DVC and Oprah's Debt diet, I need advice.

[TaraBoss]

Boy looking at Oprah's Debt Diet has been eye opening for me. I didn't have a clue on how much debt my family carries until I wrote it all down last night. We've had DVC for 7 years-paid off in 3 more years, and have loved every minute of it. Now I'm questioning if we should sell it and pay off some debt. I'm really torn on this one-any advice?

 

[Lenc324]

Maybe Oprah will pay off your debt.

 

[utahkennedys]

I think only you could make that decision, but to me, DVC is a "luxury" item that DH and I decided we would only buy when we paid cash. So, we bought a 25 point contract and will add-on with more cash. To me, vacations are also a luxury item we take when we can afford them. We carry no credit card debt, no other consumer debt, no car loans -- only a mortgage and student loans from our MBA & JD degrees. If we had paid into our savings according to plan, etc, we take a vacation. That is just us, but we won't ever go into debt for any kind of vacation, DVC or otherwise.

 

[vascubaguy]

Boy looking at Oprah's Debt Diet has been eye opening for me. I didn't have a clue on how much debt my family carries until I wrote it all down last night. We've had DVC for 7 years-paid off in 3 more years, and have loved every minute of it. Now I'm questioning if we should sell it and pay off some debt. I'm really torn on this one-any advice?

I think a major part of your decision should be based on what type of debt you have...

When I add up all of my debt it does seem like a lot, however, then I calculate in my assets and then I get back well into the green! I am fortunate though that my only major sources of debt are the mortgage and student loans (for my MS). Well, and the DVC credit card bill with 0% interest, but that will be paid off before the end of the year.

I had debated giving up some of my vacations and renting points to cover the MN fees and use the other $$$ to pay off some of the student loans. However, after a semester of PhD courses and working full-time... I'm READY for a vacation!!! So... I'll just keep paying that 2% interest on the student loans and be happy.

Good luck with your decision. Just make sure you think about the "cost" of selling the contracts when you consider letting them go. And remember that if you plan on continuing your trips to WDW even if you do sell your contract(s), that you might be paying more in the long run.

 

[MrShiny]

Well, if DVC will save you from renting rooms, then it could be worth it to keep. Throw together a spreadsheet of what your debt would look like over the next 10 years if you keep DVC and if you sell it (included additional vacaton costs if you sell).

Did you finance with a home equity loan? If not, that might saveyou some money (which in turn could (and should) be used to pay off debt.

Basically, get to the point where you debt is not increasing. It's very easy to be paying towards you debt every month and still borrowing more! Pay the highest interest rate debt off first - make minimum payments on everything else. When figuring out what's the highest rate, I usually knock a couple of points off any interest that is deductible (like mortgage).

Keep in mind if you sell, if you want to buy again, the price could very well be higher.

I'd say though if you are using DVC and your debt is decreasing every month (even just a little), it's probably good to keep. YMMV

 

[kaw1106]

Why don't you keep your DVC and rent the points for a while until you pay off some debt?

 

[mommyceratops]

We are doing Dave Ramsey and are snowballing our DVC. We decided we do not regret it and use DH bonus money for our tickets and dining while we are there.

What about renting points and using that to pay off your debt? Then once DVC is paid off you do not have to worry! LOL!!

 

[dallastxcpa]

All I can say is, Quality of Life.

What is important to you? Sure there has to be balance, but at what cost. Being debt free is good, but not if it works you into an early grave.

 

[Lenc324]

I know I will never be debt free. I know Oprah won't help me be either but what about enjoying some things in life? I can't keep working and working and pay bills with no fun. If owning DVC is a hardship and just another bill to pay, by all means sell. We bought for fun and to enjoy the trips there. I would never do it if it was a burden.

 

[Scratch42]

What does Oprah Know about Debt!?!

It's like Dr. Phil telling me about marriage and his failed!

Work and No Play!

j

 

[roelongo]

I actually just got my check from the Timeshare store yesterday. We sold one of our contracts it was so easy to do and we had the check in about six weeks. Only you can make the decision that is right for your family. When we bought I researched a lot and made sure we bought different contracts with fewer points in each so that we could sell if we needed to. We still have 250 points after selling one of ours so I don't feel like I had to give up my DVC. If you do sell and buy again later on I strongly suggest you break up the contracts

 

[jimmytammy]

If DVC isnt causing you a hardship, then I would hang onto it. With only 3 yrs to go, I have a feeling you might kick yourself when that 3 yrs rolls around and it would have been paid for.

If you need to, rent pts out. This will allow you the money spent on vacation to put towards debt payment.

Good luck and pixie dust in your decision!

 

[crisi]

I think it depends on your debt level and the expenses that come from owning DVC and taking Disney vacations.

If you are uncomfortable because you have a mortgage, student loans, and your DVC loan, but at the end of each month are ahead of where you were in getting everything paid off, I wouldn't worry about it too much. Cut your expenses, maybe rent out your points.

If you are uncomfortable because the Oprah show made you sit down and you discovered every month you are deeper in debt because you overspend each month and that you cannot buy groceries AND make the minimum payments on your credit cards, you are going to have to go through some major life changes, and one of the first things I'd do would be sell DVC. Particularly if you are one of those people who couldn't bear not to go, and using your DVC points means more days, more park tickets, more food, more souvieniers - if you are a Disneyholic and that is a significant cause of your debt, getting rid of DVC might help.

You are probably somewhere in between.

I don't like debt and am pretty financially conservative. I would never recommend someone take out a loan for DVC in the first place. But everyone has different risk tolerences.

 

[Paging Tom Morrow]

I do my best to make practical decisions on what debt I choose to carry. In addition to carrying a mortgage, I have chosen not to be pay off my college loans because the interest accruing on those loans is only @ 2.5%. My low-risk investments are returning at a rate greater than that so taking money from those investments to pay that debt would actually cost me money.

 

[Jen D]

I think you've gotten some good advice. Is your debt level going down or up each month? Are you aggressively bringing your debt level down?

Unless you're drowning in credit card debt and can't handle your monthly expenses-- and putting some away for savings-- I'd say hang on to it, especially with only 3 years left on the loan. If you seriously want to go on the debt diet, then rent out your points for the next 2-3 years and use the proceeds to either speed up the re-payment of your DVC loan or make payments on whatever debt has the highest interest rate.

The budget board is a great place to ask for advice on this stuff. But be warned--- most of them will probably say you should sell DVC!

 

[Jynohn]

DH and I are in the process of paying off our debt too, and the DVC does feel like a luxury that we don't technically "need." That said, I would never consider selling it unless it meant I was missing payments on something else or struggling to put food on the table.

We have made a lot of sacrifices over the years, and live pretty frugally right now. We drive older cars, don't eat out much, etc. DVC is our one luxury, and our Disney vacations are the one thing we look forward to. We consider it our reward for working so hard and saving so much the rest of the year Only you know your financial picture, but since you are so close to paying it off, if you're still enjoying it, I say hang on to it if you can.

We did finance our DVC, which looking back, was probably a mistake. We're paying it off as fast as we can, and I've made a promise to myself that there will be no more add-ons until the other two contracts are paid off and we can pay cash. That may be easier said than done if a Polynesian DVC comes along though!

Good luck in whatever you decide.

Jynohn

 

[crisi]

I do my best to make practical decisions on what debt I choose to carry. In addition to carrying a mortgage, I have chosen not to be pay off my college loans because the interest accruing on those loans is only @ 2.5%. My low-risk investments are returning at a rate greater than that so taking money from those investments to pay that debt would actually cost me money.

But a DVC loan is unlikely to be at 2.5%. And the tax break on the interest won't cover the difference. As a financial conservative, I have no problem at all borrowing money at a cheap rate and picking up a higher return on a "safe" investment somewhere else. If your assets are greater than your debts (particularly if your relatively liquid assets are greater than your debts excluding mortgage and arguably student loans) you are sitting pretty. But I doubt TaraBoss would be posting if she had a savings account big enough to pay off her debt or if she could just sell a little stock and not have to see a Visa bill.

 

[TammyAlphabet]

All I can say is, Quality of Life.

What is important to you? Sure there has to be balance, but at what cost. Being debt free is good, but not if it works you into an early grave.

Here Here!!!!!

 

[MrShiny]

The point is, many times just a little bette management and you can reduce debt and thus have more money.

You see debt is like a a tax for getting things early. It makes them more expensive.

I don't think you should say "Well, I'll always have debt." If you eliminate some things that are expensive, but don't add that much to your life (the latte factor), and use that money to pay down debt effectively, anyone can rid themselves of debt in their lifetimes!

Look, let's say you are short cash and charge a $5 hamburger to a credit card that you keep a balance on. At say 15%, in 10 years that burger cost you $21.92.

Believe me, I've been there (and am still there, but trying to get out!). Just because you can make the payments today doesn't mean you always can. They will grow. You really need to try to reduce debt every month - if even by a dollar. If you aren't, then you are buying more than you make. It's really easy to spend $1000 more than you make in a month. That's $12000 new debt a hear. Eventually, you won't have any money after just paying for what you already bought!

That being said, I think DVC can be a wise investment. It has decreased what I spend on my vacations. Sure, there is a big lump sum tied up, and I am paying a bit of interest on that, but that has value. I can sell it some day, or rent it, or simply use it for years, making the cost per trip very low.

Basically, if you can spend less than you make, make all the minimum payments on your lower interest debt and more than that on your high interest debt so at the total debt decreases as much as possible each month, then you are doing well.

 

[Tink-n-Belle]

You have to prioritize what is important.

DVC didn't get you into the amount of debt you have. Your everyday spending did. Do you spend money on everyday luxuries like lunches out and or dinners out, coffees, donut, snacks or do you spend money on clothes, shoes, vacation, big ticket items. And out of this spending do you really need these items or could you wait.

Until you confront what got you into debt in the 1st place selling your DVC won't help you because you will be back into debt again and than you won't have your DVC. Its like a food diet. How many people do you know that can lose weight but not keep it off. You need to find out why you over spend and than stop overspending ( its not easy-- we all have our vices- for me its chocolate). If your going to be frugal you need to keep some luxuries or you'll blow it.

The most important thing to do is to see where your money goes every day. You could be spending money on things you don't even realize.

4 years ago my MIL was $7000 in debt. I drew up a budget which listed her needs (rent, car expenses, food, utilities) then I gave her her wants (going out to eat money, spending money, holiday & birthday present money etc). Its important to keep your wants but try to spend half of what you usually spend. (for example, if you get your haircut every 6 weeks try to go 8 weeks, if you go out to eat 2 times per week, either spend half (get soup and salad) of what you usually spend or only go 1 time per week. By doing that I was able to apply about $400 to her debt per month (money she was pissing away on high interest cc and stupid things.)

She was paid weekly and every 3rd month for those of you that get paid weekly you have 5 checks in the month instead of 4. If you learn to live on 4 paychecks a month (set up your budget for 4 paycheck per month) than every 3rd month you get a "free" paycheck that you can apply to your debt. Within 8 months she was out of debt, had bought a new car, and found a better apartment that included heat.

Follow Oprahs advice and see how you are doing in 3 months. Then decide if you should sell or not. Like alot of other poster said- renting out your points is a better option at this point because it could at least pay your MF and some of your payments with that money. Good luck to you!!! You can do it!!!