Credit requirements for DVC?

[Dean]

I guess different strokes for different folks, in the grand scheme of a largest investment, the extra cost vs extra savings stretched out over the length os the contract is tiny... and financing a portion of a AKV contract makes MUCH more financial sense than buying direct from DVC at the current offerings.

IMO they're both bad choices but I'd agree that comparatively speaking one is worse than the other. I also would suggest the risk added is far more than the amortized cost.

 

[Steven25]

Assuming DVC makes sense for you and you can you can afford it. The title of this thread is credit requirements? but I feel if you can't pay cash you can't afford it.

Well I already said I'm new and sorry I posted in the wrong thread. You shouldn't say if you can't pay cash you can't afford it. You have no idea of people's finances or bank info. I assume you paid cash for you house then right?

 

[Dean]

Well I already said I'm new and sorry I posted in the wrong thread. You shouldn't say if you can't pay cash you can't afford it. You have no idea of people's finances or bank info. I assume you paid cash for you house then right?

I referenced the thread title to show that my post was on task, not as a criticism of your choice of post location, if you took it that way, I apologize. I'm not referencing your situation, only the principles I believe in. If you read my other posts on the subject, you'll see that I believe that consumer debt is a poor choice and adds risk. To me, not being able to buy without financing is by definition not being able to afford it. IMO if it's important and one can afford it, they can find a way to pay cash. But then I feel the same on cars, 90 days same as cash, etc. That's my opinion and all I said, you can make your own decisions.

 

[beno44]

If I finance a portion of DVC, how is that adding risk more so than if I paid cash??

 

[Minniesgal]

Wow just wow I can't believe people are talking about paying these high rates of interest for a vacation product.

Collectively the human race obviously learned very little in 2008 yet it doesn't seem that long ago.

IN MY OPINION the only thing that should ever be financed is a house. Anything else is taking on unnecessary risk.

No one has a crystal ball, no one has a secure job, the credit crunch in 2008 left many well earning middle class people jobless for years, some haven't recovered yet.

 

[beno44]

The point being is that if you are already planning on going regardless of if you buy a contract now or later, you might as well buy now.. any money spent on finance costs will be eliminated by spending less on room thru Disney..

As for risk and losing job.. Their is a large resale market for these... If you need to sell because of job loss (or rent out points), that's an option.. Just don't owe more than they are worth

 

[Missyrose]

As for risk and losing job.. Their is a large resale market for these... If you need to sell because of job loss (or rent out points), that's an option.. Just don't owe more than they are worth

"Just don't owe more than they are worth" is easier said than done. When the bottom fell out of the economy and contracts flooded the market, do you know how much I paid for a BWV contract in late 2011/early 2012? $50 per point, no MFs and no closing costs.

So if someone buys and finances a BWV contract for the $85-$90 per point they're going for today, and then the bottom falls out of the economy again? What is that person supposed to do when the contract is worth much less on the resale market than they financed it for?

 

[Dean]

If I finance a portion of DVC, how is that adding risk more so than if I paid cash??

All debt add's risk. Say you lost your job tomorrow as a way to think about it.

The point being is that if you are already planning on going regardless of if you buy a contract now or later, you might as well buy now.. any money spent on finance costs will be eliminated by spending less on room thru Disney..

As for risk and losing job.. Their is a large resale market for these... If you need to sell because of job loss (or rent out points), that's an option.. Just don't owe more than they are worth

But resale takes time and there is an inherent cost in doing so and no guarantee going forward that will be a viable option. I guess my point would be that it's a poor choice to go at all if one needs to finance it. Having consumer debt and going on vacation while having consumer debt is the same as financing any vacation. They're all poor choices IMO.

 

[beno44]

Seems stupid to not look at the total picture.. I am money ahead by buying / financing than renting/ rack rate and then buying in 1-2 years..

I see little risk, I plan on putting $4K-5K down and finance the rest... Way my math works out, I will owe about $58 a point at the start go down somewhere between $1-2 a month..

 

[Dean]

Seems stupid to not look at the total picture.. I am money ahead by buying / financing than renting/ rack rate and then buying in 1-2 years..

I see little risk, I plan on putting $4K-5K down and finance the rest... Way my math works out, I will owe about $58 a point at the start go down somewhere between $1-2 a month..

There's no amount of total picture that makes financing a luxury purchase or timeshare (DVC is both) a good choice IMO but one can justify many things if they want. Regardless we all hope it works out for everyone and that you enjoy your membership.

 

[beno44]

It's a good choice if it saves me money

 

[pangyal]

Seems stupid to not look at the total picture.. I am money ahead by buying / financing than renting/ rack rate and then buying in 1-2 years..

I see little risk, I plan on putting $4K-5K down and finance the rest... Way my math works out, I will owe about $58 a point at the start go down somewhere between $1-2 a month..

I think that maybe what you're not considering is that situations and finances change, and you might end up actually not having the resources with which to go on your Disney vacation for a year or more, especially paying for Deluxe accommodations. With financing, you are stuck with the payments no matter what happens. There is the inherent risk that Dean described.

For us, we are financing for less than a year on our contracts, not so much because we have to, but because we are in Canada and are getting hammered by the exchange rate right now. I work for a U.S. company part time and they pay in USD, so that all goes towards our payments at a straight rate. Where our dollar was at par a year ago, now it is going lower. So, once it starts to climb again, it will make sense for us to pay down using CDN. But as long as we are losing almost three times what the interest rate from Monera is on the exchange rate, it seems to be logical to use a one-year finance bridge to save on those costs. I would be very much opposed to the idea of tying us into a decade of loan payments for a depreciating asset that doubles in cost because of the interest by the end of the term. A $10000 loan at 10% will cost you $20000 when the ten years are up. I can not understand why this is appealing to anybody.

 

[beno44]

First off, a $10K loan will not cost you $20K, that's just bad math...

Secondly.. I said I should have it paid off in 2 years, not 10.. would never even think of financing $9-10K for 10 years..

 

[pangyal]

First off, a $10K loan will not cost you $20K, that's just bad math...

Secondly.. I said I should have it paid off in 2 years, not 10.. would never even think of financing $9-10K for 10 years..

Not bad math, sorry. I'm including time value and opportunity cost in my estimate, though, which I understand is a grey area. The actual interest on that loan, though, would still run about $5800.

Two years is much more reasonable .

 

[Dean]

It's a good choice if it saves me money

Best case scenario assumes you make the otherwise perfect choice in terms of number of points, use year, home resort, available points and get a good price. That's a lot of assumptions even for experienced buyers. Buying 2 yrs earlier making the perfect choice only saves around $1000-1600 ($3-4 pp) compared to renting on roughly 200 points offset by the finance costs of roughly $4700 over the first 2 yrs financed for 10 yrs at 14.9%. Plus those trying to rush through to get that next trip on points for the "savings" routinely make far less than perfect choices compared to an adequate investigation that costs them far more than the savings as well. I believe that anyone that can afford it and who DVC is important to can save up and pay cash within 2 yrs.

 

[beno44]

$4700??? 10 years?? 14.9%?

I have said 2 years, looks like 8.9% and maybe $900... thats a HUGE difference..

 

[Dean]

$4700??? 10 years?? 14.9%?

I have said 2 years, looks like 8.9% and maybe $900... thats a HUGE difference..

I posted before I saw your other post. That is a huge difference but the principles are still the same. You're not really saving money by buying 2 yrs earlier and financing compared to waiting 2 yrs and paying cash. DVC has been that high, not sure the current rates. For Monera they're currently at 8.9-12.9%, for timeshare lending at 8.9 to 11.9%. Both have additional charges. Lightstream can get you down to 6% on the 2 yrs only on a personal loan (not deductible). One one of the issues is that most people who finance in this way for a longer period don't pay things off as intended but only you know your own circumstances. Even at 6% I get over $1K financing 16K for 2 yrs only. Obviously every change in the numbers will change the outcome. Best case scenario is you're around break even with addition risk.

 

[beno44]

But i think once I figure in cost savings of owning DVC and higher cost of renting points/ booking thru Disney in 2016 and 2017, i will be saving money..

And not borrowing $16K.. I am estimating total cost of about $14,500 for 160 points once I figure in $80/pt, closing costs and 2015 dues.. hoping by Oct have $4500 saved, so borrowing about $10K.. even at 8.9%, finance cost of about $1500? Feel like i can save $750 each trip in 16 and 17 by buying pts..

 

[crisi]

But i think once I figure in cost savings of owning DVC and higher cost of renting points/ booking thru Disney in 2016 and 2017, i will be saving money..

And not borrowing $16K.. I am estimating total cost of about $14,500 for 160 points once I figure in $80/pt, closing costs and 2015 dues.. hoping by Oct have $4500 saved, so borrowing about $10K.. even at 8.9%, finance cost of about $1500? Feel like i can save $750 each trip in 16 and 17 by buying pts..

I hope it works for you. A lot of us here are financial conservatives, including myself. And I hope it works for you not only because I do, but because if it doesn't work it means the economy has taken another hit, people have lost their jobs (with some chance its me and my husband) and my portfolio is sad. In 2008 we had a lot fewer financial conservatives and a lot more people who were rah rah on financing. In 2009 and 2010 we saw DVC members have to come up with thousands of dollars in cash to dump their points, the rental market sluggish, and a few of our fellow posters who lost points and homes.

I will say as a financial conservative, DVC is not about saving money. You may get more value for the dollars you spend, but at the end of the day, we'd all be better off at Bonnett Creek, or not going to Disney at all. Or finding a good RCI deal and trading in. Plus a lot of DVC owners do a psychological switch - they end up spending more - fitting in a few extra trips, taking friends, spending money on activities they'd never have done if there were a hotel bill at the end of the trip. I'm content with the value I get from DVC, but the idea that its saving me money - no. Don't get caught up in the emotion and then use "saving money" as the logical justification.

If I had to do it again today, with the options that are available (many more since I joined), I'd own over at Bonnet Creek, if I owned at all. At the time, it was a good decision for us, today it wouldn't be.

 

[Friendlyadvice2]

But i think once I figure in cost savings of owning DVC and higher cost of renting points/ booking thru Disney in 2016 and 2017, i will be saving money..

And not borrowing $16K.. I am estimating total cost of about $14,500 for 160 points once I figure in $80/pt, closing costs and 2015 dues.. hoping by Oct have $4500 saved, so borrowing about $10K.. even at 8.9%, finance cost of about $1500? Feel like i can save $750 each trip in 16 and 17 by buying pts..

Many forum members have tried to help you and/or provided detailed calcutions for you showing no savings with your strategy. I'll try one more time:

1. Cost of renting 160 points at $12 = $1,920, at $13 = $2,080

2. Buying 160 points would cost $1,008 (160*$6.30) in MF (in the first year and more in the second year) plus your estimated finance costs which you now estimate at $750/year for two years. That puts you at $1,758. You then have to add the purchase price of your points which adds about another $2 per point or $320 ($2*160). That now puts your total at $2,078 and is now a wash or costing you more and you still need to account for the opportunity cost of the time value of money. Where is your savings???????

If you remove the financing fees from your equation, you MIGHT be able to get ahead if you execute all other variables of buying the contract correctly. That's why it is being suggested that you rent, stay at a value/offsite, or don't vacation at all for the next two years until you can purchase the contract without $1,500 in financing fees (over two years) which will minimize your risks and provide the most savings IF that is your goal. If savings is not your goal and you just want to purchase a contract without taking the costs into consideration, then by all means, finance and spend as much as you want......just don't proclaim you're saving anything by going that route.