Took out a loan to pay off timeshare in order to offload - smart move?

[GladlyGoingGordon]

Hi all,

My wife and I decided to take out a loan to pay off the remaining balance of the Mortgage on my Westgate timeshare. The plan was to pay it off and sell it for nothing so that we didn't have to continue to pay rising maintenance fees and no longer had the burden of it. The balance is just about $15k. I wanted to make sure this was the best move to make before pushing ahead? Are there other options?

 

[Passepartout]

Only if you have the means to pay off the loan quickly. You are already in a $15K hole. How much do you expect to need credit going forward 10 years? I would be very tempted to simply default on Wastegate, take the credit score hit and file explanation letters that your only credit hit was a dumb timeshare purchase. The decrease in your expenses should go a long way toward increasing the score.

Neither choice is a good one, but we wish you well.

Jim

 

[GladlyGoingGordon]

Only if you have the means to pay off the loan quickly. You are already in a $15K hole. How much do you expect to need credit going forward 10 years? I would be very tempted to simply default on Wastegate, take the credit score hit and file explanation letters that your only credit hit was a dumb timeshare purchase. The decrease in your expenses should go a long way toward increasing the score.

Neither choice is a good one, but we wish you well.

Jim

Well, the original Westgate mortgage was opened with a crazy interest rate - something like 14% - so the plan was to take out the loan, and immediately do a balance transfer to my Discover card which is offering 0% interest on balance transfers with a 3% fee for the transfer. We will continue making the same monthly payment that we were making towards the mortgage, except now it will be knocking all principal balance off rather than a hunk of interest. Then, once that promotional period ran out, balance transfer to one of my other cards with a 0% offer. We would be done within 3 years with this method, while getting rid of the timeshare and avoiding spending an additional $1000+ in maintenance. A costly lesson but this was the best way I could see ourselves getting out of the timeshare and paying the debt off the cleanest and most efficient way.

 

[Shankilicious]

In my opinion, anything is better than paying that crazy high interest rate. If your credit score is good enough now that you have $15k+ credit limits, I'm betting your score is in decent shape and there's no telling how badly letting your TS default would effect it. You could search around for other posts about people who have defaulted to give you a general idea.
I'm going to disagree with Passepartout on the letters of explanation having any effect on you credit score after the fact. Just because it was a "dumb"/financially irresponsible decision, doesn't make the fact that you failed to pay on a debt go away. I doubt the credit bureaus would view it any differently than if you bought a $15k car and failed to pay on it.
Your credit score is based on four things.
1. Length of credit
2. Number of lines of credit
3. Types of credit (car loans, mortgage, student loans, personal loans, credit cards etc)
4. How long you've been keeping up with payments.

Example, my credit score went down about 50 points when we no longer had a car loan. It went back up 15 points-ish when we opened a new credit card. We've got four credit cards, a mortgage, and a personal loan all with an only positive credit history of 12 years. Current credit score right around 790. I'm sure if I started a new car loan, it would go back above 800 where it was before we paid it off.
After we pay off our personal loan in two years, and mortgage in 20 years, our credit will TANK. Because the only lines of credit we'll have open are a 2-3 credit cards.
But I digress. A credit score is a debt score but until you can pay cash for everything, a good credit score is very useful.

 

[TheTimeTraveler]

I hate to say it but I don't think you were (or are) in any financial position to take on a Mortgage loan on a vacation property in reading the information you've provided.

It was a costly lesson and getting rid of it is a good move!

Keep your hands in your pocket and invest your money in a 401K and IRA once you get your finances back in order.

Best of luck!




.

 

[GladlyGoingGordon]

I think some folks are confused, the $$ is not the issue, I am just trying to ensure there is no 'smarter' way of offloading the Timeshare while paying down the debt. I already have the loan funds in my bank account, I was approved on the spot and the cashier's check was processed minutes later.

 

[truckinusa]

I think some folks are confused, the $$ is not the issue, I am just trying to ensure there is no 'smarter' way of offloading the Timeshare while paying down the debt. I already have the loan funds in my bank account, I was approved on the spot and the cashier's check was processed minutes later.

If you don't have the $15,000 to just pay it off it sounds like a pretty good plan. Defaulting on the loan might get you a judgment and a garnishment. That wouldn't be good. If I was in Texas I'd contemplate defaulting in a heartbeat. They have great protection against judgement and garnishments.

 

[bluehende]

Since the mistake has already been made I think you are on the right track. If I read right you realize that the timeshare is worthless and just want out from under it. Now make the mistake as cheap as possible. I like the idea of balance transfer as you are not in the position of funding your life with credit cards. Just make sure you pay it off. The only question I will ask is are you sure you want to get rid of it. When you bought it you were convinced it had a high value. Are you sure it does not have more than zero value to you now?

 

[WVBaker]

Well, the original Westgate mortgage was opened with a crazy interest rate - something like 14% - so the plan was to take out the loan, and immediately do a balance transfer to my Discover card which is offering 0% interest on balance transfers with a 3% fee for the transfer. We will continue making the same monthly payment that we were making towards the mortgage, except now it will be knocking all principal balance off rather than a hunk of interest. Then, once that promotional period ran out, balance transfer to one of my other cards with a 0% offer. We would be done within 3 years with this method, while getting rid of the timeshare and avoiding spending an additional $1000+ in maintenance. A costly lesson but this was the best way I could see ourselves getting out of the timeshare and paying the debt off the cleanest and most efficient way.

I suppose I'll be in the minority but, I have never been in favor of defaulting on ANY loan or purchase by choice. Perhaps that's just old school thinking however, if there's any way possible I'll pay back the money. That credit report means to much to be playing financial games with it. Sounds like with the balance transfer moves you have that part figured out.

Ridding yourself of the timeshare may be an issue. Depending on the demand for the unit and it's use, that could take some time with giving it away. The landscape is covered with others trying the same thing and you're just one more added to the list. I'm sure you understand that you may have to cover all costs to eliminate this burden.

Know that the sooner you get this unit listed and on the market the better.

 

[GladlyGoingGordon]

Since the mistake has already been made I think you are on the right track. If I read right you realize that the timeshare is worthless and just want out from under it. Now make the mistake as cheap as possible. I like the idea of balance transfer as you are not in the position of funding your life with credit cards. Just make sure you pay it off. The only question I will ask is are you sure you want to get rid of it. When you bought it you were convinced it had a high value. Are you sure it does not have more than zero value to you now?

Well, a quick search of Westgate Lakes timeshares shows people practically begging people to take their weeks off their hands. And, as we got more seasoned in traveling, any place we want to visit has a timeshare promotion package where we can sit in their presentation, say no, and enjoy 5-star accommodations for a couple hundred dollars. There is absolutely no reason for me to being $266 a month for a room in Orlando when I can do a promotion for $399-799 wherever I want to go, whenever I decide I would like to go. Add the rising maintenance fees and it was just a bad mistake on our part back in 17 that we are trying to fix as best as possible now in 19.

 

[bogey21]

I see nothing wrong with what you are thinking of doing. Basically you are considering redirecting the amounts you are currently paying on the TS loan and MF to getting out...

George

 

[rickandcindy23]

I would walk away. Creditors do not care as much about timeshare debts as other debts. You might be able to get the credit reporting agencies to ignore that debt.

 

[HudsHut]

What are your approximate ages? How much do you owe on the home? any car debt? other credit card debt?

 

[silentg]

How long have you owned the timeshare? Have you considered trading thru RCI? Renting it out? Asking the resort if they have a buy back option? Personally, I would do these things before taking out a mortgage. How much is your maintenance fee? Not nearly as much as the loan you want to take out?
Silentg

 

[BJRSanDiego]

After you pay off your high interest loan, you'll be in exactly the same position as a potential buyer/acquirer of your timeshare. That is, (while you have a sunk cost (it's gone, no sense agonizing at this point...) ) your "opportunity cost" is zero - - or the same as the next owner (if you give it away).

So, I suggest that you keep it for a while and try to use it through RCI or ii exchanges. Your cost to book a 1 or 2 BR unit with a full kitchen is going to be less than renting the same sized hotel room with a kitchen. Of course, if you compare the cost of renting a 200 square foot hotel room with only a coffee maker, that wouldn't be an apples to apples comparison.

I also find the Getaways or Extra Vacations where you rent a timeshare to often be good deals and a discount from the rack rate. The cost is usually less than the equivalent Maintenance fee for the timeshare.

I am retired and can travel. There are a lot of great places to exchange into using your existing timeshare. For example, here is a list of my 2019 exchanges (using some medium demand Marriott "traders"): Marriott Canyon Villas (Phoenix), Marriott Maui Oceanclub, Welk Truckee (Tahoe), Marriott Canyon Villas (Tahoe), Hyatt Pinon Point (Sedona), Marriott Newport Coast (California), Marriott Desert Springs (Palm Desert). Most of these were 2 BR units. Last year I used two bonus (~ "free" ) weeks to book a couple of Marriott Palm Desert units and also bought a SVC Starr Pass getaway (~ $700) in Tucson.

So - - do your refinance and perhaps consider trying to get some value out of your "sunk cost" timeshare before you toss it.

 

[Tia]

Once you refinance using your home loan, no going back . I'd walk away before doing that.

 

[dayooper]

Once you refinance using your home loan, no going back . I'd walk away before doing that.

Not sure the OP wants to take out a mortgage to pay it off. They are talking about transferring the mortgage loan at 14% interest on the TS to 0% credit cards (introductory rates) and keep paying the same. The OP says they can pay off the loan in 3 years that way. No home loan needed.

 

[RX8]

Your credit score is based on four things.
1. Length of credit
2. Number of lines of credit
3. Types of credit (car loans, mortgage, student loans, personal loans, credit cards etc)
4. How long you've been keeping up with payments.

Your payment history is the number one factor to your credit score. The next highest factor is how much you owe (as a % of what you owe to your available credit). If you add $15K to your credit card debt, and that takes you over 30% of your total available credit or more, your bureau score will drop from that alone.

I commend the OP on wanting to pay this off but I am in the boat to just walk away, especially if there is other credit card debt owing that the OP could pay instead with this $15K. Even if the OP paid off the mortgage they will likely have to come out of pocket with even more money just to give away this timeshare.

 

[TUGBrian]

looking at it another way, if your credit score was say, 75 points lower than it is now...would you have paid 15k to raise it up 75 points?

 

[rickandcindy23]

I just talked to a friend of my kids' from high school, who is now in the mortgage business. She has a client who went to Maui in July and bought $168K worth of Westin (NON-MANDATORY, probably). I have no idea what they bought, and according to the young woman trying to help them with a mortgage, they don't even know what they bought. I think that is probably two weeks. Anyway, she said they would qualify for much less of a house because of this. She asked what they could do. I had nothing to say. That is crazy to me. Absolutely crazy.

 

[Iggyearl]

Tuggers are normally a very moral group who believe in fulfilling obligations. But, in some cases (e.g. Westgate) the opinion turns to "why bother - they don't treat their customers well, so why should they be treated well." Westgate is privately owned. They don't publish financials. But one of the other big companies does. That is Wyndham. In the Wyndham quarterly reports, they consistently admit that they have loan loss provisions of 20%. That is - 1 out of every 5 dollars that they are owed will not be paid. They expect that. Do people brag about not paying their timeshare bill? No. Do some fail to pay? Yes. Will it hurt your credit? Possibly. I suggest going to www.responsibleexit.com and starting a case. The website is sponsored by the industry because they have had a lot of problems with exit companies. They say you can ask for help from the developers (of which Westgate is one). See what they say. Depending how you are treated, you can form a plan.

 

[T-Dot-Traveller]

Hi all,

My wife and I decided to take out a loan to pay off the remaining balance of the Mortgage on my Westgate timeshare. The plan was to pay it off and sell it for nothing so that we didn't have to continue to pay rising maintenance fees and no longer had the burden of it. The balance is just about $15k. I wanted to make sure this was the best move to make before pushing ahead? Are there other options?

As BJR says below - your options include opportunity in use -including using II - Intervals International to exchange to other properties . Your sunk $ spent cost is gone . USE may have some vacation value .

Questions -

1) You mention rising MF - you bought in 2017 .
What was the MF in 2017 and 2018 . I believe 2019 was just due in January .
How much higher is the 2019 MF than 2 years ago ?

2) Have you actually used the timeshare you own ?

3) Have you explored how exchanging works ?

Wesgate exchanges through II - which has many exchange options .
There is also an internal Westgate exchange option . The added cost is low for original owners .
(higher $ cost for resale owners / one reason for $0 resale value)

4) If you choose to default -so be it. . It is your lowest dollar cost option .
If you choose to pay off quickly - then use while you own and learn how to get maximum use value .

5) Westgate does have a give back option for paid off contracts . It generally cost
next years MF / approx. $ 1000 . This could be an option ,if use value does not work for your family .

Info on :Westgate Deedback Information - is in a pinkish coloured "stickie" at the top of the forum - All Other Timeshare Systems . It was started by TUG Brian - Sept. 24 2018.

After you pay off your high interest loan ......while you have a sunk cost (it's gone, no sense agonizing at this point...) ) your "opportunity cost" is zero - -
So, I suggest that you keep it for a while and try to use it through .... ii exchanges. Your cost to book a 1 or 2 BR unit with a full kitchen is going to be less than renting the same sized hotel ....
So - - do your refinance and perhaps consider trying to get some value out of your "sunk cost" timeshare before you toss it.

Good explanation .

*****
- GladlyGoingGordon,

FYI - lots of TUG members bought like you did & then figured out how to use what they had .
- me included .
We paid 16K in 2006 - paid mf and deposited into RCI - then paid to extend - then let the weeks expire.

< being excessively work focused & not taking vacation caused part of this issue >

Finally in 2010 - I decided it was a waste of money -
and we should start using what we owned . I booked in Jan for Feb & took what was available - and we had a great vacation at Mayan Sea Garden in Mazatlan .
Found TUG - started learning / still learning .

Happy vacations

 

[5finny]

If you can pay 3% instead of 14% it is a no brainer and you should do it
You do run a risk that you won't be able to find 3 years worth of 0% offers

The larger question is should you pay at all
It appears you are a victim
That said you are doing the honorable and right thing (also what the civil law says you should do)

Notwithstanding that doing what is right sometimes seems unjust and I will confess I would be sorely tempted not to give the scoundrels another penny
That is especially so since you will still have the timeshare to deal with

 

[DrQ]

If you can pay 3% instead of 14% it is a no brainer and you should do it
You do run a risk that you won't be able to find 3 years worth of 0% offers

... so the plan was to take out the loan, and immediately do a balance transfer to my Discover card which is offering 0% interest on balance transfers with a 3% fee for the transfer. We will continue making the same monthly payment that we were making towards the mortgage, except now it will be knocking all principal balance off rather than a hunk of interest. Then, once that promotional period ran out, balance transfer to one of my other cards with a 0% offer.

Run the numbers, I think you will find adding 3% of the total amount to the debt for a few months of 0% interest may be false economy.

If you want to do that, check out Westgate's Branded card. They would allow me to transfer $12K with 0% transfer fee and 0% interest for almost a year.

 

[jc0425]

As BJR says below - your options include opportunity in use -including using II - Intervals International to exchange to other properties . Your sunk $ spent cost is gone . USE may have some vacation value .

Questions -

1) You mention rising MF - you bought in 2017 .
What was the MF in 2017 and 2018 . I believe 2019 was just due in January .
How much higher is the 2019 MF than 2 years ago ?

2) Have you actually used the timeshare you own ?

3) Have you explored how exchanging works ?

Wesgate exchanges through II - which has many exchange options .
There is also an internal Westgate exchange option . The added cost is low for original owners .
(higher $ cost for resale owners / one reason for $0 resale value)

4) If you choose to default -so be it. . It is your lowest dollar cost option .
If you choose to pay off quickly - then use while you own and learn how to get maximum use value .

5) Westgate does have a give back option for paid off contracts . It generally cost
next years MF / approx. $ 1000 . This could be an option ,if use value does not work for your family .

Info on :Westgate Deedback Information - is in a pinkish coloured "stickie" at the top of the forum - All Other Timeshare Systems . It was started by TUG Brian - Sept. 24 2018.



Good explanation .

*****
- GladlyGoingGordon,

FYI - lots of TUG members bought like you did & then figured out how to use what they had .
- me included .
We paid 16K in 2006 - paid mf and deposited into RCI - then paid to extend - then let the weeks expire.

< being excessively work focused & not taking vacation caused part of this issue >

Finally in 2010 - I decided it was a waste of money -
and we should start using what we owned . I booked in Jan for Feb & took what was available - and had a great vacation at Mayan Sea Garden in Mazatlan .
Found TUG - started learning / still learning .

Happy vacations

I did give my Westgate timeshare back to Westgate. It cost me $750 and it was worth it. However my timeshare was paid for. Do not give it to any other companies. They are just scammers. Exchanging is fine however you are still paying $1000 in maintenance fees plus exchange fee approximately $225 and membership fee of $100 a year. So for about $1500 a year I think you can find something comparable. I would take the hit on my credit. By the time that gets paid off plus interest plus fees for timeshare you would come out ahead of the game