Timeshares are a form of vacation ownership that allow individuals and families to purchase a right to use vacation property for a limited period of time, such as one week annually. Consumers can purchase timeshares directly from the developer or through a third-party seller on the secondary market.
Financing options for timeshares can be challenging, however, since there is usually no deed involved like with traditional real estate purchases; instead, timeshare purchasers receive a contractual agreement outlining their rights to use the property.
Timeshare developers often have access to internal financing sources that provide loans for buyers purchasing units directly from them. These “Same-Day” loans typically range between 14.9% to 19.9% for a period of 120 months or 10 years and are obtained through lenders with whom the timeshare developer has an established relationship.
Outside Financing For Timeshares Is Very Limited
Due to the unique nature of timeshare purchases and the lack of a deed, obtaining financing from a traditional lender such as a bank or credit union is often impossible. While there are some specialty finance companies that offer timeshare financing, these loans tend to have even higher interest rates than those provided by timeshare developers. Additionally, some timeshare companies also provide direct financing options for buyers who cannot qualify for other types of loans. While this type of financing may be easier to obtain, it usually comes with some of the very highest interest rates and fees allowable by state law.
A regular timeshare can cost around $24,000 and usually requires an upfront payment of 10%, with the remaining balance spread over a decade. Not only will this add thousands to your initial costs, but you’ll be hit with high-interest payments that could leave a dent in your pocket! For this reason, it is important that buyers take the time to explore all their financing options before making a purchase. It is also a good idea to speak with a timeshare attorney who specializes in timeshare law to ensure the terms of any financing agreement are fair and reasonable.
Financing a Timeshare: Home Equity vs. Personal Loans
Maurie Backman at The Fool.com recently published an informative piece for consumers entitled “How to Finance a Timeshare.” This paper outlines two external financing options. First, if you own a home then you may be able to tap into a Home Equity Loan. Remember that timeshares are sold as a “Today Only” deal so unless you go into a tour presentation with financing ready, you will likely have to initially paper the purchase with the resort’s financing and then pay it off.
The second option outlined by Backman is a Personal Loan. This form of loan is not collateralized by your home and may provide a lower interest rate than what the timeshare developer offers. You can check with online lenders such as Lending Club or Prosper to compare loan terms before you commit to a timeshare purchase.
Financing a timeshare should never be entered into lightly, and it is important that purchasers understand all of their financing options before committing to a deal. It is strongly advised that potential buyers seek the advice of a financial advisor or timeshare attorney prior to making any commitments regarding timeshares or financing. Often timeshares on the secondary market can be bought for as little as a dollar on eBay and other websites online. These are usually like for like units but may not come with all of the usage and exchange benefits as a new timeshare purchase. When pursuing financing, be sure to understand the terms of the loan and whether or not it is a sound financial decision for yourself and your family.
Exploring Your Options: Making an Informed Decision
Ultimately, timeshare financing can be a daunting process to maneuver. However, with the right amount of research and time spent comparing different options, you might discover an appropriate solution for your needs. It is important for buyers to consider all their options before making a decision in order to ensure they get the best deal possible.
Furthermore, buyers should always read contracts thoroughly before signing so they know exactly what they are agreeing to. Here is where a timeshare attorney can advise you of all terms and conditions contained within the contract.
In conclusion, individuals looking to purchase a timeshare should research all their available options before committing to any form of financing. Understanding how timeshares work and where to search for financing can allow buyers to get the most advantageous terms possible. Additionally, it is important to understand the contract you are signing in order to make sure you can afford the purchase over the term of the loan. Taking all these steps can help ensure that buyers are well informed and aware of their options when it comes to financing a timeshare.
This article is for informational purposes and is not intended as legal advice. You should speak directly with a timeshare attorney for specific matters involving timeshares.
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Led by timeshare attorneys Michael D. Finn and J. Andrew Meyer with over 75 years combined experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. If you would like a free consultation to discus your timeshare matter, please contact our office at 855-346-FINN-LAW or email us at info@finnlawgroup.com – Follow us on Twitter for more blogs on timeshare financing.