Do people really pay those Disney rates?

[nunzia]

Dennis, I totally agree with you.

I agree as well. When my kids were little we even took vacations that ended up having quite alot put on the CC. We knew at the time it wasn't the best decision in the world but I was a SAHM and DH had a pretty low paying job, but we were determined the kids would have vacation experiences and memories. Ane we have no regrets about all that interest spent way back when. Now that we have 2 incomes and keep our expenses low and budget smart, we are able to pay cash for trips. Each family has to make choices they feel is best for them at the time, and I don't think anyone here should judge them on that. As long as people pay their bills and aren't a burden to society they can do what they want as far as I see it. I'm sure some people back then who saw our beat up station wagon with the fake wood peeling off the side pulling into the Tropicana for our Disney vacation shook their heads and thought we should up grade our car rather than take a Disney trip, but I don't care what they thought. I cared my kids had great experiences as children, and now that they are all grown with kids of their own, those are the things they remember the most.
Sorry to ramble..this discussion always gets to me. We ALL could make better choices with our money..I guess we ALL could have to have 8 months living expenses in the bank, the house paid off, our kids college plans fully funded and our retirement funds maxed before any of us ever took a trip, but vacationers would be pretty rare if that were the case.

 

[ecdoesit]

I decided not to buy into DVC the first time because the interest rate is quite high. I am wondering how come the bank cant get a better rate with historic low interest rate now. Since the rate is fixed and tax deductible, it is not a bad loan to have though.

 

[SeedsLuvDisney]

If there is any possibility of that happening, I wouldn't buy DVC no matter how I was thinking of paying for it.

Can't almost everyone lose their income at any time???

Which is why we are buying and putting 30% down, so if we HAD to sell it, we always could and not worry about being underwater..

 

[redrosesix]

Can't almost everyone lose their income at any time???

Believe me...been there, done that. Stuff happens.

 

[JimMIA]

Can't almost everyone lose their income at any time???

No, not really. Neither my wife nor I have any likelihood of losing our sources of income, and I'm sure many families are equally secure even in these difficult economic times.

Which is why we are buying and putting 30% down, so if we HAD to sell it, we always could and not worry about being underwater..

Be careful with your math. If you buy SSR direct from Disney, you start out underwater because SSR is selling and clearing ROFR at $70 in the resale marketplace...which is about a 35% discount from Disney direct. Other resorts are better, but you also have to factor in a 10-12% selling commission, so the math may not be as clear as you think.

As I said above, I don't have any opinion whether a particular family should finance or not, and if you're comfortable with the risk, go for it and enjoy.

But be sure you know what the risks really are because the resale marketplace is definitely a buyers market right now and is likely to get worse.

 

[Sandisw]

I also think it comes down to ease with financing through Disney and the fact that Disney does not report the debt (so I am told) to the credit agencies so its not part of your credit report.

For some, this may be a plus. While I agree that 14.75% is a lot of money, if someone can afford the payments and figure all the costs of a DVC ownership into their monthly/yearly budget, then it works.

I have spent probably over $20,000 OOP for rooms at WDW over the last 15 years, before joining DVC--best use of the money? NO Worth the memories for me and my kids? ABSOLUTELY AND THEN SOME!!!!!

To me, spending money is spending money, regardless of where it goes. If what you are spending it on makes you happy and you are paying your bills then I say it is immaterial what it is for--whether it be an extra $100 in interest or a $100 for dinner and a movie.

And, there are others who feel that saving and paying cash is the way to go. There is no right or wrong way to look at it--it is personal preference.

 

[redrosesix]

I also think it comes down to ease with financing through Disney and the fact that Disney does not report the debt (so I am told) to the credit agencies so its not part of your credit report.

If it's considered a mortgage, this is likely correct -- I've had my house for 17 years and the mortgage isn't shown on Equifax here (they don't consider that -- sucks, since it's the one thing that I've never paid even a day late)

 

[goofygolfer]

Why and whose business is it how people pay for anything? Personally, if people want to finance through DVC that is their choice. Not everyone has stellar credit, and even people with FICO scores above 650 have problems now getting credit for things thanks to the economy. People may look at the interest as a waste of cash, but I think if you are having great vacation and memories with family, that is priceless. Life is too short and you can't take the money with you when you go. And thinking that people who can't afford to buy it with cash don't deserve it is just silly. The family that makes $40,000 a year deserve it just as much as the family that makes $200,000. And sorry, with the banks being bought out and FDIC running out of money, the bank is the last place to think your money is safe right now. I would put any money I have in a foregin bank. Or better yet, like my granny use to do and put it under a mattress. LOL. It is sad when your mattress is safer than an FDIC insured bank.

The point is not that a family whose income is $40,000 per year does not deserve a nice family vacation, rather that maybe we are looking down on those that are staying at the Pop Resorts. DVC is in my estimation a high-end vacation. We as consumers are responsible for this economic mess. Over the last 10 years, our society made a huge shift toward material posessions as a way of defining ourselves. We saw middle class people moving into bigger and newer homes. We saw those same people choosing a Mercedes or Cadillac over a Honda or Chevy. Nobody is suggesting that people should stay in their homes and not go on vacation. When my family went to WDW we stayed off property at cheap hotels when I was growing up. To suggest that somehow the memories of a DVC vacation are somehow better than those who stay off property or in a budget resort is just the same kind of thinking that put our country in the place we are today. I disagree that it is not anyone's business how you spend your money. When some of these people who have no money for retirement can't work anymore, they will live off the government. Last time I checked, that requires more tax dollars which come from those who have earned and invested wisely. Now on to fun topics

 

[CarolAnnC]

Folks, this thread is discussing DVC interest rates. If it remains off topic, it will be closed. Thank yo

 

[CarolA]

Everybodys situation is different and to be honest I find it insulting that people critiscize how others pay for DVC. Thats great some have cash to pay for it but we look at it that our kids will only be young so long and the memories and great vacations we enjoy are well worth paying a little interest.

Dennis-

It's the DIS. Sadly a large number of posters on the DIS seem to think that thier views are the "RIGHT ONES" and those who disagree are WRONG and should be told how to live thier lives...

Just ignore them LOL!

 

[JimMIA]

It's the DIS. Sadly a large number of posters on the DIS seem to think that thier views are the "RIGHT ONES" and those who disagree are WRONG and should be told how to live thier lives...

Just ignore them LOL!

You're right, Carol, but it cuts both ways. There are probably an equal number of DISers who post details of their lives and then get insulted if someone disagrees with their point of view.

Discussion boards are not happy places for the thin-skinned. If a poster puts something out there on a public discussion board, they should expect discussion...including discussion where someone else thinks they've made a dumb decision. As long as the responses don't violate DIS rules (for civility, etc), nobody should get insulted by a different point of view.

That's obviously just my opinion, and others are welcome to disagree.

 

[Amy&Dan]

Wow! QUite a comment.

We bought back in '96 and financed. Luckily, we didn't feel like shooting ourselves because we were taking GREAT VACATION after GREAT VACATION!

We were already spending lots of $$ on vacations, so we shifted those costs into paying off our DVC. Had it paid off in less than five years. And we paid about half of what DVC is going for today.

WORKED BRILLIANTLY!!!!!!!!!!!!!!!!!!!!

(And by the time we saved up all that money....the cost of buying the points would have leaped dramatically, WE'D STILL have spent a lot of cash out on rooms for WDW vacations...and the rooms wouldn't have been nearly as nice.)

This is us exactly. After taking so many Disney trips, I knew we were going to keep doing that so I figured I would buy into DVC. It worked for our family. Yes we did finance through Disney, we actually have a rate of 9.75%, its tax deductible and our contract will be paid off early.

For me and my husband, there was no way we would tie up equity in our home, even for a short period of time. So for us, it was finance through Disney or put the balance on a credit card. We opted to finance through Disney and I am glad we did given the way the credit market currently is working.

I have to say, I get so tired of people who make those of us who finance feel like lesser individuals. You can have debt and still be responsible. Yes its a luxury. So is my cable tv, my central air, my car and alll sorts of other things I don't feel like doing without. Call me spoiled or stupid but its my life I have to live so I might as well live it in a way that feels right to me.

To me, the biggest factor, esp today, is when you finance through Disney, it doesn't show up on your credit. Nowadays, they monitor how much you owe, if you put the amount of a contract on a credit card, your other rates may go up, even if you don't have too much debt and a perfect payment record. Suddenly drop $14K or more of unsecured debt on your record and you may really regret it. Even if you pay it off quickly, it can drop your credit score and suddenly there is a cascade affect on everything from your car insurance rates to other credit cards or revolving lines of credit. DVC doesn't show up. I like that.

To each their own. I'm comfortable with my decision, how I spend and save and while I get both amused and sick of the comments, it doens't wreck my day. And of course we all have to assume that those who post they don't believe in debt, paid cash for their contracts etc are being truthful. I mean, who can really say for sure? Whatever. To me fiancing through Disney made a lot of sense for all kinds of reasons.

 

[december14disney]

This is us exactly. After taking so many Disney trips, I knew we were going to keep doing that so I figured I would buy into DVC. It worked for our family. Yes we did finance through Disney, we actually have a rate of 9.5%, its tax deductible and our contract will be paid off early.

I have to say, I get so tired of people who make those of us who finance feel like lesser individuals. You can have debt and still be responsible. Yes its a luxury. So is my cable tv, my central air, my car and alll sorts of other things I don't feel like doing without.

Also, when you finance through Disney, it doesn't show up on your credit. Nowadays, they monitory how much you owe, if you put the amount of a contract on a credit card, your other rates may go up, even if you don't have too much debt and a perfect payment record. Suddenly drop $14K or more of unsecured debt on your record and you may really regret it. Even if you pay it off quickly, it can drop your credit score and suddenly there is a cascade affect on everything from your car insurance rates to other credit cards or revolving lines of credit. DVC doesn't show up. I like that.

To each their own. I'm comfortable with my decision, how I spend and save and while I get sick of the comments, it doens't wreck my day. And of course we all have to assume that those who post they don't believe in debt, paid cash for their contracts etc are being truthful. I mean, who can really say for sure? Whatever. To me fiancing through Disney makes a lot of sense for all kinds of reasons.

I like this comment. We financed with a large deposit down and will pay it off early. We can 100% afford it monthly so it doesn't bother me at all the move that we made. To each his own. I can say however that I have done and spent some things I could NOT afford in my past, threw them on a credit card and budgeted myself to pay them off afterwards. Dumb? Sure. But I wouldn't change those memories for anything. One Memorial Day weekend during "Fleet week" I flew and met my two best friends in NYC and had a BLAST Sat-Mon. Double decker tour bus. Expensive cocktails. A hotel in Times Square. Couldn't afford a darn thing of it. But I ate only hamburger helper for a few months and paid it off. One of the best weekends of my life.

 

[JimMIA]

I decided not to buy into DVC the first time because the interest rate is quite high. I am wondering how come the bank cant get a better rate with historic low interest rate now. Since the rate is fixed and tax deductible, it is not a bad loan to have though.

The "bank" you speak of is Palm Financial -- a subsidiary of Disney. They could, of course, offer a MUCH lower rate. But they choose not to.

Interest rates on loans are determined by the cost of the money being loaned and the risk of the loan. In an environment where Disney is probably having to foreclose a lot of DVC loans, the risk becomes much greater. Disney has said as much in its public discussions of the pros and cons of financing 75-80% of their new DVC sales, and that is why they dramatically raised their interest rates.

The interest rate is fixed; that part is correct. However, the interest may or may not be tax deductible, depending on the specifics of the borrower's family finances. Only a qualified tax expert who knows your personal situation can tell you that a Disney mortgage on DVC would be tax deductible for you.

For those who choose to borrow, a home equity line offers a much lower interest rate and is almost always tax deductible because it is interest on your own home.

 

[Amy&Dan]

But see, the problem I have with using a Home Equity loan is that if you default on that, you can lose your home. Default with Disney and life will stink. Default on your mortgage and life will more than stink. In the past months, I have seen two good friends lose their homes. Had they not refinanced and home equitied themselves to death years ago when that was "safe", they'd still have their homes today. I just can't see risking your home this day in age, especially since the houseing market is very unstable. I am so glad I financed through Disney. Back in 2005 when I bought, I had plenty of equity. Today, not as much. So if I had used my l.o.c. with my house, I'd be way more concerned than I am now having my debt through Disney.

I agree that the way we have evolved as mega consumers has cost this country plenty. But the sheer number of defaulted mortgages is the biggest factor in today's economy. Or so I am told. So I think all of us need to realize that when we use our homes to secure purchases, its a risk. Far riskier in my book than paying a higher interest through Disney. If you lose your job or your income changes, better to risk your vacations and not your home. Given the way housing values have crashed, people who find themselves needing to move probably regret the equity they have tied up with home equity loans, esp ones they took out to purchase things or even pay off debt. Lower interest rates for anything whether its a DVC purchase, car or anything else are never worth risking your home. Just my opinion.

I'll add that our rate is 5% less than what Disney is offering now. So that makes my loan through Disney (or rather their subsidiary) easier to swallow.

 

[Brian Noble]

I am wondering how come the bank cant get a better rate

Disney isn't necessarily interested in getting you the best rate---the interest paid on DVC purchases is itself a profit center, and must remain so in a risk-adjusted sense. JimMIA explained it nicely.

Can't almost everyone lose their income at any time???

Most people have (or can get) a reasonable idea of how much risk there is in losing a non-trivial portion of income. It's important to be honest in making this assessment, but it isn't too hard. For example, several close friends of mine work for Ford, Toyota, and Borders. All of them have a non-trivial risk of losing their jobs, even though they are all valued and more-than-competent employees, because their industries are all facing unprecedented challenges, and these companies are all currently losing money.

It would take a near-catastrophe for either my wife or I to have a significant loss of income, because we work in industries (education and health care) that are counter-cyclical, and work in places that are still showing strong demand and solid financial fundamentals. In fact, my instituation is looking to grow faculty headcount by 10% over the next several years, and both of her offices are adding physician time as well.

the problem I have with using a Home Equity loan is that if you default on that, you can lose your home.

Each person has to come to their own decision as to their risk tolerance. But, if I honestly believed there was a non-trival chance that I might end up deafulting on a financed DVC purchase, there is no way I'd feel comfortable maknig a 50-year commitment to annual luxury vacations that cost many thousand dollars each.

On the other hand, if the chances of default were very low, I just don't see any reason to pay any more in interest than absolutely necessary.

Either way, using Disney financing doesn't make sense to me personally. Again, though, it's not my money, it's yours, so use it however you like.

 

[Amy&Dan]

Brian, I see what you are saying. I just know that houses in my area have plunged like I never thought possible over the past few years since I bought DVC. I think many of us who do finance things, finance differently now than we might have years ago. My husband and I have never defaulted on anything or even come close nor have we had our situation change as far as income since we financed. However, I have always felt saving money with lower interest rates isn't always the most important deciding factor. When I bought DVC houses in my area were already starting to level off and even decline due to a highly inflated market. So even though the overall economy was strong when I bought, my area's housing market wasn't. I had plenty of equity and the rate I could have gotten on a loan was a couple of percent better than what Disney offered me, but I chose Disney's after consideration and given what has happened since then in my area, I was right on the mark.

Also, even though DVC is technically secured debt, to me it isn't. I never use my house to secure unsecure debt. Just me.

You yourself said you don't finance luxury purchases. So I think from your standpoint you are looking at this differently. Your advice makes sense, however given your thoughts on this whole issue, its a bit like asking someone who doesn't swim what type of scuba gear is the best deal. For me, I have done this and can say that I am very glad I didn't use my home equity to finance my purchase. I wasn't worried about default and still am not. But given the current housing market in my area and the fact that I am finding anything can happen to any of us at any time, unless you have an enormous amount of equity, to me its better to pay the higher rate through Disney than tie up your home and chance losing it. Often the difference isn't as much and you still in many cases can declare you interest through Disney on your income tax. There is no prepayment penalty and it doesn't show up on your credit. For those of who hold credit, its important to have as little as possible show up on your credit report. Even a small contract is a lot of money and when it shows up on your credit, it can affect your overal score. So you may save on the interest of the purchase itself, but then have another interest rate go up. When you finance through Disney, this doesn't come up since it doens't show up as long as you are current.

I think you are looking at this understanably from your standpoint on not only debt but also your income security. For those of us who have jobs but don't feel as secure (secure, but not 100% secure because to be frank that is very rare) we have to look at things from maybe a different angle than you do. It doesn't mean we are irresponsible but rather we are trying to be responsible. In my situation, the interest rate was one factor and not enough of one to make me not finance through Disney. From yours, it would be the deciding factor although it wouldn't because you wouldn't finance period.

And I'll add again, when I financed through DVC, my rate was much lower than what they offer today.

 

[JimMIA]

Nowadays, they monitor how much you owe, if you put the amount of a contract on a credit card, your other rates may go up, even if you don't have too much debt and a perfect payment record. Suddenly drop $14K or more of unsecured debt on your record and you may really regret it. Even if you pay it off quickly, it can drop your credit score and suddenly there is a cascade affect on everything from your car insurance rates to other credit cards or revolving lines of credit. DVC doesn't show up. I like that.

In the past months, I have seen two good friends lose their homes. Had they not refinanced and home equitied themselves to death years ago when that was "safe", they'd still have their homes today.

And herein - in your two thoughful posts - lies the crux of what got many people into the messes they are in now.

The truth is, many people have gotten much better at working the system to obtain the maximum amount of credit to buy the things they want than they are at repaying the debt. They'll use every device to avoid "lowering their credit score" because in the context we're discussing -- financing DVC -- it will mean the higher interest rate. Or, as you point out, it might have far greater ramifications.

But does anyone ever bother to think about why prospective lenders want to monitor how much debt we have? No -- we just try to find a way to work around it.

I'll tell you why lenders monitor our debt -- it's because higher debt reduces the likelihood that we'll be able to pay off our debts. A dropping credit score should tell us to double-check to be sure we're living within our means. Unfortunately all it usually tells us is that we need to conceal more.

When we work ourselves into debt up to our eyeballs, it doesn't take much of an upset to cause the whole house of cards to come crashing down. The sky doesn't have to fall -- all it has to do is rain hard.

And it doesn't matter whether you're rich or poor -- if you're rich, there are just more zeros involved. A middle-class person might lose their job -- or even just have their hours cut back. A wealthy person might get a margin call because their stock portfolios have decreased in value. If either person is living on the edge, they're in big trouble regardless of how many zeros there are.

Unfortunately, as others have noted..."stuff happens"...especially in these uncertain times. Ideally, we'd manage our debt so that "stuff" doesn't ruin us.

The debt repayment side --

As I explained in several earlier posts, if you use a home equity loan to finance DVC, that action in itself does not put your home at risk. A home equity loan is basically a second mortgage, and that creditor would have to pay off the first mortgage before they could go after the underlying asset.

But...if I get in over my head and have to refinance the whole package into one convenient lower payment, the whole picture changes. If I do that several times, the picture can get really ugly. DVC is paid off at that point, but the debt burden remains. The debt that DVC created may be the straw that breaks the camel's back and causes foreclosure.

But that's not the home equity line's fault. The fault there is that the borrower bit off more than they can chew.

 

[Dannielle_1]

Not a DVC owner yet. We have vacationed at least yearly at Disney for the past 9 years (except 2007 and we made up for it in 2008 with two visits). So we really think that the Vacation Club would make sense for us as we see this pattern continuing.

However, we don't have a $15,000 for and outright buy in (or even close to that). We could easily put a 20%-25% downpayment, but would need to finance and we are okay with this (and can easily fit it into our monthly budget.) Like others we would just see this as our way of "saving" for Disney. Also, I'm thinking that saving for 5 years so we could pay cash, when we will also be paying for other on-site Disney accomodations and the point price rates increasing, will put us behind in the long run (but maybe this is me thinking emotionally than actually figuring it out numbers wise).

Not sure exactly how we will finance. I do know that we will not use our Home Equity Line, we save this line of credit for actual "house stuff." If it isn't house related we won't put anything on there. We've needed it in the past to replace flooring, replace a roof/soffit, replace a heat pump, etc... Our house is "stable" right now and no repairs needed at this point in time but we want that available just in case.

So after all that rambling, I do have a few questions... If we would finance, what other options are out there besides Disney (high rate), HELOC (see above) and Credit Cards (just wouldn't do)? Those who have financed through Disney then paid off with another loan, who/how did you go about getting another loan with a lower interest rate? One more, Disney's rate is it the same across the board for everyone, or do they base it on your credit rating at all?

We are probably looking to buy within the next year, though the incentives do look good now, but am trying to research as much as possible now.

 

[Amy&Dan]

Jim, thanks for the lesson and lecture. I don't have debt up to my eyeballs and I never have. I am okay with what I did as to financing my DVC. I have a very high credit score, I'm not maxed out. I got a mortgage for about 40% than what I qualified for. I consider myself pretty thoughtful, not somebody trying to conceal or work the system. I am paying off my DVC contract in half the time I could just like I have my cars, my cc's and most everything else. Yes, there are people that don't do that. But I can't tell you how sick I get of people like you that refuse to ever acknowledge that some of us have credit for things that are luxury items and are still responsible.

I was just trying to give some information and detail for those of us scumbags that finance things we shouldn't and have debt and how some of the conventional wisdom that applied for many years as far as credit and financing, isn't as cut and dry as it used to be. It wasn't a road map for how to work the system. But I'm glad you got some things off your chest about how irresponsible people like me are making the whole house of cards crumble.