Most people finance the purchase of their primary homes, cars and furniture – but not all of us think about financing a timeshare. This can be an excellent way to get a great vacation property that will bring you and your family a lifetime of memories, especially if you’re not in a position to buy one outright right now. There are several options for financing a timeshare, including mortgage loans and personal loans.
When buying a timeshare, many people turn to the seller for financing. This can be the easiest option as the salesperson will likely have specific lenders they work with and can offer a package deal with all the paperwork. However, the buyer should shop around to make sure they are getting the best deal.
Unfortunately, most buyers don’t qualify for mortgages when buying a timeshare because they’re not actually purchasing a home they own, but rather a right to use the property at specific times each year (typically for a week or two). The lender will be less willing to lend money on these types of purchases because the security they have is not as strong. This means the timeshare loans that are available will typically have much higher interest rates than a typical mortgage loan.
Because of this, it’s important for a potential timeshare buyer to explore alternative ways to finance their purchase. One option is a personal loan, which can be found through a number of banks and lenders that cater to the timeshare market. These can be very competitive with developer timeshare loans, and may even have lower interest rates than some credit cards.
Another option is to take out a home equity loan. This can be done with a bank or private lender that specializes in this type of transaction, and again, is often more competitive with developer rate than the typical home equity loan offered by traditional banks. In addition, the interest on a home equity loan is tax-deductible if it is used to purchase a timeshare.
Lastly, some online lenders offer personal loans that are specifically tailored for the timeshare market. These can also be quite competitive with both the developer and resale loan offerings. They will still be unsecured, so the rates won’t be as low as a mortgage, but they can be better than the high-interest rate developer offerings. Lastly, any type of financing should be evaluated for added fees such as maintenance or resale fees and prepayment penalties. These can add up and make the cost of a timeshare significantly more than it should be. If you do choose to finance a timeshare, we recommend finding a lender that reports to the credit bureaus so you can build a good payment history to improve your credit score over the course of your loan term. This will be a great way to help you qualify for an even better timeshare purchase in the future.