Not too long ago we read a tweet that let people know that they could take out a loan to help them purchase a timeshare – and it annoyed us. There’s nothing new with the idea of timeshare financing (although we hadn’t seen this particular company offer this product before) as both Marriott and Starwood have been offering financing for people wanting to buy their timeshare products for years. The reason why it annoyed us is because it’s a terrible idea.
We are all still recovering from a depression brought about by frivolous lending, irresponsible borrowing and a whole lot of greed, yet sometimes it seems like people don’t learn.
Timeshares are not assets like a house or a condo, rather they are depreciating assets, more like a car than a property. If you buy from the developer (like Marriott or Starwood) you will almost certainly never get your capital back when you choose to sell somewhere down the line – a bit like when you buy a new car from a dealership.
If you buy on the resale market there is a chance that you’ll grab your unit at a low point (e.g. during a recession/depression) and be able to sell it at a higher point in a few years time (when prices have recovered slightly) but this is also very rare. Yes, if you buy wisely, the market value of your timeshare may hover around your purchase price for some time, so you may be able to recoup a good amount of what you paid for it, if you choose to sell. In the end, however, the price will go down: It always does.
No one should be buying a timeshare with the idea that they’ll make money on it when they sell it on. Timeshares can be fantastic ways for families to vacation and, if you do your homework, you can get some great deals, but you’re still only buying vacations, not investments. With all that in mind, why would you even consider taking out a loan to buy a timeshare?
There can be good reasons to still go ahead and buy a car when the only way you can afford it is by financing; you may need a car for work, or to take the kids to school, or to look after your folks, or for any number of valid reasons, but there really isn’t ever a valid reason to take out a loan to go on vacation – especially not at the rates generally offered! Vacations and timeshares are luxury items, they’re not part of life’s necessities. If you can’t afford to purchase them without a loan, you probably shouldn’t be buying them in the first place.
More importantly, if you can’t afford to buy the timeshare outright, how are you going to afford the maintenance fees? Will you take out more loans to pay for them too? A lot of top-end timeshares can be purchased on the resale market for considerably less than $10,000 but these units often come with maintenance fees of $1,000+/year. Once you’ve signed on the dotted line you’re committed to paying those fees each and every year until you decide to sell, so where is the money going to come from to pay for those?
Financing is not the solution if you find that you can’t afford the timeshare you’re interested in. Perhaps you could find a similar resort where units are more affordable, perhaps you could rent rather than buy at the resort you like so much (see this article: “Do you really need to buy that timeshare?”) or perhaps timesharing isn’t right for you in the first place.
We’re in the business of helping people rent, sell and buy timeshares at affordable prices, but we’re not in the business of encouraging people to get into debt just to go on vacation. Timesharing doesn’t suit everyone’s budget so, if you’re thinking about getting a loan to buy a unit or some Destination Club points, perhaps you should think again – it could save you a lot of heart ache in the long run.
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