If you’ve ever been to a resort at a destination location, you’re probably familiar with the timeshare sales pitch. The developer of the resort will typically lure you in with a free dinner in the hopes of wooing you into buying a timeshare on the spot. If you do not have the ability to pay upfront, they might offer you a loan.
Accepting this finance may result in not only a long term debt but also purchasing something that intrinsically has no real value except future holiday memories. With many resorts wanting around £20,000 as an entry level purchase and with repayment terms stretching between 10 and 20 years, this is a decision that should not be taken lightly or in haste.
Benefits of timeshare loans
The primary benefit of using a loan from a contractor to pay for a timeshare is convenience. The convenience factor may be attractive if you’re hoping to secure any limited-time or special perks being offered by the contractor. Taking this route may also make sense if you have no other financing options available. On the day, those special perks like free restaurant vouchers or free theme park tickets may seem attractive but in reality, they will be available to every purchaser every day, they are simply a way of getting you to make a decision on the spot.
Drawbacks of timeshare loans
The most obvious drawback of timeshare loans is that they come with much steeper interest rates. A recent review of a purchase finance contract revealed an APR as high as 18.9% percent! Loans are unsecured; this is the reason for the inflated interest rates. Interest is merely one of the issues to be aware of when considering financing a timeshare purchase.
It is not uncommon for the timeshare salesperson to advise their clients to arrange the re-finance of their loan with a high street bank once they get home, thus reducing the interest rates considerably. The problem they later incur is that in reality the main stream lenders will not offer any loans on timeshare or other long term holiday products.
Reselling is challenging
The main reason is quite simply, supply and demand. The supply of timeshare resales greatly exceeds the demand for resales. This has always been the case in the timeshare industry due to the fact that so few people even realize you can buy a timeshare resale!
Most mainstream lenders such as high street banks shy away from providing loans for timeshares because they offer no real monetary value. Given that you are not buying an investment, the value typically depreciates the moment you complete your purchase and ultimately in most cases the timeshare offers no market value at all, making the ability to sell virtually impossible.
If you’re considering a timeshare purchase, experts say that you should be sure that you are doing it for the right reasons. Buy it to use and enjoy it, not as a financial investment. Along with the holiday memories, a timeshare’s main advantage is that it allows you to avoid spending money on future holiday accommodation. The trouble is that if your personal circumstances change, the expense doesn´t, so for many it soon becomes an encumbrance and in time; due to the ever increasing maintenance charges and difficulty in exiting, a financial liability.
