Everything You Need to Know About Timeshare Loans
Swaying palm trees, frozen strawberry daiquiris, and miles of white sand. A vacation paradise always sounds enticing, but never more so than after a year of pandemic cabin fever. Now that the world is (hopefully) starting to get back to business as usual, you might have your heart set on a vacation. One option is purchasing a timeshare.
But is a timeshare a good way to afford the vacation of your dreams? What are the pros and cons, as well as the different payment options? Should you take out a timeshare loan? Dust off your loan payoff calculator because we’re about to get real with timeshare economics.
A timeshare is a piece of vacation property that you collectively purchase with other people. You basically own a piece of real estate. You are able to use it at certain points in the year. Most timeshares are for one week, once per year.
There are three types of timeshare models:
Fixed week: With a fixed week, you can use your timeshare property at a very specific date or dates. It can be hard to switch your date, so if you can’t make it during your allotted time, you’ll either have to try to sell it or be out of luck.
Floating week:With a floating week, you can select when you use your timeshare on a first-come, first-serve basis. Floating weeks are best for individuals with more flexible schedules.
Points:The points model is a little more complicated. You’re given a certain number of points that you can use at your discretion. You can purchase vacation time at resorts within your network—some resorts cost more points than others.
There are two different types of timeshare ownership.
Shared lease timeshares: With a shared lease, the developer holds the deed to the property. You own a property for a specific time each year, but your ownership can expire, e.g. if you pass away or after a specific amount of time. Your timeshare can’t be passed on to your beneficiaries.
Deeded timeshares: With a deeded timeshare, you own a small amount of property as well as the deed for it. You own it for the rest of your life or until you decide to sell it.
Advantages of timeshares include:
- You can vacation in your favorite spot(s) for a designated period each year, no hours of research required.
- You have the ability to pay over a period of time.
- Timeshares are less expensive than buying a second home.
Disadvantages of time shares include:
- The value of a timeshare typically declines with time.
- Owning a timeshare may not actually save you more than just staying in a hotel.
- They can be very difficult to get out of. Don’t expect to have an easy time selling.
Want a timeshare but need to pay for it over time? There are different timeshare loan options available.
The most affordable option can be a personal loan, assuming you have a high enough credit score to qualify for a favorable rate. You don’t need to put up any collateral and the interest rates are often lower than other options, such as with a timeshare seller or relying on a credit card.
While technically not a loan, some timeshare sellers offer plans where you can pay for the timeshare cost over monthly payments rather than upfront. The average APRs are higher with these arrangements than with personal loans.
Home Equity Loan
If you’ve built up equity in your primary residence, you can consider a home equity loan. Since you’re putting your house up as collateral, you’ll likely be offered a lower interest rate than what you’ll find from a timeshare seller. However, if you can’t pay your loan, there’s a risk of losing your home.
You can use your credit card to pay for your timeshare. However, you’ll want to make sure that the interest rate isn’t absurdly high. If you can’t pay your balance in full each month, you could land yourself in debt.
Timeshares can provide you with a vacation getaway, but make sure to read the fine print before signing on the dotted line. The last thing you want is for your dream getaway to turn into a financial nightmare. Make sure to do your due diligence—and don’t forget the SPF.