Financing in an unusual situation

[RoseGold]

A week in an AoA family suite, even at 35-40% off rack rate, could easily cost more than the total finance charge over the life of a modest DVC loan.

Sure, if that were the only cost. Compared to value resorts, DVC math usually doesn't work, and that's assuming cash. There are a few outliers, because of oddness in the point charts, but not many.

 

[striker1064]

where do you think is the best place to get a loan with the lowest interest rate??

Try your local bank or credit union first. If that doesn't turn up anything, LightStream has the lowest available rates online that I've seen - currently 5.95% for 24-36 months. If you have to finance, that's what you should aim for.

 

[sethschroeder]

A week in an AoA family suite, even at 35-40% off rack rate, could easily cost more than the total finance charge over the life of a modest DVC loan. If someone knows they plan to regularly vacation at Disney World and the choice is finance DVC or keep paying cash for Disney rooms, especially if they need larger rooms like family suites, then I don’t think financing is always the worst option.

Counter argument is to take 1 year off, do a cheaper vacation, take all that money save it, and the following year buy yourself a nice contract without financing. Another option is to rent DVC which is likely cheaper than tha AOA suite especially now (if I was renting I would be looking for $10-$12 points in the coming months might settle at around $13/$14). Final option is to do a Disney Springs hotel for the single trip.

Again people can do what they wish though. For all I know your grandma might be 78, your parents 50th is during the trip, and you are proposing. None of those are financial considerations which people respond to.

Financial considerations vs other factors will lead you to a final decision. Honestly I personally think now is easier than ever to choose an alternative since resale I feel will just keep dropping in value and there is going to be lots of loaded contracts possibly for sale in the coming months.

The OP I know is looking to buy sooner now though so they can pick up a 100 point direct contract before the min raises. That changes the math as well since buying an extra 25 points direct likely covers any finance charges if you are aggressively paying it back quickly.

 

[T-i-double-guh-er]

Counter argument is to take 1 year off, do a cheaper vacation, take all that money save it, and the following year buy yourself a nice contract without financing. Another option is to rent DVC which is likely cheaper than tha AOA suite especially now (if I was renting I would be looking for $10-$12 points in the coming months might settle at around $13/$14). Final option is to do a Disney Springs hotel for the single trip.

Again people can do what they wish though. For all I know your grandma might be 78, your parents 50th is during the trip, and you are proposing. None of those are financial considerations which people respond to.

Financial considerations vs other factors will lead you to a final decision. Honestly I personally think now is easier than ever to choose an alternative since resale I feel will just keep dropping in value and there is going to be lots of loaded contracts possibly for sale in the coming months.

The OP I know is looking to buy sooner now though so they can pick up a 100 point direct contract before the min raises. That changes the math as well since buying an extra 25 points direct likely covers any finance charges if you are aggressively paying it back quickly.

Financing can definitely be a big mistake, but there are a lot of factors. People are quick to say never finance, but I think there are certain situations where it does make sense. Similar to the examples you mentioned, we financed our first contract to be able to have points in time to book a 2BR for a big multi-generational trip with people coming from 3 states. We scored a value 2BR at AKV for Thanksgiving week, which would have been impossible with renting and increased the "savings" significantly. If we had waited to buy until we could pay cash, we would have still booked the trip, but paying cash and staying somewhere like AoA. We also put down 40% and kept the term short to lower the interest rate, and could pay the rest off quickly. Now we're adding another contract and paying cash.

 

[Starport Seven-Five]

Financing can definitely be a big mistake, but there are a lot of factors. People are quick to say never finance, but I think there are certain situations where it does make sense. Similar to the examples you mentioned, we financed our first contract to be able to have points in time to book a 2BR for a big multi-generational trip with people coming from 3 states. We scored a value 2BR at AKV for Thanksgiving week, which would have been impossible with renting and increased the "savings" significantly. If we had waited to buy until we could pay cash, we would have still booked the trip, but paying cash and staying somewhere like AoA. We also put down 40% and kept the term short to lower the interest rate, and could pay the rest off quickly. Now we're adding another contract and paying cash.

I think the biggest thing is interest rate. Double digit interest rates are a non-starter and very tough to justify but when you get below 5% it becomes much more palatable.

People come into these discussions with assumptions of what "financing" means and really dig in based on those assumptions.

 

[sethschroeder]

which would have been impossible with renting

I have found owners willing to walk in the past on a different forum if you paid a slight premium.

If we had waited to buy until we could pay cash

This is the biggest decider as well. If you for sure are going do the math and see what comes out ahead based on your math.

 

[meanwoodwhite]

A vacation investment is not a luxury for me. I go on vacations as a lifestyle choice.

I have been visiting the US at least once a year for the last 15 years. If I financed the purchase back then I would be well up by now.

Even with the loan amount it doesn't cost the $4k that it costs to stay in the family suite at AoA for two weeks. Or even the 2.5k it cost to stay at the MVC property we stayed in last year.

 

[meanwoodwhite]

actually the MVC property was closer to 3.5k was thinking of the £ amount

 

[sethschroeder]

A vacation investment is not a luxury for me. I go on vacations as a lifestyle choice.

I have been visiting the US at least once a year for the last 15 years. If I financed the purchase back then I would be well up by now.

Even with the loan amount it doesn't cost the $4k that it costs to stay in the family suite at AoA for two weeks. Or even the 2.5k it cost to stay at the MVC property we stayed in last year.

Luxury items can be lifestyle choices for you but that doesn't stop it from being a luxury item.

You are looking at AOA but that is not the only option (and personally the most expensive of all options other than cash Deluxe Villas). Renting points, staying offsite, skipping WDW for a single trip, are all other options as well. There are way cheaper options out there if you wanted them.

You're choosing to go regardless which is something you personally take in to account when doing your numbers. It does not change the math it just allows you to more easily explain why the interest and risk of a loan does not matter as much to you. It also is easy to look back where nothing of consequence happened and say it would be cheaper. No one has a crystal ball moving forward and that is why taking a loan for a vacation is typically frowned upon by many as a good financial move.

Said it before and will again, anyone can do whatever they want. There is way more than enough resources out there telling you to borrow more, how to move around money to get more credit, ect. I find it refreshing that this board is pretty good at "do not finance DVC" yet at the same time you typically will get "but if you must then x,y,z".

 

[JereMary]

Thanks all. I'm going to plan to watch the market and see where the bottom goes. Hopefully that means we are able to save up to the point where we're only financing $5K or so; at that point I can undoubtedly get a better rate just taking an unsecured personal loan via SoFi or something than the 10%+ rates I see quoted around resale sites. Or maybe use one of those 0% interest for a year "checks" that Chase sends me every few weeks. Our first trip with the points wouldn't be until May 2021 so we have time and, depending on the use year, no need for 2020 points.

Thanks!

We get those checks a lot too. Hold out for the 15 or 18 month checks!