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So you got swayed by the allure of an annual vacation in a snowy or tropical locale, and now you’re the proud owner of a timeshare. If you financed that timeshare directly with the developer, however, you may be paying more than you need to for that privilege.The good news is that you may be able to refinance your timeshare loan at a lower rate, which could lower your monthly payments, and also reduce the total cost of the loan. Alternative timeshare financing options include personal loans, home equity loans and lines of credit, and low- or no-interest credit cards. Read on to learn how to find affordable financing options for a timeshare.
What is A Timeshare?
A timeshare provides you with fractional ownership of a vacation home, often in a popular travel destination. Rather than purchasing the home or condo outright (and having the ability to stay there any time), you pay a fraction of the price in exchange for a certain number of days or weeks per year that you have access to it. You can finance that cost, either directly with the developer or with a third party.
How Timeshares Work
Timeshare setups are as varied as the destinations where they are located, but here’s a look at three of the most common arrangements.
Fixed Week Timeshare
If you have the same vacation period every year, you may appreciate the fixed week timeshare because you get access to your timeshare at the same time each year. The benefit of this setup is that you never have to fight to find a time slot that works for you and your family. On the other hand, if your schedule changes, you may not be able to benefit from the timeshare you’ve purchased unless you can switch weeks with another owner.
Floating Week Timeshare
With the floating week option, you can choose the week you take your vacation, as long as the timeshare is available. This provides more flexibility, though you may need to plan far out to ensure you get the week you want.
Points System Timeshare
With the first two options, you typically stay at the same property each time you travel. With the points system, however, you have access to all the timeshare locations that the company owns. Each year, you are allotted a certain number of points that can be used at any of these locations. Some may require more points than others, and peak seasons may require more points than off-peak times of year. You may be able to purchase additional points if you need them. The floating points system can be a great option if you want a little variety in your vacations.
Are Timeshares Good Investments?
It depends on how much you end up using your timeshare. If you have a week or more off a year, love a particular destination (or in the case of the points system, want to explore the world), and use the timeshare each and every year for 10 or so years, it can end up costing less than if you had gone to a resort and paid a nightly rate for each one of those vacations.On the other hand, if you don’t travel every year or get sick of the timeshare, you may not recoup your expenses.
Advantages & Disadvantages of Timeshare Loans
Unlike when you buy a house, you can’t get a traditional first mortgage to buy a timeshare. A mortgage needs to be secured by the property it’s financing and a timeshare doesn’t give you ownership of the property. However, that doesn’t mean you can’t get financing for a timeshare. Often, you have the option to finance your purchase through the developer. While developer financing can be convenient, it may not be the cheapest option. The loans provided by lenders that work with timeshare sales teams, often come with very high interest rates and long repayment terms. It’s also possible to get your own loan to finance — or refinance — a timeshare, using a lender that is not connected to the developer. Private loans can come with lower rates and more flexible terms — if you qualify. Personal loans and home equity loans can be used either to buy or refinance a timeshare.If you’re thinking about refinancing your timeshare with a new lender, here is a quick look at the pros and cons.
Pros of Timeshare Loans
Cons of Timeshare Loans
You may be able to reduce the total cost of the loan by getting a lower interest rate
You may have to pay an origination fee and/or other fees
Your may be able to lower your monthly payments
You may need to use your home as collateral, putting it at risk
Paying off the original timeshare loan could help you sell the timeshare
If your credit isn’t strong, interest rates may be high
Advantages of Timeshare Loans
Refinancing a timeshare comes with several benefits, including:
Lower Interest Rates
One of the benefits of getting a personal loan or other type of loan to refinance a timeshare is that you may be able to secure a lower interest rate than you got with the original loan, allowing you to pay less in interest over the life of the loan.
Lower Monthly Payments
A lower interest rate can translate into lower monthly payments. And, if you get a long-term personal loan, you may also be able to extend the length of the loan, which can also reduce your monthly payments. Keep in mind, however, that a longer loan term can lead to higher overall interest costs.
Exit Strategy
If you’re thinking about getting out of your timeshare, paying it off may provide you with more exit options, including selling it (if that’s allowed in your contract).
Disadvantages of Timeshare Loans
There are also potential drawbacks to refinancing a timeshare, which include:
Loan Fees
Many lenders charge an origination fee, which can run as high as 8% of the loan. This could negate any cost advantage of refinancing, so make sure you run the numbers and look at the refinance loan’s annual percentage rate (APR), which includes interest plus any fees.
Home as Collateral
If you take out a home equity loan to refinance your timeshare, your home will be used as collateral. Having collateral can lead to a low interest rate because it reduces risk to the lender. However, should you run into trouble paying the timeshare loan back, you could potentially lose your home.
High Interest for Bad Credit
If you don’t have good or excellent credit, getting a personal loan to refinance your timeshare loan may come with a high interest rate, which means it may not offer any advantages.
Can a Timeshare Be Refinanced?
Yes. If you have an expensive timeshare loan, you may be able to refinance that loan and, in turn, reduce your interest rate and/or your monthly payment. You have several options for timeshare financing. These include: personal loans, home equity loans and lines of credit, a 0% APR credit card, and remodeling your loan.
Timeshare Financing Options
If you’re struggling with your current timeshare loan payments or simply want to see if you can lock in a lower rate, it can be worth looking at some of these alternative financing options.
Unsecured Personal Loans
You may be able to get an unsecured personal loan to refinance your timeshare. This type of loan doesn’t require collateral, which means you don’t need to put any assets at risk. And, if you have strong credit, you may be able to qualify for a lower interest rate than what you are currently paying on your timeshare loan. To see if you meet personal loan requirements, lenders will typically review your credit scores, income, and debt-to-income ratio. Generally, a higher credit score, higher income, and less debt, make it easier to qualify for a timeshare refinance loan.Recommended: 12 Types of Personal Loans: Pros & Cons of Each
Home Equity Loans
You may be able to get a home equity loan or home equity line of credit (HELOC) to refinance your timeshare loan. A home equity loan is given as one lump sum that you repay with interest over time. A home equity line of credit allows you to access a certain amount of credit over a certain period of time.With this refinancing option, you borrow against the equity you have built in your home. Because your home acts as collateral, you may be able to lock in a low interest rate. However, with collateral comes risk, since you could lose your home if you end up defaulting on the loan.
Credit Cards
Though credit cards tend to come with high interest, some cards offer a promotional 0% APR period, which can be as long as 18 months. This lets you avoid having to make any interest payments on purchases and balance transfers. If you’re able to get this type of card, you might be able to refinance your timeshare loan and pay it off before the introductory offer expires.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 you are currently paying on your timeshare loan.
Modify Your Loan
If you are having trouble making your timeshare payments, another option is to reach out to your current lender and ask if it’s possible to modify the terms of the loan. Some lenders will consider loan modifications, such as deferring payments for a few months or extending your loan repayment period, in order to keep a borrower from defaulting on the loan.
Timeshare Financing Rates
Generally, the better your credit, the more likely you are to qualify for a timeshare loan with low interest rates and flexible repayment terms. For personal loans, for example, interest rates range anywhere from about 3% to 36% depending on your credit score. For excellent credit scores (720 to 850), the average personal loan interest rate currently ranges from 10.3% to 12.5%. Home equity loans will come in even lower, since they are secured by your home. For borrowers with credit scores of at least 700, home equity loan rates are running between 3.25% to 7.9%.To find the best refinancing deal, it can be helpful to use an online lending marketplace. These sites save time and effort by allowing you to research and compare loan rates all in one place.
The Takeaway
Refinancing a timeshare loan may help you save in interest and/or lower your monthly payments. You have several options for timeshare refinancing, including unsecured personal loans, home equity loans or lines of credit, credit cards, and loan modification. If you’re interested in exploring your refinancing options, Lantern by SoFi can help streamline the process. By using our online lending platform, you can quickly compare personal loan offers from multiple lenders to find the best financing deal.
Frequently Asked Questions
What is a good timeshare financing rate?
What are my timeshare financing options?
Can I refinance my timeshare?
Photo credit: iStock/bymuratdeniz
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About the Author
Susan Guillory
Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
