Timeshare Financing Risks Exposed — and How to Avoid Them
A standard part of almost every timeshare sales presentation includes giving you the option to take out a loan to buy into vacation ownership. It might be spun as a convenient or economical idea, but in reality, it is neither. The truth is, developers offer these loans because traditional lenders (i.e., banks) don’t want to take timeshare financing risks.
Banks don’t want to loan money for timeshares because they aren’t worth anything, and the banks can’t get their money back if you stop paying on the loan. Therefore, timeshare developers create their own lending companies and make their own loans to customers. Those loans, however, are a bad deal.
In this article, we will take a look at developer loans and timeshare financing risks generally. We’ll look at why these loans are such bad deals for timeshare owners, as well as other possibilities for financing or refinancing vacation ownership.
Why Are Timeshare Loans Considered Predatory?
The concept of predatory lending is a broad one, but it generally refers to a situation in which a money lender takes advantage of a consumer’s situation or limited options to offer unfair loan terms. Timeshare financing companies (which are nearly always formed and run by developers) are predatory because they take advantage of several factors bearing on timeshare purchasers.
As mentioned above, banks don’t typically give loans for timeshares. For a bank to provide a loan, they need some kind of collateral that they can collect if you stop making loan payments. (In real estate loans, this process is known as foreclosure.)
The problem is, timeshares are generally not worth anything, which makes them bad collateral and too much risk for banks. This tends to be the view regardless of whether a contract is for a deeded timeshare, a fixed-week timeshare, or a points-based system. From a bank’s perspective, any loan for fractional ownership is bad. While you shouldn’t take all your personal finance advice from banks, this bit is worth considering.
Therefore, if you want to purchase a timeshare and you can’t pay cash, the timeshare sales pitch can’t close with a signed timeshare contract unless the company offers you another way to fund the purchase price.
That’s where the financing company comes in. And because they know you don’t have any better options, they will offer the loans on much worse terms than you would get from a bank loan. Unlike with a traditional loan, they won’t encourage you to make a down payment, so you have to borrow more from the company.
Sometimes, a salesperson may even try to sell you on the idea of a timeshare credit card and transfer the price of the timeshare purchase to that card. (In some of the worst cases, they even do this without telling you.) Needless to say, racking up a credit card balance of tens of thousands of dollars is a terrible financial idea in almost any case.
Simply offering loans like these is bad enough. The fine print, though, shows that the situation is much worse than you might think.
What Are the Interest Rates and Terms of Timeshare Financing?
Loans from timeshare companies are known for their high interest rates and onerous terms. Rates are much higher than you would see on loans from a bank, rising to 20% or more depending on the state of your credit report.
The timeshare loan is also made more complicated by the nature of what it is you’re buying. The terms of your agreement make it much more difficult to leave than a traditional loan/real property relationship.
Also, timeshare companies can be sneaky and trick you into signing even more papers for additional loans. One woman’s daughter was horrified to find that her mother had been persuaded to open three separate loans for more timeshare points and owed over $100,000 at a 14% interest rate. (That rate, which is high anyway, would have undoubtedly been worse had she had a bad credit score.)
The obligations of timeshare loans are not limited to monthly payments on the loan. If you fail to pay annual maintenance fees, special assessments, or any other number of fees, that could be considered a breach of your loan contract as well.
While a default on a conventional loan for your home might end with a foreclosure, the truth is that timeshares and their loans are not designed for quick or easy exits. If the timeshare company does not want to let you out of your timeshare — and why would they? — they can prolong your suffering and keep you locked into unfair contracts for years.
Can You Refinance or Cancel a Timeshare Loan?
Yes, you may be able to cancel or refinance your timeshare loan to escape a bad financing deal, but it depends on your specific circumstances, loan terms, and timeshare purchase agreement. You generally have three options: a timeshare rescission, refinancing with a different loan, and exiting your timeshare altogether. Let’s take a closer look at each of these.
1. Timeshare Cancellation/Rescission
First, a timeshare loan cancellation may be possible if you have recently purchased your timeshare. Most states have laws allowing you to cancel the purchase and all related agreements if you act within a certain amount of time, ranging from a few days to a few weeks.
If you find yourself in this situation, you have to act fast. Centerstone Group can provide you with free information and the resources you need to cancel your timeshare the right way.
Keep in mind that a cancellation must be done the right way, and even then, timeshare companies can be slippery. One senior citizen who canceled her purchase and loan was later blindsided by Hilton, which improperly claimed that the rescission was not valid, then proceeded to foreclose and ruin her credit.
It bears repeating, then, that any move you make to cancel a timeshare and its loan should be taken with the aid of an expert, like a timeshare exit company. In the case of a legal dispute by the timeshare company, legal advice from a timeshare attorney or law firm might be necessary.
2. Refinancing
Refinancing is when you replace your current loan with a new one so you can secure better terms and interest rates. But this can be a tricky option for timeshare loans because, as noted above, banks don’t like loans that are secured by timeshares. It may be possible, though, to get a loan secured by another asset.
For example, if you have equity in your home, you might be able to get a home equity loan and use that to refinance your timeshare loan. But this may not be a wise decision, as mortgaging your home for a timeshare is a personal finance risk most shouldn’t take.
Another option may be to get a personal loan, but the terms may only be a bit better (or not better at all) than the developer’s timeshare loan. Personal loans are usually unsecured, which means they can have interest rates that are either a bit lower or the same as most timeshare loans. They also require fairly good credit, which can be hard for many timeshare owners to establish.
Plus, keep in mind, a developer will not let you out of your timeshare or its loan for free. Your timeshare loan will almost certainly have a prepayment penalty or similar hidden fees if you try to pay it off with money from another loan.
Before you start signing more loan documents, consider your third option: a timeshare exit.
3. Timeshare Exit
Another way to leave a bad financing deal behind is to exit your timeshare outright. But this option requires the help of experts, like those at Centerstone Group. Our team can look at your situation and help you get out from under your timeshare methods ranging from a transfer or proprietary pressure campaign to a referral to a trusted timeshare lawyer if necessary.
Take Timeshare Financing Risks Seriously and Prevent the Damage They Can Cause
One of the chief timeshare financing risks is that it is treated too lightly by timeshare companies, which tricks buyers into signing loans they cannot afford. Centerstone Group, with its team’s decades of experience, knows the tricks and tactics of the timeshare industry, so we can help you stop being exploited once and for all.
But don’t just take our word for it. Centerstone Group is an accredited company with an A+ rating from the Better Business Bureau and a 4.77-out-of-5-star rating from its satisfied clients.
If you have been the victim of predatory lending practices by timeshare companies, contact us today for a free consultation, and we will see what we can do to help you.
A standard part of almost every timeshare sales presentation includes giving you the option to take out a loan to buy into vacation ownership. It might be spun as a convenient or economical idea, but in reality, it is neither. The truth is, developers offer these loans because traditional lenders (i.e., banks) don’t want to take timeshare financing risks.
Banks don’t want to loan money for timeshares because they aren’t worth anything, and the banks can’t get their money back if you stop paying on the loan. Therefore, timeshare developers create their own lending companies and make their own loans to customers. Those loans, however, are a bad deal.
In this article, we will take a look at developer loans and timeshare financing risks generally. We’ll look at why these loans are such bad deals for timeshare owners, as well as other possibilities for financing or refinancing vacation ownership.
Why Are Timeshare Loans Considered Predatory?
The concept of predatory lending is a broad one, but it generally refers to a situation in which a money lender takes advantage of a consumer’s situation or limited options to offer unfair loan terms. Timeshare financing companies (which are nearly always formed and run by developers) are predatory because they take advantage of several factors bearing on timeshare purchasers.
As mentioned above, banks don’t typically give loans for timeshares. For a bank to provide a loan, they need some kind of collateral that they can collect if you stop making loan payments. (In real estate loans, this process is known as foreclosure.)
The problem is, timeshares are generally not worth anything, which makes them bad collateral and too much risk for banks. This tends to be the view regardless of whether a contract is for a deeded timeshare, a fixed-week timeshare, or a points-based system. From a bank’s perspective, any loan for fractional ownership is bad. While you shouldn’t take all your personal finance advice from banks, this bit is worth considering.
Therefore, if you want to purchase a timeshare and you can’t pay cash, the timeshare sales pitch can’t close with a signed timeshare contract unless the company offers you another way to fund the purchase price.
That’s where the financing company comes in. And because they know you don’t have any better options, they will offer the loans on much worse terms than you would get from a bank loan. Unlike with a traditional loan, they won’t encourage you to make a down payment, so you have to borrow more from the company.
Sometimes, a salesperson may even try to sell you on the idea of a timeshare credit card and transfer the price of the timeshare purchase to that card. (In some of the worst cases, they even do this without telling you.) Needless to say, racking up a credit card balance of tens of thousands of dollars is a terrible financial idea in almost any case.
Simply offering loans like these is bad enough. The fine print, though, shows that the situation is much worse than you might think.
What Are the Interest Rates and Terms of Timeshare Financing?
Loans from timeshare companies are known for their high interest rates and onerous terms. Rates are much higher than you would see on loans from a bank, rising to 20% or more depending on the state of your credit report.
The timeshare loan is also made more complicated by the nature of what it is you’re buying. The terms of your agreement make it much more difficult to leave than a traditional loan/real property relationship.
Also, timeshare companies can be sneaky and trick you into signing even more papers for additional loans. One woman’s daughter was horrified to find that her mother had been persuaded to open three separate loans for more timeshare points and owed over $100,000 at a 14% interest rate. (That rate, which is high anyway, would have undoubtedly been worse had she had a bad credit score.)
The obligations of timeshare loans are not limited to monthly payments on the loan. If you fail to pay annual maintenance fees, special assessments, or any other number of fees, that could be considered a breach of your loan contract as well.
While a default on a conventional loan for your home might end with a foreclosure, the truth is that timeshares and their loans are not designed for quick or easy exits. If the timeshare company does not want to let you out of your timeshare — and why would they? — they can prolong your suffering and keep you locked into unfair contracts for years.
Can You Refinance or Cancel a Timeshare Loan?
Yes, you may be able to cancel or refinance your timeshare loan to escape a bad financing deal, but it depends on your specific circumstances, loan terms, and timeshare purchase agreement. You generally have three options: a timeshare rescission, refinancing with a different loan, and exiting your timeshare altogether. Let’s take a closer look at each of these.
1. Timeshare Cancellation/Rescission
First, a timeshare loan cancellation may be possible if you have recently purchased your timeshare. Most states have laws allowing you to cancel the purchase and all related agreements if you act within a certain amount of time, ranging from a few days to a few weeks.
If you find yourself in this situation, you have to act fast. Centerstone Group can provide you with free information and the resources you need to cancel your timeshare the right way.
Keep in mind that a cancellation must be done the right way, and even then, timeshare companies can be slippery. One senior citizen who canceled her purchase and loan was later blindsided by Hilton, which improperly claimed that the rescission was not valid, then proceeded to foreclose and ruin her credit.
It bears repeating, then, that any move you make to cancel a timeshare and its loan should be taken with the aid of an expert, like a timeshare exit company. In the case of a legal dispute by the timeshare company, legal advice from a timeshare attorney or law firm might be necessary.
2. Refinancing
Refinancing is when you replace your current loan with a new one so you can secure better terms and interest rates. But this can be a tricky option for timeshare loans because, as noted above, banks don’t like loans that are secured by timeshares. It may be possible, though, to get a loan secured by another asset.
For example, if you have equity in your home, you might be able to get a home equity loan and use that to refinance your timeshare loan. But this may not be a wise decision, as mortgaging your home for a timeshare is a personal finance risk most shouldn’t take.
Another option may be to get a personal loan, but the terms may only be a bit better (or not better at all) than the developer’s timeshare loan. Personal loans are usually unsecured, which means they can have interest rates that are either a bit lower or the same as most timeshare loans. They also require fairly good credit, which can be hard for many timeshare owners to establish.
Plus, keep in mind, a developer will not let you out of your timeshare or its loan for free. Your timeshare loan will almost certainly have a prepayment penalty or similar hidden fees if you try to pay it off with money from another loan.
Before you start signing more loan documents, consider your third option: a timeshare exit.
3. Timeshare Exit
Another way to leave a bad financing deal behind is to exit your timeshare outright. But this option requires the help of experts, like those at Centerstone Group. Our team can look at your situation and help you get out from under your timeshare methods ranging from a transfer or proprietary pressure campaign to a referral to a trusted timeshare lawyer if necessary.
Take Timeshare Financing Risks Seriously and Prevent the Damage They Can Cause
One of the chief timeshare financing risks is that it is treated too lightly by timeshare companies, which tricks buyers into signing loans they cannot afford. Centerstone Group, with its team’s decades of experience, knows the tricks and tactics of the timeshare industry, so we can help you stop being exploited once and for all.
But don’t just take our word for it. Centerstone Group is an accredited company with an A+ rating from the Better Business Bureau and a 4.77-out-of-5-star rating from its satisfied clients.
If you have been the victim of predatory lending practices by timeshare companies, contact us today for a free consultation, and we will see what we can do to help you.