wedding resource group The Knot. In fact, it's one of the main reasons Avy was driven to start SwanLuv in the first place.

"My roommate in college was about to get married and was struggling to figure out how to pay for the wedding," he said. "This caused me to start thinking about what I would do in the same situation."

Ironically, however, studies have shown a correlation between the more couples spend on their wedding and a heightened risk of divorce. One such study by two Emory University economists found the hazard for divorce to be 3.5 times higher for women spending more than $20,000 on a wedding than those spending just $5,000 to $10,000.

Of course, divorce is part of SwanLuv's gamble. The company says on its website that revenue comes from advertising partnerships and that any income from failed marriages will be used solely to fund the dream weddings of other applicants. However, it is likely that a self-backed start-up wouldn't be able to sustain growth without hoping for divorces to start trickling in soon after — and odds are fairly high that they will.

Census data show that first marriages which ended in divorce lasted a median of eight years and that the cumulative divorce rate of ever-married women approached 40 percent after 50 years. Avy stopped short of revealing details on how long applicants are tied to the contract, but said terms would be made public when the company launches.

Theoretically, however, the added cost of having to pay back a loan plus interest should deter at least a few divorces from occurring, according to Harvard professor and behavioral economist Brigitte Madrian.

"This might make you believe more strongly in working on the problems of your marriage, since it might appear to be less of an incurred cost than repaying this loan," she said, adding that there is a unique level of risk to a loan that would be triggered by divorce.

"It wouldn't surprise me if the default rate is very high," she said. "If the reason you get divorced is because you can't manage your money, this would add more financial stress with a big loan at precisely the time you are dealing with other issues. It just sounds like a recipe for default."

Ahead of the company's launch, Avy said SwanLuv was operating solely on the investments made by existing partners and had not yet actively engaged investors.