Prespectives on Financing

[rchristiansen]

I keep considering paying off the remainder of our $7K balance on our BLT contract, but it's only $100/month. I have this viewpoint that DVC is actually a "Club." While yes, technically I'm paying off a mortgage I look at my $100/month payment as a club membership fee - sort of like paying $100/month to the health club or the cable TV.

Trust me I DO understand compounding interest, etc. However, I just don't want to hand over a wad of cash if I can pay this "nominal" fee.

Anyone else have "weird" viewpoints of your monthly payments?

 

[kristie03]

I know its the monthly payment I like the most!

 

[hellerjw]

I've had the same conflicting issue. We are definitely in debt reduction mode lately and trying to follow the whole Dave Ramsey approach, with slight modifications.

We have 2 small contracts financed with Disney right now and have some other debt to pay off as well. We have a decent chunk of change from tax refunds and savings to pay off all of the non-DVC debt. After looking at all the scenarios of how to best utilize this extra cash I've finally made a decision regarding our DVC financed contracts. Since the DVC financing interest is deductible in our case it isn't as bad a debt as say credit card balances. The DVC contracts also have some resale value associated with them so they aren't like the unsecured credit card debt.

I decided to pay down our DVC loan balances to the point that if I had to sell them today I could break even without any out of pocket costs. I also plan to use the freed up funds from paying off the non-DVC debt to make extra payments to keep me below what the resale market will bare just in case. I feel this is a good compromise between preserving extra cash for emergencies and achieving my debt reduction goals. It doesn't pay the DVC loans off but it helps keep me from taking a loss if I do have to get rid of them.

 

[iwrbnd]

This is an interesting thread. I want to take a chunk of money and pay off our DVC or the car but my husband wants to invest it. I do the monthly bills, though, and understand how great it would be to not have those 2 payments. They are our last thing to being debt free! (Well, besides the house)

 

[WendyinNC]

Most people on these boards are very much against financing for luxury items. I take a different view. I refuse to let go of my cash for luxury items. I don't see any problem with holding onto cash and financing DVC. Once you let go of that $7000 you may never see it again. How many people will really save that monthly payment and replace the assets they used. I know I probably won't. So ask yourself this. Where do you think you will be in 10 years if you use the $7000 to pay off the loan? Yes, it's better to pay off the loan and then save the monthly payments. But, will you? Also, you might be able to use that $7000 more effectively to build your wealth. Maybe improving your home, buying a 2nd home, investing in a business, etc. I'm of the view that I will only use my cash savings for purchases that will increase my wealth. If it were me I would hang onto the $7000 and try to squeeze my monthly budget to send extra payments to DVC to pay it off sooner. Good luck. I'm sure you will receive a lot of different opinions on this.

 

[hellerjw]

This is an interesting thread. I want to take a chunk of money and pay off our DVC or the car but my husband wants to invest it. I do the monthly bills, though, and understand how great it would be to not have those 2 payments. They are our last thing to being debt free! (Well, besides the house)

I too had the same delimma about whether to invest it or pay down other debt. What made my decision for me was realizing that I would have to earn a return of somewhere near 14% just to offset the financing costs and inflation. I think most folks would be hard pressed to get anywhere close to that rate of return in the current market.

 

[iwrbnd]

I too had the same delimma about whether to invest it or pay down other debt. What made my decision for me was realizing that I would have to earn a return of somewhere near 14% just to offset the financing costs and inflation. I think most folks would be hard pressed to get anywhere close to that rate of return in the current market.

Good thought! I'll have to share that with hubby!

 

[sissy_42]

Most people on these boards are very much against financing for luxury items. I take a different view. I refuse to let go of my cash for luxury items. I don't see any problem with holding onto cash and financing DVC. Once you let go of that $7000 you may never see it again. How many people will really save that monthly payment and replace the assets they used. I know I probably won't. So ask yourself this. Where do you think you will be in 10 years if you use the $7000 to pay off the loan? Yes, it's better to pay off the loan and then save the monthly payments. But, will you? Also, you might be able to use that $7000 more effectively to build your wealth. Maybe improving your home, buying a 2nd home, investing in a business, etc. I'm of the view that I will only use my cash savings for purchases that will increase my wealth. If it were me I would hang onto the $7000 and try to squeeze my monthly budget to send extra payments to DVC to pay it off sooner. Good luck. I'm sure you will receive a lot of different opinions on this.

I agree with much of what you said. I just became a member and I did end up making a large payment right away. I do I want to be able to save as much money on interest as possible but not at the risk of loosing something else. With the payment I recently submitted and paying an extra $50 a month I will pay off my 10 year DVC loan in four. My plan is to pay as much over the minimum payment as possible with out sacrificing something else, especially something I really need. My choice was DVC or a new car, my car is only three years old and in good condition, so I thought about it and decided what I really want now is DVC and a low car payment. A new car can wait two or three more years. I actually feel a new car for me would be more of a luxury purchase then DVC at this point. But keeping that extra money in the bank is gonna help if something happens and I end up NEEDING a new car or major repairs.

 

[ut*disney]

I'm curious. About how much is a monthly note, financed through DVC? I know it all depends on the percent of finance. I'm just trying to get a ballpark figure.

We just put a contract down on SSR 220 points. I am going to be on the Webinar next week. I know my hubby is nervous I am going to give in and purchase AKV through Disney.

 

[mgilmer]

I'm curious. About how much is a monthly note, financed through DVC? I know it all depends on the percent of finance. I'm just trying to get a ballpark figure.

We just put a contract down on SSR 220 points. I am going to be on the Webinar next week. I know my hubby is nervous I am going to give in and purchase AKV through Disney.

Just go here: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx and plug in your term (2-10 years) your amount financed, and the interest rate (10.75 or 14.25).

 

[rchristiansen]

I should put in the caveat that we do have two contracts:

One 50 Point at AKV that IS paid off and the 2nd at BLT for 75 points that is not.

I think I'm OK with the monthly payments as long as its only around $100/month. Anything more than that would seem too much.

 

[maryloubsw]

Most people on these boards are very much against financing for luxury items. I take a different view. I refuse to let go of my cash for luxury items. I don't see any problem with holding onto cash and financing DVC. Once you let go of that $7000 you may never see it again. How many people will really save that monthly payment and replace the assets they used. I know I probably won't. So ask yourself this. Where do you think you will be in 10 years if you use the $7000 to pay off the loan? Yes, it's better to pay off the loan and then save the monthly payments. But, will you? Also, you might be able to use that $7000 more effectively to build your wealth. Maybe improving your home, buying a 2nd home, investing in a business, etc. I'm of the view that I will only use my cash savings for purchases that will increase my wealth. If it were me I would hang onto the $7000 and try to squeeze my monthly budget to send extra payments to DVC to pay it off sooner. Good luck. I'm sure you will receive a lot of different opinions on this.

I totally agree with your viewpoint!

 

[Dean]

I keep considering paying off the remainder of our $7K balance on our BLT contract, but it's only $100/month. I have this viewpoint that DVC is actually a "Club." While yes, technically I'm paying off a mortgage I look at my $100/month payment as a club membership fee - sort of like paying $100/month to the health club or the cable TV.

Trust me I DO understand compounding interest, etc. However, I just don't want to hand over a wad of cash if I can pay this "nominal" fee.

Anyone else have "weird" viewpoints of your monthly payments?

I don't know your overall personal situation, but as asked, I'd pay it off and then set the $100 to be deposited into some type of savings vehicle going forward. If you actually look at the interest you're paying over the remaining life of the loan you'll see it's likely around $5K depending on the term remaining and actual interest rate. If you do the same calculations saving $100 a month for 10 years, you'll have around $20K at 7 % annual return which is on the low side for many investment options that are long term. Not saying what you should do, only what I would do.

 

[arthur06]

I guess for me it depends on the 7 grand... Do you have $7,000 saved up in total or an additional $7,000 to other "emergency" type savings...

 

[Sandisw]

I am also one that feels the same way as you. For years, I had to carry a small credit card balance (around $1000) just so that I wouldn't charge things I really didn't need. As long as I had that balance hanging over me, I was a little more hesitant when buying stuff. I know that sounds weird, but it helped and I built up money that I don't think I would have had I not had some sort of debt.

Now, years later, we are in a different position and no longer need this piece to control our spending. When we bought DVC last year, we did think about financing and had no problem doing so. Our yearly trips to WDW were running around $5000 - $6000 per year (room, food, airfare, spending, and car rental) and figured if I could buy in and keep my yearly costs within that figure, it was not costing me more. Whether I paid interest on my DVC or paid high rates to stay at the CR, I was still spending vacation dollars.

We ended up rearranging things and not having to go that route, but I don't feel there is any one right way to look at things. As long as people are realistic as to what the financing adds to the purchase, it is all good.

 

[bumbershoot]

OP, as long as you have a plan of what to do with the 100/month, I'd just start paying it off. Perhaps you could start slow...pay an extra 100/month as a principal payment? Ooh, if you can add regularly to the 7K you have sitting there, you could just keep building the 7K back up even as you send in extra principal.

I used to enjoy having a bunch of money sitting there, but now, if I have a place to send it, I like to send it.

But if you can see the interest you're paying, and it's an acceptable trade-off, then....as I've read on the DR boards, there's a reason why it's called *personal* finance.

This is an interesting thread. I want to take a chunk of money and pay off our DVC or the car but my husband wants to invest it. I do the monthly bills, though, and understand how great it would be to not have those 2 payments. They are our last thing to being debt free! (Well, besides the house)

I think that you are on the right track.

Since you're nearly debt free and obviously have a plan for the montly payment money once no one is asking for those monthly payments, you could easily just get that money after paying them off, and THEN invest in something. That way, if you lose all the invested money, at least you won't also have a car and DVC payment, ya know?

I'm curious. About how much is a monthly note, financed through DVC? I know it all depends on the percent of finance. I'm just trying to get a ballpark figure.

I don't ever mind (over)sharing. 160 points, BLT, last March prices. Put down 1700, I believe, and we got the preferred interest rate. Our payment (this isn't including the dues, that is a separate payment) is 226.92. We found that to be quite reasonable for what we are getting, and it's ridiculously easy to make extra payments on the principal, as long as you don't have a pending payment (so for about 3 business days each month you can't make a principal payment online).

As long as people are realistic as to what the financing adds to the purchase, it is all good.

 

[kdepot]

We financed for 10 years and put a large downpayment to get a low monthly payment.

When we have some extra cash we send a $500.00 principal payment to cut down the years.

We have cut 3 years off the end of the loan so far and will be sending another extra prin. payment this month.

What ever works to save something in the end.

 

[rchristiansen]

So I've been playing with our household budget (We're self employed so I'm always looking at the budget) and came to the realization that while I can't get a 10% return on any investment right now, I do get a ginormous tax deduction this year by putting that cash into a qualified retirement account. Which means less in taxes and more cash at the end of the year ---

I think if we make any extra this year, then I'll pay off the DVC loan. For now, I'm going to hide that cash from uncle sam.

 

[WendyinNC]

So I've been playing with our household budget (We're self employed so I'm always looking at the budget) and came to the realization that while I can't get a 10% return on any investment right now, I do get a ginormous tax deduction this year by putting that cash into a qualified retirement account. Which means less in taxes and more cash at the end of the year ---

I think if we make any extra this year, then I'll pay off the DVC loan. For now, I'm going to hide that cash from uncle sam.

Now that's a good plan!

 

[nunzia]

I'm curious. About how much is a monthly note, financed through DVC? I know it all depends on the percent of finance. I'm just trying to get a ballpark figure.

We just put a contract down on SSR 220 points. I am going to be on the Webinar next week. I know my hubby is nervous I am going to give in and purchase AKV through Disney.

I bought 125 VGC, 5K down, financed for 5 years at preferred rate of 10.? % (hard to believe over 10% is preferred, but there you have it). Around the same time as when we bought DVC we needed a new (to us, not brand new) car. At first I was slapping extra money on the car, but then realized that since the car is under 5% compared to DVC 10+ that it was wiser to put the extra on DVC, so that's what I'm doing. My DVC minimum payment is 182.00 a month. I'm payinig it down quickly, but I am not sacrificing other things, like extra payments on the mortgage, savings, trip plans, etc. I try to keep some balance. I really do think I'll be getting a 50 point add on (after talking myself out of a 75 point ) so will sell my OKW to help pay for the that. I only bought OKW to get in the system and I think I'll be able to get some resort at WDW at 7 months easier than VGC at 7 months..