DVC Loan Payoff

[pooh.kim]

I asked this on the budget board, but thought I'd ask here too since many here have financed their DVC purchase.

We are looking at two debts here and I keep going back and forth with which to pay off. The amounts are almost the same.
1. DVC loan
2. CC debt

I really want to pay the CC so that I can say I have NO credit card debt. However, the interest on the CC is 2.9% till paid and the DVC loan is 9.9% (with 9 1/2 yrs left unless pd early)

Any suggestions or reasons why one would be better to pay off first.
Thanks in advance

 

[milachy]

I remember something being said in another post about DVC loans are simple interest as opposed to compounded interest on Credit Card debit... Not 100% sure though...

 

[ChickieToo]

Also, can't you deduct the interest on the loan like you deduct mortgage interest from your home loan? Crunch the numbers and see how much you save on your income taxes vs. your non-deductable cc interest. Just a thought

 

[InstImpres]

Also from a credit stand point, DVC does not show up on TRW's, etc. so think long term if showing the debt matters.

JMHO

 

[rsschneck]

I would go for the DVC loan.

1. The interest is higher (even though the OP could possibly write off the interest)

2. If you pay off your CC debt you might be more likely to start charging it back up. Once DVC is paid off that is it!

3. Pay off DVC and then put the money you would have paid you monthly DVC loan with put it towards your credit card and you will have both debts paid off before you know it!

 

[tamu91]

Why not pay down both. DVC because it's a much higher rate and CC simply because you don't want to pay just the minimum and accumulate unnecessary interest charges.

No matter how you slice it, CC is a bad liability. DVC is a liability as well but not so bad. You're building equity and you can always sell it, if necessary.

BTW, you can't write off your DVC loan unless your residence was used to secure the loan. Most of your home equity loans will qualify but a direct loan from Disney/CCs will not.

 

[pplasky]

Originally posted by tamu91

BTW, you can't write off your DVC loan unless your residence was used to secure the loan. Most of your home equity loans will qualify but a direct loan from Disney/CCs will not. [/B]

This varies state to state. Since timeshares are considered real estate interests, some people have posted that they are able to deduct the interest.

 

[OneMoreTry]

Pay off the higher interest loan. It is tax deductible on your federal taxes, but even if you were in a 50% bracket, that would not bring it down to the rate you have on your CC.

 

[pumpkinboy]

Originally posted by OneMoreTry
Pay off the higher interest loan. It is tax deductible on your federal taxes, but even if you were in a 50% bracket, that would not bring it down to the rate you have on your CC.

Originally posted by rsschneck
I would go for the DVC loan.
1. The interest is higher (even though the OP could possibly write off the interest)
2. If you pay off your CC debt you might be more likely to start charging it back up. Once DVC is paid off that is it!
3. Pay off DVC and then put the money you would have paid you monthly DVC loan with put it towards your credit card and you will have both debts paid off before you know it!

Yep, I'd advise nailing the higher interest liabilities first too. It's just sound financial management. However, if there is ANY chance the 2.9% CC rate could increase, it would be wider to kill off that one instead.

Good luck!

 

[pooh.kim]

Thanks for all the replies!

Still not 100% sure what we're going to do, but all the advise is helpful.

Either way, the "extra" payment will be added to the remaining one so both should be paid off completely in less than 2 years.
We no longer charge what cannot be paid off monthly. We also just started a new account just for Disney savings so those trips cannot be "charged" either.

 

[The Prophet]

My 2 cents to pay it off interest free.

First get a credit card that gives you interest-free balance transfer for up to 1 year-- or longer. (Make certain that they will approve whatever credit limit you need before accepting their offer)

Then, pay off DVC with a credit card. Use the one that you get points/miles on.
Then get do a balance transfer from one card to another.
I did this with Discover and now have 0% interest for the life of my transfer.

The Prophet

 

[weathernlu]

I would suggest the CC debt. You might pay more interest, but it will do wonders for your credit score depending on your current utilization.

I guess for me I would pay the CC, but your credit score might not be as important to you as the interest savings.

If you go to myfico.com and get your reports, you can do a simulator that will tell you how much higher your score would go if you pay down the CC debt.

Again, if you have nothing you will need to be using your credit to buy, then pay off DVC and save the money.

P.S. If you still can't decide, send me the money to pay off my CC bills!