Should we sell or hang on to it?

[cindybelle]

I just read through Luvdsne's post about having to sell their points....and it made me think about the same conversation my husband and I have had about ours.

We too are trying hard to get out of debt and as of last month, we paid off our last student loan!!! But we still have a large CC debt and our DVC loan. With the application of our student loan payments to our DVC principal, we should have it paid off next January. And then those payments we'd put towards our cc debt, but it would still take another 18 months to pay that off (end of summer '08)

If we sell our DVC next Jan/Feb (Feb use year and the points would be current). We could put that money towards our CC debt and be out of debt a year sooner (early summer '07).

But what do you all think? We got a great deal on our 170 points in 2000....we financed them for around 6700.00 (I'm a seasonal CM and got an additional discount).

We would definitely want to buy in again once our finances are settled...but it would be for a much higher cost.

Is it smarter to hang on to it since it's almost paid off? Or should we sell and knock out our debt sooner?

I have such a hard time thinking about not having our DVC points....but being out of CC debt sooner would also be a huge relief!

I'm so torn!!

 

[cobbler]

Well how high is the interest rate on your cc's?? If higher than what you financed DVC for I would suggest you put all that student loan $$ towards the cc instead of the DVC first.

 

[KelNottAt]

This is totally your decision. Only you know what other variables and personal factors are relevant to your situation. (i.e., your age, any kids?, are you in so much debt that you can't manage to contribute to a 401(k), etc., does your employment future have good potetial, how's your health, any big purchases on the horizon, etc., etc.)

But, with the disclaimer out of the way, and assuming your debt situation is not dire, I would keep the DVC and put the student loan money toward the CC. The CC probably has a higher rate than the DVC loan and is racking up finance charges. Plus, if an emergency arose, a low balance on your CC would free-up credit to pay unexpected bills. (Heaven forbid.) Likewise, in a truly worse case scenario, keeping your DVC allows you to sell it if you need emergency cash. Or, you could rent your points and use the money toward the CC.

IMO, selling DVC while you make some short-term changes to address manageable debt sounds a little extreme. BUT, if your situation is extreme, then buy all means, do it.

 

[mickeyfan2]

Since you would buy back in I would say not to sell. Pay the student loan payment on the higher interest loan. Sell your point for 2006 and 2007 and put that toward your debt. Put off a WDW vacation until you have the CC and DVC paid off. Think of the great vacation you could have with no CC or DVC debt.

Now if it was me I would sell and apply everything to the CC and get myself a good emergency fund and fully fund my retirement before buying back into a vacation club. Being debt free and in a sound financial position is more important than a vacation club.

 

[Pluto4Pres]

You should also check how much you're paying now - principal vs. interest. You probably have already paid most of the interest up front and now you're really paying yourself.

 

[cindybelle]

I've consolodated our debt onto one CC with a 3.99% until the balance is paid off. So it's a low rate for as long as it takes us.
And yes, we are paying more principal than interest on our DVC loan at this point.

Being a seasonal CM....I have to work a week a year to keep my status (something that I just can't imagine giving up right now). So we have to go to Disney once a year (it's funny to say we "have" to....like someone's twisting my arm )

Right now we only have 1 child, DD3 (the reason we moved from FL back to MI and why I turned from a FT CM to a Seasonal CM)....and are in the midst of deciding about adding to our family one more time. So there's a possible financial increase. But by the time we'd sell, we'd know if we were going to have a 2nd child. I guess we should just keep plugging away and in another 6 months access the situation.

I'll talk to DH about renting out our points though.....that's a great idea!

Thanks for your thoughts!!

 

[mydogdrew]

You should also check how much you're paying now - principal vs. interest. You probably have already paid most of the interest up front and now you're really paying yourself.

This is a common error. You don't pre-pay interest on debt. The reason that you pay lower interest expense over time is because you have a lower principal balance over time, not becase you pre-paid interest. There are many people who think you should not pay off your 5-year car loan after four years because you have "paid most of the interest already". Say you borrowed $10k to buy DVC over 10 years @ 10%. The first year you will pay roughtly $1,000 interest (ave principal of $10K) and the last year you will pay roughly $100 interest (ave principal of $1000). If you are looking to go debt free, it makes just as much sense to payoff the loan early in year 10 as it would in year one. There is no penalty in that regard.

I also agree that you should rent your point to expire debt before selling outright. Pay off the credit cards first.

 

[Jen D]

Personally I think if you can stick with the payment schedule you've mapped out, rolling one payment into the next debt as things get paid off, you should hold on to it. Especially since you intend to keep traveling to WDW and say you'd want to buy back in later. Might as well hold it. As others said, you could rent some points to get through this lean period.

But obviously I'm not giving you the Dave Ramsey advice.

 

[luvdzne]

You sound like you are in a better position to keep your points than we are. First of all we just purchased ours last year, so we still owe more than I would like to on it. If we were in your situation and would be able to pay it off with the rest of our CC we would definatly keep it. It just isn't in our best intrest to keep it with the position we are in. I guess I have been hanging out on the budget board too long....It is a very hard thing to have to do . Good luck to you, I'm sure whatever you decide to do it will be the best for you and your family!

 

[yitbos96bb]

I just read through Luvdsne's post about having to sell their points....and it made me think about the same conversation my husband and I have had about ours.

We too are trying hard to get out of debt and as of last month, we paid off our last student loan!!! But we still have a large CC debt and our DVC loan. With the application of our student loan payments to our DVC principal, we should have it paid off next January. And then those payments we'd put towards our cc debt, but it would still take another 18 months to pay that off (end of summer '08)

If we sell our DVC next Jan/Feb (Feb use year and the points would be current). We could put that money towards our CC debt and be out of debt a year sooner (early summer '07).

But what do you all think? We got a great deal on our 170 points in 2000....we financed them for around 6700.00 (I'm a seasonal CM and got an additional discount).

We would definitely want to buy in again once our finances are settled...but it would be for a much higher cost.

Is it smarter to hang on to it since it's almost paid off? Or should we sell and knock out our debt sooner?

I have such a hard time thinking about not having our DVC points....but being out of CC debt sooner would also be a huge relief!

I'm so torn!!

I'd keep it. Why not rent your points and if you get $10 a point use that $1700 towards your DVC payment or Credit Card. 3 years of not going would pretty much pay it off, if you were paying NOTHING extra. 6700 for 170 points is a hell of a deal.

 

[yitbos96bb]

This is a common error. You don't pre-pay interest on debt. The reason that you pay lower interest expense over time is because you have a lower principal balance over time, not becase you pre-paid interest. There are many people who think you should not pay off your 5-year car loan after four years because you have "paid most of the interest already". Say you borrowed $10k to buy DVC over 10 years @ 10%. The first year you will pay roughtly $1,000 interest (ave principal of $10K) and the last year you will pay roughly $100 interest (ave principal of $1000). If you are looking to go debt free, it makes just as much sense to payoff the loan early in year 10 as it would in year one. There is no penalty in that regard.

I also agree that you should rent your point to expire debt before selling outright. Pay off the credit cards first.

I had this same understand issue a while ago. Look at the loan in the amoritization table and that gives a good visual on what Mydogdrew is talking about.

http://ray.met.fsu.edu/cgi-bin/amortize