Creative Ways to Finance DVC

[DanCali]

401k Loan

Pay yourself the interest, and add to your retirement in the process.....
Depending on your retirement management company loan may cost $50.

Yes opportunity cost,
But it is another options,

It's an interesting idea, especially if the interest rate is low. But I'd be ultra-careful with it for the following reasons:

(1) if you leave your job (willingly or not), a 401k loan will convert to an accelerated repayment schedule.

(2) If you default on a 401K loan - you will owe the early withdrawal penalty and taxes if under 59½.

(1)+(2) combined would literally be a one-two punch in the gut.

Also - If you file for bankruptcy, you’ll still have to repay your 401k loan or face taxes and early withdrawal penalties. Unlike other debt, 401k loans don't go away with a bankruptcy.

Personally, I would never finance a timeshare under any circumstances. But if borrowing from yourself is appealing, why not use home equity? A home equity loan or a HELOC can offer competitive rates and flexible terms. But of course, you're putting up your house as collateral in exchange for that...

 

[Robbie Cottam]

It's an interesting idea, especially if the interest rate is low. But I'd be ultra-careful with it for the following reasons:

(1) if you leave your job (willingly or not), a 401k loan will convert to an accelerated repayment schedule.

(2) If you default on a 401K loan - you will owe the early withdrawal penalty and taxes if under 59½.

(1)+(2) combined would literally be a one-two punch in the gut.

Also - If you file for bankruptcy, you’ll still have to repay your 401k loan or face taxes and early withdrawal penalties. Unlike other debt, 401k loans don't go away with a bankruptcy.

Personally, I would never finance a timeshare under any circumstances. But if borrowing from yourself is appealing, why not use home equity? A home equity loan or a HELOC can offer competitive rates and flexible terms. But of course, you're putting up your house as collateral in exchange for that...

Funny thing,

You pay the interest to yourself.

Is you can not default on a 401k loan without losing your job.

It is true that if you lose your job you have 60 days to pay the money back in full, or have to pay a penalty,

However, if you lose you job you most likely will not pay off the zero interest credit card during the offer period.

Credit card debt only goes away in a chapter 7 BK….

You still have repay some of it in a chapters 13.

And if you go into a BK owning DVC free and clear you would have to sell it to repay debts, however, if it is secured by a mortgage and you continue to pay the mortgage you should be able to keep it.

 

[DanCali]

It is true that if you lose your job you have 60 days to pay the money back in full, or have to pay a penalty,

However, if you lose you job you most likely will not pay off the zero interest credit card during the offer period.

Everyone has their own risk tolerance. But there is probably a big difference between having to pay the full amount owed within 60 days when you are unemployed (with the penalty being losing a huge cut of your retirement money to taxes and penalties), versus keeping up with scheduled zero interest credit card loan payments while unemployed...

 

[Robbie Cottam]

Everyone has their own risk tolerance. But there is probably a big difference between having to pay the full amount owed within 60 days when you are unemployed (with the penalty being losing a huge cut of your retirement money to taxes and penalties), versus keeping up with scheduled zero interest credit card loan payments while unemployed...

We could speculate all day long.
If we are going to speculate then the easiest way to finance DVC is to win the lottery.

Personally,
I I would just let Disney finance the purchase and enjoy all the benefits that come with that.

 

[Kidguile]

We could speculate all day long.
If we are going to speculate then the easiest way to finance DVC is to win the lottery.

Personally,
I I would just let Disney finance the purchase and enjoy all the benefits that come with that.

Also with the the DVC financing, you do receive a 1098 Mortgage Interest to write off the interest.

 

[Robbie Cottam]

Also with the the DVC financing, you do receive a 1098 Mortgage Interest to write off the interest.

Yes, thats what i was hinting at, however, some are going to say you cant write off the interest…..

thank you for pointing that out

 

[TheLyinKing]

you would have to pay the credit card back with post tax money too,
Kinda seems like a wash....

Also, your claim that the withdrawn money will not gain interest although correct, over looks the simple fact that in the last two years, "gains" in the stock market have not be a sure thing.

Also you car completely overlooking the "cost" to your credit rating of a new credit card, with 20, or 25000 dollars sitting on your credit report.

What happens if you can't pay the credit card off during the introductory period?

Bottom line if you are looking for "creative ways:" to finance DVC your are most likely not a cookie cutter consumer.
All situations are different and

FOR SOME PEOPLE LOOKING FOR CREATIVE FINANCING, A 401K LOAN MAY BE THE BEST OPTION, imo.

yeah I guess you make a fair point. I didn’t realize the double taxation occurs only on the interest paid back and not the whole payment. I would just advise people to look at their terms of their 401k loans. Some companies require immediate full payment of the loan if you change jobs. I still wouldn’t advise taking a 401k loan out, but you’re right it is an option for certain people if they really need to finance dvc.

 

[Robbie Cottam]

yeah I guess you make a fair point. I didn’t realize the double taxation occurs only on the interest paid back and not the whole payment. I would just advise people to look at their terms of their 401k loans. Some companies require immediate full payment of the loan if you change jobs. I still wouldn’t advise taking a 401k loan out, but you’re right it is an option for certain people if they really need to finance dvc.

You are going to pay the principal and the interest with post tax money no matter what type of financing you tax.
There are quite literally to schools of though on 401k loans some advises are dead set against it. I’m guessing you‘re in this boat, other see the value in it.

if we are going to talk worst case scenario, say a job lost,

The potential interest on a defaulted 0 percent credit card could be 29.99 percent

So in worst case both scenarios end badly.

 

[TheLyinKing]

You are going to pay the principal and the interest with post tax money no matter what type of financing you tax.
There are quite literally to schools of though on 401k loans some advises are dead set against it. I’m guessing you‘re in this boat, other see the value in it.

if we are going to talk worst case scenario, say a job lost,

The potential interest on a defaulted 0 percent credit card could be 29.99 percent

So in worst case both scenarios end badly.

Yep you're pretty much right. While you'll be double taxed on the interest gained, I guess it's better than paying interest to someone else. I'm not a fan of using a 401k loan unless absolutely necessary, but I also don't believe you should be financing DVC either. If I'm putting it on a 0% interest card, I have the cash in hand to pay for it. I'm just allowing myself to spread the amount out for cash flow purposes.

I will say with CC you have the option of bankruptcy. Which you don't get with the 401k loan.

 

[Robbie Cottam]

Yep you're pretty much right. While you'll be double taxed on the interest gained, I guess it's better than paying interest to someone else. I'm not a fan of using a 401k loan unless absolutely necessary, but I also don't believe you should be financing DVC either. If I'm putting it on a 0% interest card, I have the cash in hand to pay for it. I'm just allowing myself to spread the amount out for cash flow purposes.

I will say with CC you have the option of bankruptcy. Which you don't get with the 401k loan.

So I’ll poke the hornets nest…

what do you think about the ability to deduct the interest paid, when you do finance DVC….
how does that fit into you equation…

 

[Spivey378]

Use your kid’s 529 account.

 

[LittleBitGoofy]

Use your kid’s 529 account.

Well you see, Mr IRS Audit Agent, the World Showcase is actually very educational and totally a valid use of their 529 funds!

 

[ARobyn]

Yep you're pretty much right. While you'll be double taxed on the interest gained, I guess it's better than paying interest to someone else. I'm not a fan of using a 401k loan unless absolutely necessary, but I also don't believe you should be financing DVC either. If I'm putting it on a 0% interest card, I have the cash in hand to pay for it. I'm just allowing myself to spread the amount out for cash flow purposes.

I will say with CC you have the option of bankruptcy. Which you don't get with the 401k loan.

This is the route we ended up taking. Use a CC over ~18 months and pay it that way, without interest, instead of giving up all that cash day 1. Ended up getting a decent amount of cash back / points that I took off the top of the contract price which brought me down to about 150/pt for a VGF direct purchase. I could never swallow paying thousands in interest by financing through Disney, even though it's nice it doesn't appear as debt. To each their own! Some will finance and have no issues with that, and some will say it's foolish to finance a timeshare. Life is short.

 

[achinforsomebacon]

Any thoughts on the best CC to open for a purchase? Thinking of either the Disney Premier or Chase Sapphire Preferred as we have those already and could get a referral bonus.

Disney - $300 sign up, $100 referral, $49 annual fee for net of $351 plus 0% for 6 months

Sapphire - $600 sign up, $150 referral, $95 annual fee for net of $655. Not sure if no fee My Chase Plan is available.

Both earn 2% on DVC. If the Sapphire card was guaranteed to have the free My Chase Plan, that would be the obvious winner. Can anyone who opened that card recently comment on the availability of the My Chase Plan?

Any better cards to open just for the purpose of paying for DVC?

 

[Kidguile]

Any thoughts on the best CC to open for a purchase? Thinking of either the Disney Premier or Chase Sapphire Preferred as we have those already and could get a referral bonus.

Disney - $300 sign up, $100 referral, $49 annual fee for net of $351 plus 0% for 6 months

Sapphire - $600 sign up, $150 referral, $95 annual fee for net of $655. Not sure if no fee My Chase Plan is available.

Both earn 2% on DVC. If the Sapphire card was guaranteed to have the free My Chase Plan, that would be the obvious winner. Can anyone who opened that card recently comment on the availability of the My Chase Plan?

Any better cards to open just for the purpose of paying for DVC?

I would recommend opening a new Discover card. They have unlimited matching of 1% cash back for the first year so that’s 2% total. Also they have 0% for 15 months.

I was already an existing Discover card holder so I couldn’t get the extra 1% matching. But I did get them to give me 0% for a year. I don’t have a Chase Sapphire card because I already have 3 Chase cards including the Disney Premier but didn’t like paying it back in 5 following statements.

 

[ARobyn]

Any thoughts on the best CC to open for a purchase? Thinking of either the Disney Premier or Chase Sapphire Preferred as we have those already and could get a referral bonus.

Disney - $300 sign up, $100 referral, $49 annual fee for net of $351 plus 0% for 6 months

Sapphire - $600 sign up, $150 referral, $95 annual fee for net of $655. Not sure if no fee My Chase Plan is available.

Both earn 2% on DVC. If the Sapphire card was guaranteed to have the free My Chase Plan, that would be the obvious winner. Can anyone who opened that card recently comment on the availability of the My Chase Plan?

Any better cards to open just for the purpose of paying for DVC?

No guarantees on the My Chase Plan with a new card, or even an existing one. Unfortunately.

Do you have a "player two" / spouse that you can open a card with? I'd suggest getting two new CC's that have 0% interest for extended periods of time, and you'll end up getting two sign-up bonuses, knocking a decent amount off the top of your contract cost.

A few examples, Bank of America Premium (2% back on travel, $600 SUB, but interest starts right away), Discover It (as previously mentioned it would result in 2% back, 15M no interest), Wells Fargo Active Cash ($200 bonus, 2% cash back, 15M no interest).

Another option (the best IMO) - open a Chase Sapphire, put only a small downpayment on that to reach the SUB ($4k), pay off immediately, but you'll still receive the bonus. Open a Chase Freedom for 15 months no interest for the remaining balance and receive $200 bonus, plus 1.5% back. Those two cards together for future use are great to have so it wouldn't just be for DVC purchase reasons.

The only reason I'd personally suggest the Disney Visa is if you're not a blue card DVC direct member with benefits, or an annual pass holder with benefits because having the Visa will give you small discounts on dining and merch in the parks and making up for the $49 annual fee. Otherwise the cash back options on this are only Disney gift cards which personally I'd prefer Chase points instead that have way more flexibility.

 

[davidhr]

Any thoughts on the best CC to open for a purchase? Thinking of either the Disney Premier or Chase Sapphire Preferred as we have those already and could get a referral bonus.

Disney - $300 sign up, $100 referral, $49 annual fee for net of $351 plus 0% for 6 months

Sapphire - $600 sign up, $150 referral, $95 annual fee for net of $655. Not sure if no fee My Chase Plan is available.

Both earn 2% on DVC. If the Sapphire card was guaranteed to have the free My Chase Plan, that would be the obvious winner. Can anyone who opened that card recently comment on the availability of the My Chase Plan?

Any better cards to open just for the purpose of paying for DVC?

If you spend regularly on restaurants, I’d go with the Amex Platinum with the Resy offer (you have to apply through Resy). 100k points that can be easily redeemed for at least $1,000 plus 10x back on dining for the first 6 months. It has a high Annual Fee, but it has a tons of travel benefits and credits that you can use for a year and then cancel it after the first year and you can get a lot back.

There’s also an option for the Gold with a nice bonus and lower annual fee and some cash back on dinner.

 

[achinforsomebacon]

Thanks for all the suggestions!

I would recommend opening a new Discover card. They have unlimited matching of 1% cash back for the first year so that’s 2% total. Also they have 0% for 15 months.

I was already an existing Discover card holder so I couldn’t get the extra 1% matching. But I did get them to give me 0% for a year. I don’t have a Chase Sapphire card because I already have 3 Chase cards including the Disney Premier but didn’t like paying it back in 5 following statements.

This is a pretty good option. We also have Discover already and I think we could get a $100 referral ($50 for referring and $50 for using the referral). Then 15 months no interest and 2% back with no annual fee. Another plus is the rotating 5% cashback bonus where we could double up if it's good category by maxing out both cards.

No guarantees on the My Chase Plan with a new card, or even an existing one. Unfortunately.

Do you have a "player two" / spouse that you can open a card with? I'd suggest getting two new CC's that have 0% interest for extended periods of time, and you'll end up getting two sign-up bonuses, knocking a decent amount off the top of your contract cost.

A few examples, Bank of America Premium (2% back on travel, $600 SUB, but interest starts right away), Discover It (as previously mentioned it would result in 2% back, 15M no interest), Wells Fargo Active Cash ($200 bonus, 2% cash back, 15M no interest).

Another option (the best IMO) - open a Chase Sapphire, put only a small downpayment on that to reach the SUB ($4k), pay off immediately, but you'll still receive the bonus. Open a Chase Freedom for 15 months no interest for the remaining balance and receive $200 bonus, plus 1.5% back. Those two cards together for future use are great to have so it wouldn't just be for DVC purchase reasons.

The only reason I'd personally suggest the Disney Visa is if you're not a blue card DVC direct member with benefits, or an annual pass holder with benefits because having the Visa will give you small discounts on dining and merch in the parks and making up for the $49 annual fee. Otherwise the cash back options on this are only Disney gift cards which personally I'd prefer Chase points instead that have way more flexibility.

More good options. BoA has a few options with and without fees and some with 0% APR. We already have a few Chase cards so I don't know if we want two more. Definitely can't do the x2 to get double the points since we have them. Could get the referrals though.

If you spend regularly on restaurants, I’d go with the Amex Platinum with the Resy offer (you have to apply through Resy). 100k points that can be easily redeemed for at least $1,000 plus 10x back on dining for the first 6 months. It has a high Annual Fee, but it has a tons of travel benefits and credits that you can use for a year and then cancel it after the first year and you can get a lot back.

There’s also an option for the Gold with a nice bonus and lower annual fee and some cash back on dinner.

We spend very little at restaurants so the Resy probably doesn't make sense. I'll have to see if there are any other Amex options that might work.

 

[Cfabar1]

A few thoughts I have:

1. I'd start with the Disney Visa and see how much you can pay off in the 6 month 0 interest period. Hopefully at least half, maybe more of your purchase can be paid off then - especially if you do the payments over 90 days, and maybe even more with the first payment just being an initial down deposit.

2. If you reach the end of the 90 days you could always then do a balance transfer to another card to spread out the payments even further. Most cards offer generous terms with low balance transfer fees. People are even arbitraging that right now where they are doing a balance transfer to their bank account to earn more on the interest than the cost of the loan for just investment purposes. You can do it by putting it in a high yield FDIC insured savings account and potentially end up ahead, or at least even after taxes. It's a nice way to have an emergency fund at the very least for the short term....

I would be loathe to do the 401(k) loan option. I think the Credit Card option is the best. If you lose your job, you can take the 401(k) money out and pay the taxes and/or penalties if applicable, and use that to finish the payments. But honestly, if you are financing it, and are losing your job, and money is that tight that you're having to pull out of 401(k) loans to cover a timeshare that will include additional costs of maintenance fees, and the costs associated with visiting WDW, you're probably actively trying to sell the DVC anyways...

My view is that you need to be extremely careful with the decisions to finance a product like DVC. I wouldn't want to get too fancy with how to pay for it and hope for the best.

 

[Robbie Cottam]

A few thoughts I have:

1. I'd start with the Disney Visa and see how much you can pay off in the 6 month 0 interest period. Hopefully at least half, maybe more of your purchase can be paid off then - especially if you do the payments over 90 days, and maybe even more with the first payment just being an initial down deposit.

2. If you reach the end of the 90 days you could always then do a balance transfer to another card to spread out the payments even further. Most cards offer generous terms with low balance transfer fees. People are even arbitraging that right now where they are doing a balance transfer to their bank account to earn more on the interest than the cost of the loan for just investment purposes. You can do it by putting it in a high yield FDIC insured savings account and potentially end up ahead, or at least even after taxes. It's a nice way to have an emergency fund at the very least for the short term....

I would be loathe to do the 401(k) loan option. I think the Credit Card option is the best. If you lose your job, you can take the 401(k) money out and pay the taxes and/or penalties if applicable, and use that to finish the payments. But honestly, if you are financing it, and are losing your job, and money is that tight that you're having to pull out of 401(k) loans to cover a timeshare that will include additional costs of maintenance fees, and the costs associated with visiting WDW, you're probably actively trying to sell the DVC anyways...

My view is that you need to be extremely careful with the decisions to finance a product like DVC. I wouldn't want to get too fancy with how to pay for it and hope for the best.

Let’s be honest regardless of how you finance DVC or anything else, the tax burden is the least of your worries.

The IRS does payment plans, CC companies are more likely to sue you and get a judgement before you file for bankruptcy protection.

My guess is if someone is looking for creative ways to finance DVC they didn’t qualify for a cc with a credit limit that will help in this situation, and since I have never heard of Disney saying no to in house financing, I kinda think this maybe more academic then anything else.

Personally, I prefer paying myself the interest than paying someone else….

I would want a 20 or 30k dollar purchase sitting on my credit report for 90 to 180 days..

And what happens when you don’t pay it off…
You can only rob Peter to pay Paul for so long…