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Updated on Friday, March 11, 2016
You’ve finally escaped the stress of your commute, stacks of unfinished paperwork, and the never-ending demands of the office. You’re staying someplace warm, enjoying pina coladas on the beach or working on your tan by the pool.
The resort’s sales manager has casually mentioned an affordable way to return to this same place every year. And in your relaxed state of bliss, you start daydreaming about future vacations. You imagine making the resort an annual family destination or the spot to celebrate your wedding anniversary.
Let’s face it — buying a timeshare is often an impulsive decision. And one you may regret after the drinks have worn off, your vacation is over, and reality sets in. Because chances are, your timeshare is not the amazing deal the resort’s sales manager sold you on. If you’re stuck with buyer’s remorse or simply can’t afford your timeshare, here is how to minimize the damage to your wallet and credit score.
What is a Timeshare?
So what is a timeshare exactly? A timeshare allows you to buy the right to use a property every year for a certain period of time. And the property is usually part of a resort. A deeded timeshare means you’re purchasing a portion of the property. And a non-deeded timeshare mean you’re leasing the right to use the property for an agreed upon number of years (usually 10-50).
How Much a Timeshare Actually Costs
The cost of a timeshare varies based on the size of the unit, the resort’s location, the time of year, amenities, and more. But the National Timeshare Owners Association (NTOA) says the average timeshare sales price is $20,020.
What does typical report-based financing looks like?
- Loan Amount – $20,000
- Term of Loan – 6 years (72 months)
- Interest Rate Charged – 15.9%
- Monthly Payment – $432.74
- Actual Cost – $31,157.28
Many resorts also offer a 1-year loan with a 0% interest rate if you’re willing to put 50% down within 30 days of purchasing the timeshare.
In addition to the cost of the timeshare itself, you’re also responsible for an annual maintenance fee. The National Timeshare Owners Association (NTOA) says the average maintenance fee for 2015 is a whopping $880. This annual maintenance fee can increase over time. And you’re responsible for paying this fee every year regardless of whether or not you visit.
Selling a Timeshare
Are you thinking about trying to sell your timeshare? Although the National Timeshare Owners Association (NTOA) lists three preferred resellers on their website, it’s not always that simple.
Resale websites operate as a subscription service. And their fees range from $14.99 to $125 per year. Plus, resellers may take a portion of the sale.
Remember, timeshares are not real estate investments. And the secondary market is oversaturated with buyers. Want to see further evidence? A quick search on eBay revealed dozens of timeshares practically being given away for $1.
Try Refinancing Your Loan
Between the high interest rates of resort-based financing and the annual maintenance fee, what was sold as an affordable vacation becomes expensive very quickly. If you’re struggling to afford monthly loan payments, you may want to try refinancing to secure a single-digit interest rate.
LightStream, a division of SunTrust bank, offers timeshare-refinancing options if you’re a U.S. citizen with good credit. They don’t charge fees to refinance. And their interest rates are fixed.
Here’s an example of what the numbers may look like for refinanced timeshare loan:
- Loan Amount – $20,000
- Term of Loan – 6 years (72 months)
- Interest Rate Charged – 8.49% – 14.74% APR with Autopay
- Monthly Payment – $349.10 – $368.91
- Actual Cost – $25,135.20 – $26,561.52
- Money Saved – $4,595.76 – $6,022.08
Your timeshare might be such a financial drain that you decide to sell (or give it away) and then refinance the remaining debt to pay it off quickly and with a lower interest rate.
Consider Timeshare Exchanges
Did your resort’s sales manager mention the option of timeshare exchanges? It’s a major selling point for many buyers. And who wouldn’t like the option of trading timeshares with owners in other locations? But does it make sense for you? It depends.
If you’ve paid off your debt, it may be worth the additional fees to list your timeshare on an exchange. The National Timeshare Owners Association (NTOA) lists preferred exchange companies on their website. But you need to read the fine print. Less popular destinations and off-peak season timeshares tend to be more difficult to exchange. And there may be other restrictions that weren’t mentioned at the closing table.
Try To Negotiate With Original Owner
Have you paid off your debt but you’re sick of coughing up annual maintenance fees? It’s worth reaching out to the original owner to see if they’re willing to negotiate. They may agree to let you out of your original deal if you agree to cover a few years of maintenance fees. And they’ll have the option of reselling the timeshare to another buyer. It doesn’t hurt to ask!
Can’t negotiate with the original owner? Try getting a team of experts to help you legally get out of the contract with the Time Share Exit Team.
The Truth About Timeshares
It’s cheaper than ever to find affordable places to stay on vacation. Websites like Airbnb, VRBO, and HomeAway make it easy to find affordable listings all over the world. A timeshare at a luxury resort may seem attractive today, but what happens when your tastes and lifestyle change? The truth is, timeshares don’t always get used as often as buyers originally planned.
If you have to finance a timeshare, it’s probably not worth buying. Why? Resort-based financing can incur interest rates of 15-16%. And even once you’ve paid off the loan, you’re still stuck with expensive annual maintenance fees averaging $880 or more! Plus, attempting to resell can be a nightmare. It can get costly and there’s just not a strong secondary market. And all this doesn’t even include the cost of travel to get to your timeshare in the first place.
Despite all these drawbacks, almost 400,000 timeshares were sold in 2015. And it’s easy to see how buyers get roped in. It’s not easy to make a clear-headed decisions on a white sand beach after a couple of margaritas.
If you’re regretting your choice to buy or can’t afford your timeshare, you can minimize the damage to your wallet and credit by refinancing, exchanging, or negotiating with the original owner.