Buying timeshares is a major financial commitment. The average price is $22,942 according to the American Resort Development Association (ARDA). If you’re like most people, that’s more than you have in cash on hand and you’ll need a loan to pay for it. But not all loans are the same. Unlike traditional mortgages and car loans, which use your house or automobile as collateral, timeshare loans are unsecured. That means the debt isn’t tied to any of your personal assets, but you’ll still be paying a lot of interest for a timeshare that you don’t really want or need.
Timeshares typically cost a significant amount of money and, because of that, many owners opt to finance their purchases with loan products offered by the developers or third parties. These loans, however, generally have high rates that can make the timeshares unaffordable in the long run. It’s important to evaluate the costs of a timeshare carefully, including how much you’ll have to spend on maintenance fees each year. You should also consider whether a timeshare actually fits your vacation preferences.
It’s common for salespeople to offer buyers financing for their new timeshare during the on-the-spot purchase process. But it’s a mistake to assume that these are the best or only available options. There are third-party lenders who specialize in timeshare loans with more competitive rates and an easier approval process than the loan products provided by your resort developer.
Getting a timeshare loan from a third-party lender will not only save you money, it may also be easier than qualifying for a home equity or credit card debt. If you have good credit, you can often find a loan with better terms and lower interest rates than what you were originally given by the resort developer.
The most popular type of timeshare ownership is deeded property ownership, which involves a permanent right to the use of a specific unit or portion of a resort. The deed usually comes with a timeshare contract that spells out the terms of the timeshare contract, such as usage rights, maintenance fees and other associated expenses. It’s possible to buy a deeded property without going through a timeshare program, but it’s typically more expensive.
Timeshares can be purchased as points-based units, which allow you to purchase a specific number of vacation days each year, or resale properties that come with a fixed week of vacation each year. Both types have advantages and disadvantages, so it’s important to understand the options before deciding on which is best for your travel plans.
Once you’ve decided on the timeshare you’d like to purchase, it’s a good idea to crunch the numbers to see how much your annual maintenance fees will be. Then compare that to how much you would spend on a comparable vacation in a hotel room to ensure you’re able to afford the purchase. To help you do this, we have a timeshare loan calculator on our site that allows you to plug in all the relevant details and get an estimate for your potential financing.