Timeshares are popular vacation properties that allow owners to enjoy the benefits of a vacation home without incurring the expense and hassle of owning one. Timeshares are generally not considered to be a good investment, as they do not usually appreciate in value and are difficult to sell or rent out for a meaningful income. However, for those who find them appealing for the convenience and amenities they offer, financing a timeshare can be an option. Unfortunately, many people who buy timeshares are not aware of the high interest rates associated with this type of financing. The lenders recommended during a timeshare sales presentation often charge much higher rates than would be available to consumers who shop around.
The most common method of timeshare financing is through the developer. This can be done after attending a timeshare sales presentation, at which timeshare developers will provide prospective buyers with a special offer that can be paid for in cash or by credit card. The credit cards used to purchase a timeshare often come with a promotional 0% APR for up to 18 months, which could help reduce the initial costs of a timeshare. However, the credit cards will likely start charging a much higher rate after the introductory period expires.
In contrast, personal loans can be a great way to finance a timeshare. These loans are unsecured, meaning that you do not use your home as collateral. This allows you to avoid the risk of losing your home in case you fail to pay back the debt. Furthermore, if you have a strong enough credit score, you may be able to obtain a personal loan with an interest rate that is lower than the rates offered by the developer.
Another way to finance a timeshare is through a home equity loan, though these typically require a much larger down payment. It is also important to note that the lender will take a hard credit pull, which can negatively impact your credit score.
Refinancing a timeshare is not always a good idea, as it can cost more in the long run than paying off your current debt and selling the timeshare. However, it can be beneficial if you want to get out of a timeshare that you no longer use or if the current interest rates are too high. Online lender LightStream, which is owned by SunTrust Bank, offers a refinance loan that can be used to pay off a timeshare debt with interest rates starting at 5.99%.
Because the majority of timeshares are non-ownership products, it is rare to purchase them with a traditional mortgage. The primary reason is that it would be difficult for the owner to transfer a timeshare to a new buyer due to its lack of marketability. Because of this, timeshare loans are typically securitized and rated on the basis of expected gross defaults and variability, rather than on a pool of underlying transactions. In addition, ratings of these timeshare loans tend to be accompanied by liquidity reserves and other credit enhancement mechanisms.