Financing resale contracts?

[hilltopper152]

It's mostly about the interest charges. Most will advocate not to finance since it adds on to the cost, but I advocate "finance responsibly". You'll need to do the math to see if it's worth it for you. A 10-year loan of $10,000 at 10% interest means that after the whole term, you would have paid over $5850 in interest. Yes, this is a lot! Look for a personal loan rather than a timeshare loan (which typically has a higher percentage) and pay it off ASAP.

Assuming you fast-track it and pay your loan off in 3 years... That's at least 3 extra DVC vacation memories you will have rather than saving up for it. Kids get older and life changes. Will the interest paid be worth it for you?

Also, If you decide to save for it, prices might go up and/or new restrictions could be in place. If you finance, you would have "locked in the price" and be grandfathered in. Will the interest paid be worth it for you?

I am glad to have financed in January 2019 and quickly repaid it. I can use all my resale points in all future resorts, and I was glad to be able to take my parents to Disney in 2019 since my dad's health has declined. The interest paid was definitely worth it for me!

I missed the cut off for grandfathering in by 3 months. We paid cash first and may finance a tiny bit now, I mean a tiny amount that it is embarassing to admit. Either way these loans of 10% plus are intense and if you do not have a way to accelerate payment then you will pay for it. One way to spin this for the OP is if you want to make payments now so you do not empty your cash in this current economy it would allow for that. You can keep payments reasonable in case their was job loss or tighter budgets but have to be ready to "make up" for it when you can. Easy to let another $50 be added to a monthly payment but the interest works against you fast.

I agree that time is money and while it cost you, the time without vacation also cost you. My daughter is 3 once, I acknowledge that the finances does not match my heart or means. It is a heavy consideration but currently I have to talk myself out of debt for these reasons. ONLY A SMALL AMOUNT can be logically assumed.

I see many old timers haha on here that have cash to drop during these cheaper windows but I like to think we will have our opportunity down the road too for grandkids maybe. Just be smart and there are cash discounts at many great resorts. I hate off property so I would consider Cornado Springs or something like Swan too. Feels nice and truthly it is more affordable without the crazy long break even point. I think I will take my own advice more often on this matter! lol

 

[lilsonicfan]

As someone who looked to buy my first house in the 80's when mortgages rates were running over 16% I still cannot get past that today's rates are considered high.

It's all relative, I guess.

Ah, the 80s. A time when houses could be purchased for 2-3x annual household income. Yes, the interest was high, but today house prices are what 10x annual household income…(In my city at least) so yeah - today’s rates are relatively quite high!

 

[hilltopper152]

Ah, the 80s. A time when houses could be purchased for 2-3x annual household income. Yes, the interest was high, but today house prices are what 10x annual household income…(In my city at least) so yeah - today’s rates are relatively quite high!

ha yeah I am lucky to have got 3% right at 2020 early. Homes here for average suburban areas at least 6x salaries. Of course it varies but we are talking basic homes in a city that is not close to a hot bed ha. I have peers that probably will never own a home or be happy with a condo by 38. Sad really even for my youngest brother.

 

[sndral]

The should I finance question is interesting to me.
For someone accumulating wealth via living in a fiscally conservative way the answer is no, don’t finance a timeshare purchase. The answer should be the same if the question asked is if they should finance a new car purchase. Anytime you finance & pay interest you are committing future money to meeting todays wants. The more interest you pay the less money you’ll have for tomorrow’s wants.
The reality is that few people live in a fiscally conservative way & that’s ok. In an ideal world you’d pay cash for a house too, yet it’s not realistic for most to wait & pay rent until they’ve saved up enough to buy a house w/ cash. W/ a house you need some place to live anyway, so folks borrow to buy houses. Thus a case can be made that if you are going to go to WDW & stay in a deluxe resort anyway, it can make sense to finance & have an asset once you’ve paid it off as well as a reduced cost to stay in a deluxe once you’ve paid it off.
It’s basically a question of do you want to sacrifice later to get something you want now, or do you want to sacrifice now to get something that you want later.
W/ DVC resale there have been times when the increase in cost while you saved up was more than what interest would have cost you if you’d bought before prices went up conversely in the ‘08 era resale prices dropped.

 

[Epcot Forever Forever]

The answer should be the same if the question asked is if they should finance a new car purchase

The comparison isn’t *a* car, it’s a luxury car. You need a car in 97% of the US (by land). You never need a Porsche. Finance a car. Don’t finance a midlife-crisis-mobile.

 

[Epcot Forever Forever]

Accelerating payments is great but the years you’re paying interest are the ones where it’s 80% of your payment and the ones you’re skipping are the ones where interest is 20% of your payment.

 

[sethschroeder]

What happens when you lose your job or get a reduction in salary?

What happens if daily costs of necessities go up a ton?

What happens if resale prices tank while Disney park prices sky rocket so you can't afford to go?

Also the longer it takes to pay off the less savings benefit there is.

 

[Stank]

Accelerating payments is great but the years you’re paying interest are the ones where it’s 80% of your payment and the ones you’re skipping are the ones where interest is 20% of your payment.

That’s one way to look at it, but also your next payment will be more principal than interest than otherwise. You’re accelerating the growth in the share of the paid off principal and accelerating the shrinking of the dwindling interest share. So the benefits of accelerating debt repayment are immediate, not just deferred to later years.

Similar to how biweekly payments of a mortgage shed years off the mortgage’s age. You’re blunting the compounding effects. Likewise, paying $100 extra on a 10% loan isn’t just a benefit in the 7th year of loan payments, but on your current interest burden you carry. That $100 is now not compounding at 10%.

Said yet another way, you’re making a guaranteed 10% ROR. That’s more than double what you can find in high yielding savings accounts, and trumps stocks once you consider tax implications. Either way, 10% guaranteed tax-free return is the best deal in town.

 

[RoseGold]

I agree that time is money and while it cost you, the time without vacation also cost you. My daughter is 3 once, I acknowledge that the finances does not match my heart or means. It is a heavy consideration but currently I have to talk myself out of debt for these reasons. ONLY A SMALL AMOUNT can be logically assumed.

Nobody is saying don't take vacation if you don't buy a five figure timeshare. Heck, the Waldorf is $250 in my August dates on Hotwire. Even that is competitive with DVC.

 

[Stank]

What happens when you lose your job or get a reduction in salary?

What happens if daily costs of necessities go up a ton?

What happens if resale prices tank while Disney park prices sky rocket so you can't afford to go?

Also the longer it takes to pay off the less savings benefit there is.

Exactly. Living above your means today means you live beneath your means tomorrow when it comes to consumer debt.

In 2008, the biggest outcry wasn’t that people lost their homes….but that people had their credit limits cut. I remember how people freaked out when their credit card issuer sent them letters notifying them their limits were reduced from $10k to $8k. You would’ve thought they took $2k cash from their pocket.

Banks just reduced lending the last 2 weeks of March by the most in history. Credit is being dammed up; if you’re dependent on borrowing, yesterday was the time to get focused. When it comes to DVC, I would say today is especially not the time to borrow. Tomorrow doesn’t look good either. Many people 6 months from now will have wished they didn’t borrow.

 

[RuntheMouse]

The rule in our house is you don’t finance toys. Motorcycles, snowmobiles, boats, campers, timeshares. You save up and pay cash!

 

[mz-s]

I am not your momma or daddy but I say no do not ever finance something like a timeshare. If you can't just buy it cash, then don't buy it...

I paid cash for my DVC contract and my cars are paid off (I'll never finance another car now)...

Philosophically I can't see paying interest for a toy like vacations. Sorry I'd never agree with it. Putting it on a Disney credit card 6 months same as cash sure as long as you pay off the card so there's no interest, sure. But no loans.

You asked...that's my opinion...

 

[tom1944]

I am not your momma or daddy but I say no do not ever finance something like a timeshare. If you can't just buy it cash, then don't buy it...

I paid cash for my DVC contract and my cars are paid off (I'll never finance another car now)...

Philosophically I can't see paying interest for a toy like vacations. Sorry I'd never agree with it. Putting it on a Disney credit card 6 months same as cash sure as long as you pay off the card so there's no interest, sure. But no loans.

You asked...that's my opinion...

Mine too

 

[Anthony Vito]

I'm going to disagree with the majority of posters, but for the point that everyone is different. I'm more in line with the original poster as well. For us, financing made sense. We were going to buy DVC eventually, and originally intended to wait until we saved up enough to pay cash. However, we were also going to go to WDW at least once a year, but probably more. We also stay on property and in deluxe (location is the most important factor for us - we want to be close to the parks, and typically only stay at resorts with non-bus transportation to at least one park). So it's two-factor for us - one, we're spending the money anyway on WDW hotel rooms, so that's not money being saved or put towards anything else. Two - the fact that we were going to buy eventually, regardless, meant that by buying sooner (with financing), we may be saving money in the long run taking into account the rising point costs (someone else mentioned this as well). Now, as opposed to the original poster, we bought direct (not going to get into that debate), so for OP, it's slightly different given the current resale market trend.

For us, we financed two contracts, one in early 2019 at Copper Creek, where we absolutely wanted to own, and a second contract in 2020 when we got a good deal (Riviera - also wanted to own there). We'll likely have the first contract paid off in about 4-5 years, and the second in about the same, we're paying quite a bit of interest. However, for example, with the Riviera add on - we were able to get the points at $160/pt. If we wanted that now, we'd be paying over $8,000 more than what we paid for them. That's our interest most likely right there. We've also been able to use 800 points (through this summer). Similar to OP, the monthly payments (plus some extra) are not the problem for us. Additionally, while the economy, layoffs, etc. are a concern as others have said - they're not necessarily a concern for everyone - everyone has their own individual evaluation on that.

Finally, we have been able to go on multiple trips with our points. While we would have certainly still traveled to WDW multiple times, not as many times, and certainly not in the rooms we stayed in (2-BRs a couple times, even one night in a Copper Creek cabin). We also wouldn't have gone quite as many times paying cash. So, for us, with two young kids (8 & 10), I'm more than happy to have paid extra to go a bit more than we would have otherwise, rather than waiting until kids were older and student loans were paid off, etc.

 

[tom1944]

I'm going to disagree with the majority of posters, but for the point that everyone is different. I'm more in line with the original poster as well. For us, financing made sense. We were going to buy DVC eventually, and originally intended to wait until we saved up enough to pay cash. However, we were also going to go to WDW at least once a year, but probably more. We also stay on property and in deluxe (location is the most important factor for us - we want to be close to the parks, and typically only stay at resorts with non-bus transportation to at least one park). So it's two-factor for us - one, we're spending the money anyway on WDW hotel rooms, so that's not money being saved or put towards anything else. Two - the fact that we were going to buy eventually, regardless, meant that by buying sooner (with financing), we may be saving money in the long run taking into account the rising point costs (someone else mentioned this as well). Now, as opposed to the original poster, we bought direct (not going to get into that debate), so for OP, it's slightly different given the current resale market trend.

For us, we financed two contracts, one in early 2019 at Copper Creek, where we absolutely wanted to own, and a second contract in 2020 when we got a good deal (Riviera - also wanted to own there). We'll likely have the first contract paid off in about 4-5 years, and the second in about the same, we're paying quite a bit of interest. However, for example, with the Riviera add on - we were able to get the points at $160/pt. If we wanted that now, we'd be paying over $8,000 more than what we paid for them. That's our interest most likely right there. We've also been able to use 800 points (through this summer). Similar to OP, the monthly payments (plus some extra) are not the problem for us. Additionally, while the economy, layoffs, etc. are a concern as others have said - they're not necessarily a concern for everyone - everyone has their own individual evaluation on that.

Finally, we have been able to go on multiple trips with our points. While we would have certainly still traveled to WDW multiple times, not as many times, and certainly not in the rooms we stayed in (2-BRs a couple times, even one night in a Copper Creek cabin). We also wouldn't have gone quite as many times paying cash. So, for us, with two young kids (8 & 10), I'm more than happy to have paid extra to go a bit more than we would have otherwise, rather than waiting until kids were older and student loans were paid off, etc.

No doubt it works out for many

If you go to the Orange County deed site you can also see by the number of foreclosures it becomes a financial problem for a significant number of people too.

 

[Sandisw]

No doubt it works out for many

If you go to the Orange County deed site you can also see by the number of foreclosures it becomes a financial problem for a significant number of people too.

I am sure there are people who end up in financial trouble..but it is still an individual decisions and IMO, no one right or wrong answer because it depends on what one values most.

But, when people do ask, it’s good to give one’s opinion.

Personally, I would never suggest one is better than the other. But that before deciding be sure to consider certain things and a few what ifs..

We decided long ago to balance financial goals with personal goals which included trips to Disney in the manner we wanted..which was not staying offsite.

We have no regrets today thst we are not the millionaires we might be if we lived frugally, never financed things, and took vacations, especially to Disney, in a way that would have made us happy.

Granted, this isn’t the way everyone would do it, but we almost financed DVC and would have had no regrets if we had. We didn’t end up needing to but it would have been completlet comfortable if we had gone that route.

 

[sethschroeder]

I'm going to disagree with the majority of posters, but for the point that everyone is different.

You disagree because so far it has worked out for you.

Others say don't finance because of the risks associated. If you can look back and say "never had an issue" that is very different.

With going to WDW multiple times a year you seemingly could have cut out a trip, save that money and afforded DVC by skipping a trip and doing something closer to home.

You also likely financed at a much lower rate than what the OP will get.

No doubt it works out for many

If you go to the Orange County deed site you can also see by the number of foreclosures it becomes a financial problem for a significant number of people too.

Bingo which is why it's best to say to avoid. If it makes overwhelming sense to you to finance you don't need a forum telling you so.

Anyone coming here for affirmation already has doubts likely.

 

[tom1944]

I am sure there are people who end up in financial trouble..but it is still an individual decisions and IMO, no one right or wrong answer because it depends on what one values most.

But, when people do ask, it’s good to give one’s opinion.

Personally, I would never suggest one is better than the other. But that before deciding be sure to consider certain things and a few what ifs..

We decided long ago to balance financial goals with personal goals which included trips to Disney in the manner we wanted..which was not staying offsite.

We have no regrets today thst we are not the millionaires we might be if we lived frugally, never financed things, and took vacations, especially to Disney, in a way that would have made us happy.

Granted, this isn’t the way everyone would do it, but we almost financed DVC and would have had no regrets if we had. We didn’t end up needing to but it would have been completlet comfortable if we had gone that route.

Years ago 1996 I wanted to purchase DVC, I believe it was Boardwalk that was being sold. My daughter was 6 and we had relatives in Florida so I thought it made sense. I would have had to finance. We ended up not purchasing because while I was tempted to purchase immediately I never do anything on emotion or without generally overthinking.

We ended up a one income family by choice so not making that purchase ended up the right decision for us.

If we did purchase I would not have been able to pay for my daughter’s college education which was a bigger priority for us.

Every family has to make the decisions that work for them

 

[ak517]

Another way to do it is finance but put some or all of it on one or more 0% interest credit card, assuming the balance in high enough. We did that for half of our original loan, knocking the interest accrual off 50% of our original purchase price, and giving us some flexibility in paying it off due to the terms of the 0% interest period. Although our original loan was for like 5 years (I knew what we were doing and wanted lower payments in case of unforeseen crisis despite having dual incomes with stable jobs) we’ll be able to pay the remainder off with lower total interest accrual and much faster.

The negatives to this are obviously increasing your credit utilization, but if you aren’t planning to buy a house, finance a car, or take out another major loan requiring a hard credit inquiry while you pay off the 0% credit balance (and you don’t go into the regular credit APR terms ) it doesn’t exactly matter.

 

[CVG]

As someone who looked to buy my first house in the 80's when mortgages rates were running over 16% I still cannot get past that today's rates are considered high.

It's all relative, I guess.

16% of nothing is a lot less than 5% of stupid.