Financing Question - What would you do?

[cfw213]

First - I know financing a DVC isn't ideal, so save me the lecture

In a perfect world, I would be able to finance DVC with a 9.74% unsecured personal loan from TD Bank (I have banked with them for several years)- does anyone have any experience with this? I have a credit score near 750 and a very low debt/income ratio. I do not own a home so a home equity loan isn't an option.

Before I start the DVC process, I want to know if I would get approved from the bank, as it would affect whether or not I would buy into DVC.

I am hoping to start looking at DVC properties at the end of this year, after I get my raise....Would you contact the bank now and get approved for the loan? Or should I wait until I'm closer to start the process? I'm unsure what to do because I probably won't do it with the 12.9% interest rate through the timeshare company - I would hate to waste the time/energy/excitement only to find out I won't be approved, but I am not sure if essentially "asking" for one now will affect my ability to get one at a later date.

If you can help me, thanks in advance! This board has been so helpful in the decision process

 

[KatieRach]

You said you would have a new raise going into effect...I would wait until that time to apply for the loan. The additional income with help with the income to debt ratio. Additionally, you have a good FICO, so I would think (assuming the amount being requested is reasonable) you would be a good candidate.
You may also want to look at Discover National Bank for a personal loan. My brother-in-law used them and highly recommends them. Good luck!

 

[Tunseeker1]

You have a few options.

Prequalify a personal loan and pay cash outright, but you might not know how much the total is going to be.

Finance with timeshare loan and use personal loan to pay off first loan.

Finance with timeshare loan and pay off early if you can.

I would start with an informal talk with you bank to see if they will lend you the amount you need.

 

[cfw213]

You said you would have a new raise going into effect...I would wait until that time to apply for the loan. The additional income with help with the income to debt ratio. Additionally, you have a good FICO, so I would think (assuming the amount being requested is reasonable) you would be a good candidate.
You may also want to look at Discover National Bank for a personal loan. My brother-in-law used them and highly recommends them. Good luck!

That's a good thought - I will wait until July when the raise goes into effect. I am only looking to buy around 100-120 points at BLT or AKV, so the loan would be around $10,000.

I will definitely look into Discover - I was thinking TD because I have been a customer, but will check it out - thanks!

 

[cfw213]

You have a few options.

Prequalify a personal loan and pay cash outright, but you might not know how much the total is going to be.

Finance with timeshare loan and use personal loan to pay off first loan.

Finance with timeshare loan and pay off early if you can.

I would start with an informal talk with you bank to see if they will lend you the amount you need.

All good ideas, thank you!

 

[Dean]

First - I know financing a DVC isn't ideal, so save me the lecture

In a perfect world, I would be able to finance DVC with a 9.74% unsecured personal loan from TD Bank (I have banked with them for several years)- does anyone have any experience with this? I have a credit score near 750 and a very low debt/income ratio. I do not own a home so a home equity loan isn't an option.

Before I start the DVC process, I want to know if I would get approved from the bank, as it would affect whether or not I would buy into DVC.

I am hoping to start looking at DVC properties at the end of this year, after I get my raise....Would you contact the bank now and get approved for the loan? Or should I wait until I'm closer to start the process? I'm unsure what to do because I probably won't do it with the 12.9% interest rate through the timeshare company - I would hate to waste the time/energy/excitement only to find out I won't be approved, but I am not sure if essentially "asking" for one now will affect my ability to get one at a later date.

If you can help me, thanks in advance! This board has been so helpful in the decision process

I'd start saving now so I could pay down as much as possible minimum 20%, hopefully more. Personally I wouldn't finance but you should talk to your bank about a personal loan and what they're looking at but I would not do a pre qualification or finance now. You might also want to talk to any Credit Unions that might be accessible to you. They might offer you a good deal to try to ear your future business. I'd agree with waiting until the raise is actually in place before committing.

 

[Rob S.]

Disclaimer - this is not tax advise
You may want to check with your tax advisor, but the interest on the DVC loan may be tax dedectable (it's considered a mortgage). If you are in a 25% tax bracket, that would effectively lower your interest rate to 9.675%. All interest on personal loans is NOT tax deductable.

 

[DizBub]

Good advice on the credit union. We are fortunate enough to actually have the money in our CU. We financed a portion of our DVC by pledging shares. Our money is still in the bank but it is technically frozen until our loan is paid. They are charging us 2.24%. Just another way to do it.

 

[Dean]

Disclaimer - this is not tax advise
You may want to check with your tax advisor, but the interest on the DVC loan may be tax dedectable (it's considered a mortgage). If you are in a 25% tax bracket, that would effectively lower your interest rate to 9.675%. All interest on personal loans is NOT tax deductable.

The same is true for the company that finances resale as well but it does depend on your bracket and whether you'd be able to itemize.

 

[cfw213]

The same is true for the company that finances resale as well but it does depend on your bracket and whether you'd be able to itemize.

Funny enough, I'm a CPA so I'm my own tax advisor! Ha. I dont think the interest alone would give us enough deduction to itemize - we don't own a home so no other mortgage interest or real estate taxes (besides the dvc re tax) and no major medical expenses.

The plan for now is try to get the personal loan from TD Bank (if I get $10,000 instead of $9,000 the interest rate drops to 7.99% - not bad) for 60 months. If that doesn't work I will wait until I can do 20% down and finance 80% for 60 months with the timeshare co at 12.9% for 5 years - after running all the numbers they are very close in total amount paid.

 

[ELMC]

Funny enough, I'm a CPA so I'm my own tax advisor! Ha. I dont think the interest alone would give us enough deduction to itemize - we don't own a home so no other mortgage interest or real estate taxes (besides the dvc re tax) and no major medical expenses.

The plan for now is try to get the personal loan from TD Bank (if I get $10,000 instead of $9,000 the interest rate drops to 7.99% - not bad) for 60 months. If that doesn't work I will wait until I can do 20% down and finance 80% for 60 months with the timeshare co at 12.9% for 5 years - after running all the numbers they are very close in total amount paid.

One other option to look into is getting a high limit credit card with a low introductory rate or an introductory offer where you can write a check against the balance and receive a promotional rate. If you have a high credit score this might be a possibility. Personally, I wouldn't feel comfortable doing that, (not a lecture, just a personal feeling statement) but it could work in your situation.

 

[DougEMG]

That's a good thought - I will wait until July when the raise goes into effect. I am only looking to buy around 100-120 points at BLT or AKV, so the loan would be around $10,000.

I will definitely look into Discover - I was thinking TD because I have been a customer, but will check it out - thanks!

Are you looking at buying direct? You can save yourself some more money by buying resale. Smaller loan, less interest and the perks you give up buying resale are poor use of points anyway.

As someone else posted on a seperate thread, they got a low cost introductory rate of around 2% for a year on a credit card. If you can pay it off that fast, that could work for you.

The TimeShare Store also has financing available with their resale contracts. From their web site

"Interest rate as low as 12.9% (subject to change), Terms up to 120 months, no prepayment penalty for loans over 12 months, no points, minimum loan amount $5,000, maximum loan amount $250,000. Some of our clients have also used or applied for a Home Equity Loan or Line of Credit. The interest rates for these types of loans are at 3.25%-4.25% and the interest is tax deductible since it is considered a mortgage. If financing is needed we hope the options above help give you some ideas."

 

[DougEMG]

Funny enough, I'm a CPA .

Have you run any numbers (I'm assuming you like numbers since you're a CPA)over say a 5 year period (your loan term) comparing various options? I'd be curious how the various options worked out.

Possible options to compare that I can think of would be:

(1) DVC purchase direct with a loan
(2) DVC purchase resale with a loan
(3) Renting points to stay at DVC
(4) Staying in a moderate

 

[cfw213]

Have you run any numbers (I'm assuming you like numbers since you're a CPA)over say a 5 year period (your loan term) comparing various options? I'd be curious how the various options worked out.

Possible options to compare that I can think of would be:

(1) DVC purchase direct with a loan
(2) DVC purchase resale with a loan
(3) Renting points to stay at DVC
(4) Staying in a moderate

We are definitely going to buy resale if I decide to do it. I actually made a pretty serious spreadsheet that I was going to post on here comparing the different resorts and the value of each, and financing with the Timeshare Store vs. a bank loan.

 

[cfw213]

One other option to look into is getting a high limit credit card with a low introductory rate or an introductory offer where you can write a check against the balance and receive a promotional rate. If you have a high credit score this might be a possibility. Personally, I wouldn't feel comfortable doing that, (not a lecture, just a personal feeling statement) but it could work in your situation.

I considered this but I don't know how great this would make my credit score look...I guess it would depend on how high the credit limit was.