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It can be tempting to buy a little piece of paradise that you and your family can escape to once a year. But timeshares don’t come cheap. And, many interested buyers simply don’t have the thousands on hand to pay for a timeshare up front in cash. Fortunately, there are ways to finance (as well as refinance) a timeshare. Your options include timeshare loans, personal loans, home equity loans, and low- or no-interest credit cards. Here’s what you need to know about how much it costs to get a timeshare and how to get timeshare financing at a rate you can afford.
What Is a Timeshare?
A timeshare is a way for multiple unrelated people to own a fractional share of (or the right to use) a vacation property, which they take turns using, typically in week-long increments. Because you share the costs with other people, it’s generally much cheaper to purchase a timeshare than to buy a vacation home of your own.Timeshare properties are typically located in popular travel destinations, from tropical beaches to ski resorts. And, you don’t necessarily have to go to the same place each time. In some cases, you can trade your property for another location, though there may be additional fees and costs.Recommended: Personal Loans for Vacations
How Does a Timeshare Work?
How a timeshare works will depend on the type of timeshare. Here are three common set-ups.
Fixed Week Timeshare
A fixed week timeshare is what most people likely think of when they think about timeshares. Fixed week timeshares guarantee owners use of a specific property the same week each year. Some timeshare owners prefer this type of ownership because it comes with no competition.
Floating Week Timeshare
Floating week timeshares allow owners some flexibility when they can use their timeshare each year. It depends on the unit’s availability, but owners can typically choose from any week during the year.
Point System Timeshare
Instead of a set amount of time each year, a point system timeshare offers points each year that owners may save up as they see fit. They usually come with a number of properties timeshare owners may choose from, and each property may cost a different amount of points depending on its location, size, and requested time of year.
Types of Timeshare Ownership
A timeshare allows you to split the costs of vacation homeownership with others based on the timeshare agreement. There are two main types of timeshare contracts.
Shared Deeded Ownership
With shared deeded ownership, you hold a deed to a fractional piece of the timeshare property. For example, if you purchase a week’s worth of vacation at a given property, you own 1/52 of the property (since there are 52 weeks in a year). Ownership lasts indefinitely, but owners are typically allowed to sell, bequeath, or gift their ownership. This arrangement is less common today than when the industry started out decades ago.
Shared Leased Ownership
When you buy a shared lease ownership, you don’t actually own any part of a property outright. What you’re buying is the right to use a property, or a group of properties, for a fixed or floating week (or weeks) each year for a certain number of years. This type of timeshare ownership doesn't last forever and cannot be passed down or inherited by a beneficiary.
Are Timeshares Good Investments?
Timeshares are typically not considered good investments. Unlike real estate, timeshares often depreciate in value over time. They are difficult to resell and typically sell for much less than the original purchase price. A better investment would be purchasing a vacation property and renting it out when not in use.However, if you like the idea of visiting the same location each vacation, can take a week off work each year, and use the timeshare for ten or so years, owning a timeshare can end up being less costly than paying for a hotel for all of those vacations.Recommended: How to Use Debt to Build Wealth
How Much Do Timeshares Typically Cost?
There are several costs involved in buying a timeshare. This includes the initial purchase, which is the biggest outlay. The average price of a timeshare interval is $23,940, according to the American Resort Development Association.In addition, you should expect to pay annual maintenance fees (which can run around $1,000, depending on the size of the property). These fees tend to increase over time due to inflation. If you have a deeded timeshare, you'll pay these costs indefinitely. If you want to switch locations, you will typically have to pay exchange fees.When purchasing a timeshare, it’s a good idea to ask about your all-in costs per year and when you'll pay them. Some resorts require you to pay monthly, quarterly, or twice per year.
Is There a Way to Save Money on Timeshare Ownership?
Yes. The primary way to save money on a timeshare property is to buy from a previous timeshare owner. Because timeshares rarely appreciate in value, you can end up spending far less for a timeshare on the secondary market than one that you buy new directly. Timeshare resales often sell for half of the original purchase price, and sometimes for far less. Just make sure you understand what ongoing fees come with the purchase.
Can You Borrow Against a Timeshare?
Generally, no. Timeshare ownership usually doesn’t come with actual ownership of the property. And even when it does, timeshares generally decline in value over time. As a result, you typically can’t use a timeshare as collateral to secure another loan.
Financing Options to Pay for a Timeshare
People selling timeshare will often connect buyers with partner lenders that offer timeshare loans. But borrower beware: these offers often come with very high interest rates, especially for buyers with lower credit scores. Fortunately, they are not your only option for financing a timeshare. With some advance planning, you can find alternative financing options. Here are some to consider.
Home Equity Loan
If you have built up a fair amount of equity in your home, you may be able to get a home equity loan to purchase a timeshare. Though home equity loans are typically used for home improvements that will increase your home’s value, they can also be used for timeshare financing. The benefit of choosing home equity loans vs personal loans is that home equity loans typically come with lower interest rates since they are secured by the equity in your home. Keep in mind, however, that if you fail to pay back your loan, your lender could seize your home to recoup their losses.
Credit Card
Though credit cards tend to come with high interest rates, some cards offer a promotional 0% annual percentage rate (APR) period, which can be as long as 18 months. If the initial down payment on a timeshare is something you can pay off within this time frame, it could be a good financing option. Keep in mind, though, that if you do not pay off the balance before the introductory rate expires, you could end up paying a higher interest rate than the one offered by the developer. Recommended: Average Credit Card Interest Rates
Timeshare Personal Loan
If you have a strong credit score, an unsecured personal loan will often cost you less over the long run than a timeshare loan offered through the developer. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent. It’s also possible to get personal loans for fair credit (which are scores around 580 to 669). Because this type of loan doesn’t require any collateral, your primary home will not be at risk in the event of default.To find out what rates you might qualify for — and determine if a personal loan is a better deal than a timeshare loan — it can be a good idea to use a loan comparison site to get preapproved for personal loans.
Benefits and Drawbacks of Timeshare Loans
When you purchase a timeshare, the developer may offer you a timeshare loan to make the initial cost more manageable. There are both pros and cons to financing a timeshare this way. Here’s a look.
Pros of Timeshare Loans
You can apply for a timeshare loan directly from a lender that works with the timeshare sales team, so there’s no delay in securing financing and completing your purchase.
Timeshare loans tend to have long repayment terms, which leads to low monthly payments.
Timeshare loan lenders understand timeshare costs and are able to provide loans large enough to finance the timeshare.
Cons of Timeshare Loans
Timeshare loans typically come with very high interest rates.
Long repayment terms usually lead to higher overall loan costs because you can end up paying more interest over the (longer) life of the loan.
Timeshare properties do not provide any return on investment, and become even more costly if you take out a costly loan.
Are Timeshare Loans Secured?
Not typically. A secured loan involves putting up an asset as collateral for the loan. A timeshare loan could be secured, however, if you opt to use a home equity loan to finance (or refinance) the purchase. This type of loan is secured against the value of your home equity.Since collateral lowers risk for a lender, secured loans tend to come with lower interest rates than unsecured loans. Keep in mind that you cannot use the timeshare you are purchasing as collateral for the timeshare loan.
Can You Refinance a Timeshare Loan?
Yes. If you have a high-interest timeshare loan, you may be able to refinance it. When you refinance a loan, you apply for a new loan with a lower interest rate. Once approved, you can use the new loan to pay off your existing one. You may also benefit from smaller or fewer monthly payments. You have several options for timeshare refinancing. These include: personal loans, home equity loans, and a 0% introductory APR credit card. It may also be possible to work with your existing lender to remodel your loan.
Compare Personal Loan Rates With Lantern
Timeshares can be financed via personal loans, home equity loans, credit cards, or even with specialized timeshare loans offered through the timeshare developer. If needed, timeshare loans can also be refinanced. The total costs of each timeshare vary, so it’s imperative to understand exactly what you’re initially spending and what you will continue to spend as the years go by.If you’re thinking about financing (or refinancing) a timeshare with a personal loan, Lantern by SoFi can help. With our online lending tool, you can quickly compare personal loan offers matched to your financing needs and qualifications.
Frequently Asked Questions
Can you borrow against a timeshare?
Are timeshare loans secured?
What kind of loan can you get for a timeshare?
Photo credit: iStock/Ольга Симонова
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About the Author
Lauren Ward
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
