Timeshares can be a great way to enjoy a vacation property without the high costs of renting or buying a whole home. But, when it comes to paying for your share of the property each year, some owners find themselves considering a timeshare loan to cover expenses.
If you decide to buy a timeshare, the salesperson may recommend a lender they work with. But, it’s important to shop around to find the best financing option for your particular situation and credit profile. Private personal loans, for example, might offer lower interest rates than those offered by a timeshare’s designated lender and can be a better choice for borrowers with good or excellent credit.
When shopping for a loan, try to get preapproved before meeting with your salesperson. This will help you avoid being surprised at closing by the amount of the financing you’ll need to cover your down payment and other purchase costs. It can also speed up the loan process, making it easier to close on your new timeshare.
Some lenders specialize in timeshare loans, offering fast loan approval and low rates. These lenders are members of the American Resort Development Association (ARDA) and follow a strict code of ethics to provide timeshare owners with quality service.
Generally, these lenders will require a higher credit score than lenders that do not offer timeshare loans. They may also require more documentation, including tax returns and bank statements. In addition, they may charge a one-time fee to process the loan.
Many lenders also offer a 0% APR introductory period, which can be useful for reducing your initial borrowing costs and getting you started with a debt-free timeshare. But, the introductory rate is usually only available for 18 months or less and then the regular interest rate will apply.
Another option is to use a mortgage equity line of credit (HELOC). This uses the equity you have built up in your home as collateral for the loan, which can be an attractive financing solution for homeowners with solid credit profiles. However, HELOCs typically have a variable interest rate and aren’t suited to all buyers.
Other options to consider include a short-term credit card, which can be used for the initial down payment or closing costs. Or, you can borrow from a 401(k) plan, which is an excellent option for those with poor credit scores who lack other financing options. But, keep in mind that you’ll be missing out on the benefits of compounding interest and could lose money if you don’t repay the borrowed funds within the agreed upon timeframe.
Purchasing timeshares can be a smart investment if you choose a reputable developer and a savvy ownership type. For example, look for a timeshare with perks like day access privileges so you can enjoy the pool, beach club or gym even when you’re not staying at the resort. Also, check to see if the timeshare offers a rental program so you can make some extra income to offset annual fees.