If you’ve ever attended a timeshare sales presentation, chances are, you were lured there by the promise of a free hotel stay or spa treatment. Some attendees go on to make the purchase, but for many people, those “free vacations for life” are anything but. Buying into a timeshare comes with hidden costs, including fees that can add up and keep you from enjoying your vacations.
Timeshares are typically spacious residential condos that come with hotel-like amenities such as a pool and gym. Typically, you pay a lump sum upfront when purchasing one and then you pay annual maintenance fees that may or may not increase over time. Purchasing a timeshare on the secondary market, which is when you take over ownership from another owner, can also be an expensive proposition.
The cost of a timeshare may seem like an investment when you consider that you are buying into a property that could appreciate in value over the years, similar to purchasing a home. But that’s not necessarily the case, explains Dave Ramsey. “Timeshares depreciate, and they have a terrible resale market,” he says. In addition, he points out that you don’t own the property outright, which makes it difficult to treat as an investment.
Even if you decide to sell your timeshare, you’ll likely be hit with hefty resale fees. That, combined with high annual maintenance fees and the resale market’s poor demand, can make your timeshare a money pit.
One of the biggest reasons to buy a timeshare is for the perks, which can include discounted rates on nearby attractions and restaurants. But the reality is that a lot of these extras are not worth the hassle, according to Ramsey. He explains that it’s easy to end up spending thousands in additional fees over the years, which can quickly offset any savings you might have made.
Another benefit that is often overstated is the ability to rent out your timeshare. But this is a tricky proposition for most owners. Unless you have a great property in a popular tourist destination, it’s unlikely that you’ll be able to rent out your timeshare for enough to cover the costs of the maintenance fees and associated taxes.
When it comes to timeshares, as with annuities, the truth is that they only make sense for a very small portion of the population. So, if you’re thinking about making the purchase, be sure to take the time to crunch the numbers and see if it makes sense for you.
If you do decide to make the purchase, try to avoid paying for it with a timeshare developer’s loan, which often comes with much higher interest rates than other types of financing. Instead, look for a personal loan with competitive interest rates and borrower-friendly repayment terms. An unsecured personal loan is typically less costly than a timeshare developer’s loan, especially if you have an excellent credit score. You can also use an online marketplace that specializes in personal loans to get the funds you need.