10-15 year DVC Financing - "Its a trap!" - Admiral Ackbar

[Girlstar30]

I am happy that I'm financing my DVC vacations. I am paying them off as quickly as possible (already paid one) and even if I wasn't, I plan to go to Disney world and stay in these hotels and i would spend way more money not having DVC. I am all resale because it was more financially responsible for me to do it that way with the amount of points I want, but I'm still paying interest regardless.

One of the 2 bedrooms I booked for four nights for this trip alone would cost us over $10,000 thru Disney! I can do that with the points I have this trip and much more. Everyone deserves to be able to stay at these places regardless of their income or if it costs them a little more than others if theyd like.

When I was commenting negatively about financing it was about the interest rates (not the borrowers fault!), I was just trying to point out that the interest these loans accumulate over the lifetime of these loans are wild and people should be aware. People who bought in 2022 paid way more than now, did they not deserve to go? People who finance are just as happy as those who don't going on their vacations and creating memories with their loved ones

 

[Disneydad14]

The original poster started out by saying that financing DVC for 15 years is not a good financial decision. It's not, point blank. But people do it because they want the product and some people don't live on spreadsheets.

But financially your opinion about not breaking up payments for free over two years not only comes across as sanctimonious, but financially it's incorrect.

Money now is worth more than the same amount of money in two years. Therefore, taking advantage of "free money" is actually financially wise.

Now if you put money on a credit card that you can't pay back and is over your budget, then of course that's not wise. That's true for anything.

I’m not going to apologize for sounding sanctimonious bc I’m not. If you think someone voicing a valid opinion that’s different from yours is somehow an attack on you that’s more on you than me.

Of course I understand that zero percent interest is better than interest and with inflation you would pay less . I also understand that all the CC companies know this too and everyone who takes a zero interest loan never expects themselves to pay interest but ultimately cc companies keep offering it so someone is. I like to see people financially free and wealthy . Nobody gets wealthy by leveraging themselves for luxury purchases that depreciate in value . You should only really leverage yourself for assets you need that appreciate .

 

[Brob2132]

But your premise is invalid.

If person X is spending 10K regardless (they've decided they wanted to purchase DVC, or something completely different), then now the conversation is the best way to spend the money. And 10K now is more valuable than 10K in the future, so spreading it interest free is a good decision.

You are quibbling with whether someone should spend 10K based upon their full financial picture. Over leveraging yourself is always a bad idea.

But if they're doing it, then doing so interest free over time is not a bad decision. That's factual. That's not an opinion. That's how math and finance works

 

[intamin]

 

[Disneydad14]

But your premise is invalid.

If person X is spending 10K regardless (they've decided they wanted to purchase DVC, or something completely different), then now the conversation is the best way to spend the money. And 10K now is more valuable than 10K in the future, so spreading it interest free is a good decision.

You are quibbling with whether someone should spend 10K based upon their full financial picture. Over leveraging yourself is always a bad idea.

But if they're doing it, then doing so interest free over time is not a bad decision. That's factual. That's not an opinion. That's how math and finance works

I have a masters in finance actually. I can understand the simply concept your articulating. I even said in my previous post unless you have the amount to cover it in cash in a non risky investment like a cd it would be ok. But your formula is missing risk. A 7 percent return is not necessarily worth the risk of revolving on cc debt

 

[Cfabar1]

I think these conversations ultimately come down to personal choice and personal risk…

I would not recommend to anyone they take 15 years at 18% to take out a DVC loan. It seems like a bad idea to me - especially given the many unknowns associated with DVC, WDW, travel desires, etc. It is a LONG horizon line… and should they wish to depart, I don’t see how they’ll get anything near back to what they paid…

On the other hand, there are a number of other finance options that might make sense… especially if they are taking vacations anyways…

If they want to, they can SELL the DVC contract… You can’t sell your hotel room you paid cash for, and I think that is something that is lost in these conversations.

And, a true finance person would say you should never buy a timeshare… Ramsey, Orman, etc. I’ve never heard one of them say a timeshare is a good idea financially speaking…

And I think they’re probably right…

That said, we are glad we are DVC members, and even though it might not be the best financial decision, it was a good decision overall for us.

 

[Brob2132]

Back to full financial picture. If you have the assets to ensure that you don't have revolving CC debt, then the risk is very low and a 7% return is fine. There's always risk involved that your financial picture can change.

Financially the best decision would be to never go on vacation and invest all that money. But people don't do that because they want to live. Once again, life isn't lived on a spreadsheet.

If you have to overleverage yourself significantly for any purchase, you probably shouldn't make it.

Hope someone reading makes an unwise financial decision today and improves their mental health!

 

[disneylandtour]

Overall, I agree that luxury debt is a large problem in the US. But more specifically, I would say that it is whimsical purchases on credit that are the big problem, specifically when those whimsical purchases have the potential to overextend their financial resources. In retrospect, I think I should've purchased DVC earlier. When I bought DVC, I had the money and paid cash. But I can see a valid argument in the following: if you have strong self knowledge and a regular history of visiting the resort and if you've been spending $X each visit on a hotel, probably on property, and if you can get a two year 0% loan (or something similar), it may be a better decision to put this year's and next year's hotel budget into DVC rather than paying cash at hotels, particularly if you're buying resale on the lower end. There's risk in this, as you're making assumptions about further earnings and the national economy going forward, but I can also see that there can be a reasonable tradeoff. Again in retrospect, this probably would've been a better decision for me many, many years ago, when I was paying cash for hotels. The tradeoff to a multi-year timeshare leasehold would've been better. But I agree, there are unknowns in this. And really, the larger problem is people making large purchases that they don't fully understand or have deeply thought through. Also people buying DVC who are relatively new to the resorts and assume their interest in Disney will extend for years--when in many cases it doesn't, especially for families with young kids who then grow up. And here, on this board, I'm guessing that a lot of regular posters have had an interest in the Disney resorts for a long time. People typically don't find boards like this on accident.

 

[Sandisw]

With all due respect not really . It’s not a scientific fact I’ll give you that but no responsible financial advisor or person would tell you to finance luxury vacations . It’s not just a difference of opinion it’s irresponsible to tell people it’s ok to finance luxury items they can’t afford .

Yes, it costs more to finance DVC or any other vacation......but, guess what? Not everyone cares about making decisions solely based on which one leaves you with the most money in your account.

Again, everyone gets to decide what is and is not irresponsible spending for their personal situation. We personally have decided to make our lives a balance and yes, at times, that has included financing things others have not.

As I said, sharing with someone who is deciding the things that they need to consider before deciding is important, but ultimately, if someone feels that financing DVC is the right move for them and their family, then it isn't up to anyone else to say they are being irresponsible....sorry, its just not.

 

[TheDailyMoo]

I am 31 and have financed and paid off many things early and I am in line to pay off my DVC in 3 years instead of the 10 years I financed for. I use 0% credit cards ALL the time especially Home Depot and never miss a payment.

Think it is more so how financially responsible you are. If you miss payments or rack up credit card debt then obviously it is not for you. If you go upside down on a loan or a 0% credit card blows up that a completely different issue.

Guess my point was renting points for years to save is comparable to interest on a loan in my eye (someone that is financially responsible).

I think you're probably very much like me in terms of taking advantage of credit cards through intro rates and churning and the points game etc.

We personally put every DVC purchase on a newly opened 0% interest card either for 12 or 18 months (depending on the sign up bonus) however the caveat is that we have the cash in the bank and I take that exact amount and grab me a T-Bill or the like. I'd rather have my money working for me than a bank or DVC or a reseller etc. Then we use the points from cards for airfare. Taking advantage of financial tools that are available works really well but of COURSE you have to be responsible and careful not to let things slip away from you. You should always be monitoring your financials daily to make sure all is in order. Also any wealthy person would say never to finance anything like a DVC purchase but they are also the ones that always borrow others money to use to make themselves more money so borrowing money isn't always a bad thing. Case by case basis. But yeah please maybe reconsider a direct DVC purchase if you need a 15 year high interest loan! This would be chapter one of Rich Dad Poor Dad!

 

[Brian Noble]

With all due respect

I tried to do this gently a few days ago, but now I am going to do it less-than-gently.

You've been on this site for a hot minute. You went from "I will never buy DVC" to "I own two contracts" in the space of five months. If you want people to actually listen to you, you should probably find a different tone. More importantly, it might be worth it to try to learn from folks who have been around a while, and to recognize that maybe you don't know everything just yet.

I’m not going to apologize for sounding sanctimonious bc I’m not.

With apologies to the Bard: "The gentleman doth protest too much, methinks."

I have a masters in finance actually.

Super.

It turns out lots of people on this board have a number of letters after their names---and not Jr or Sr. They may actually know things, and it is even possible that you will learn from them. However, if you'd rather be a DISBoards Reply Guy: mission accomplished.

 

[Disneydad14]

I tried to do this gently a few days ago, but now I am going to do it less-than-gently.

You've been on this site for a hot minute. You went from "I will never buy DVC" to "I own two contracts" in the space of five months. If you want people to actually listen to you, you should probably find a different tone. More importantly, it might be worth it to try to learn from folks who have been around a while, and to recognize that maybe you don't know everything just yet.


With apologies to the Bard: "The gentleman doth protest too much, methinks."


Super.

It turns out lots of people on this board have a number of letters after their names---and not Jr or Sr. They may actually know things, and it is even possible that you will learn from them. However, if you'd rather be a DISBoards Reply Guy: mission accompslished.

I only mentioned that I had masters in finance because someone was questioning if I knew a basic concept.

You’re reading into my tone. I didn’t bring this topic up , it’s just hard to sit back and watch people make poor rationalizations and not say anything. And I admitted I was wrong and actually made a post humbling myself. If I was prideful I didn’t have to do that. I hate to see people in bad financial positions that they didn’t necessarily have to be in. That’s my intent .

Also if your arguing tone you probably lost on the merits.

 

[davidhr]

Friendly reminder this is how we loook when we’re making “bad decisions”.

Be happy people!

 

[tx911]

Boils down to this for me:

Not everything that counts can be counted, and not everything that can be counted counts.

 

[Cfabar1]

Boils down to this for me:

Not everything that counts can be counted, and not everything that can be counted counts.

Yes, from a purely financial perspective I should call my broker and sell all my DVC tomorrow...

I doubt I will do so... because I have too many trips to take first!

 

[Brian Noble]

That's a little unfair, though. There are two other ways to ask this question that strike me as very reasonable, and would still benefit from some basic economics and a litlte bit of algebra.

1. I have $X. I would like to spend that on DVC stays. How do I maximize the value of those stays?
2. I have an expected pattern of future DVC stays. What's the most cost-effective way of booking those stays?

The first one is a little squishy, because "value" can be different for different people. But the answer to either probably does not include "borrow $Y from Disney at 12% over fifteen years." On the other hand, it certainly could include "Put $Z on a credit card that will charge no interest for M months, making sure it is paid off at the end of the term." It even might include "Borrrow $Y at R% for T months," but that's getting a little beyond the basics.

 

[disneylandtour]

>>I have an expected pattern of future DVC stays. What's the most cost-effective way of booking those stays?

Completely agree. This is how I wish I had looked at this proposition about twenty or so years ago. It would been financially better--but back then I never knew if I would keep making regular trips. But yes, this seems completely valid--especially if the overall purchase, plus any interest (ideally 0%) is less than what you're presently laying out for hotels.