Timeshares can be a fun vacation option for those who don’t mind sharing a property with others. Unfortunately, they can also be very expensive. If you’re struggling with high monthly loan payments on a timeshare, then you may want to consider switching over to a personal or home equity loan. However, before doing so, you should weigh your options carefully. Taking on additional debt could be risky, especially if you can’t keep up with the monthly payments and the costly maintenance fees. In some cases, it may be best to simply exit vacation ownership altogether.
Timeshare loans are secured by a deed to a fractional interest in a property. The share can be a specific week, season, or unit within the resort property. In a timeshare exchange, owners can use their shares at different properties worldwide. These properties typically have a high occupancy rate, which makes them a secure asset for lenders to invest in. Timeshare loans often have higher interest rates than other consumer assets, such as unsecured mortgages. However, the risk of defaults can be mitigated by strong guaranty agreements and the fact that the underlying asset is very liquid.
Because the resale value of a timeshare can be very low, it’s unlikely that a bank will agree to finance a timeshare purchase with a traditional mortgage. Instead, these types of transactions are financed by private entities that specialize in these kinds of loans. A credit card is an alternative option, but only if the limit and interest rates are appropriate.
In order to qualify for a timeshare loan, you’ll need excellent credit and a stable income. You’ll also need to clear any major debts you may have prior to applying. If you’re unable to meet the requirements, it’s likely that your lender will deny the application or require a larger down payment.
If you do decide to apply for a timeshare loan, be sure to check the fine print for prepayment penalties. These are often present on these types of loans and can be quite costly. Fortunately, there are some alternatives to the developer-financed financing, such as personal or home equity loans from Figure.
Those who have a large amount of equity in their homes can save a lot of money by refinancing their timeshare loans with a home equity line of credit (HELOC). This will eliminate their monthly timeshare loan payments and reduce or even cancel the expensive maintenance fees that are included in their contract.
Timeshare loans can be a great financing option for those who want to buy a property that they will only use once or twice per year. The downside is that they are very difficult to resell or even rent out, and they will always require expensive annual maintenance fees.
A HELOC is a better choice than a timeshare loan because it offers lower interest rates, and you can easily access the money you need as needed. If you’re struggling with paying your timeshare loan, or you’d like to explore options for exiting your vacation ownership, it’s important to seek advice from a trusted company that can help you find the right solution.