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If you own a timeshare, you might wonder if you can refinance a timeshare loan. While possible, it’s not quite as easy as refinancing other loans.
According to the American Resort Development Association, the average price for a timeshare in 2023 was $23,940. This is a 30% increase from 2018. Plus, this doesn’t include annual maintenance fees and property taxes, which can also rise over time.
If owning a timeshare is straining your budget, you might want to explore your options for refinancing your timeshare loan.
Keep reading as we dig into where to look for timeshare refinancing and the process you’ll need to take. We’ll also discuss some alternatives you could choose instead.
How does a timeshare refinance work?
Before you make a decision about refinancing your timeshare, it’s important to understand how the process works.
1. Understand where to get timeshare refinancing
Most people finance their timeshares through the developer. However, similar to taking out a car loan with a dealership, this is convenient but usually doesn’t work out in your favor.
The biggest issue is that you’ll receive a much higher interest rate in exchange for convenience. Depending on your credit, interest rates could be 15% or higher.
Here are a few options if you’re stuck with a higher interest rate and want to refinance your timeshare loan.
Unsecured personal loan
A personal loan could be a great way to refinance a timeshare loan if you have good credit. However, you’ll need to find a lender offering unsecured personal loans that don’t require collateral backing.
Here are a couple of our favorite unsecured personal loan options.
- Lightstream—Lightstream offers Timeshare loans with interest rates as low as 9.49%. My favorite features of a Lightstream loan are no fees and the ability to close the same day you apply.
- Best Egg—Best Egg is another popular choice because it offers the chance to prequalify for an unsecured personal loan with just a soft credit check. Your credit score will not be impacted until you decide to move forward.
Unfortunately, not all personal loan lenders will refinance timeshare loans. However, if you find a company offering reasonable rates, the application process is straightforward.
The lender will review your credit profile to check your credit score and debt-to-income ratio. This will help determine your eligibility and the interest rate they can offer.
Home Equity Line of Credit (HELOC)
You could also refinance the timeshare using a HELOC. These loans typically have much better interest rates than personal loans and can be a great option if you’ve built up a significant amount of equity in your primary home.
One thing to be cautious about when using a HELOC for a timeshare is that you must stay on top of the monthly payments. Because your home is used as collateral, you could potentially lose it if you fall behind on HELOC payments.
2. Check your credit
When you apply for a new loan, the lender will perform a credit check to ensure your qualification. However, before the application process begins, it’s important to check your credit beforehand.
This will allow you to spot any inaccuracies and get them fixed. Inaccurate information could hurt your approval chances or affect the interest rate you’re offered.
3. Comparison shop for rates
Once you’re ready to apply, shopping around for the best rates is important. After determining the type of loan that will be best, pick two or three lenders to compare. Many lenders will provide a rate quote with only a soft pull on your credit.
However, if you choose to work with a company that does a hard pull, you’ll want to complete all of these within a two-week period. This way, FICO will consider these as a single inquiry on your credit report, and the impact will be minimal.
4. Apply for the loan
Once you’ve found the lender who will offer you the best terms on your loan, it’s time to start the application process. You’ll need to gather all your existing documents, as the lender will need them to pay off your existing loan.
Pros and cons of timeshare refinancing
Before refinancing, weigh the pros and cons. This will help you decide if refinancing a timeshare is the best financial move for you.
Pros
- Lower interest rate: Refinancing could lower your interest rate, which reduces the amount of interest you’ll pay over the life of the loan.
- Lower monthly payment: A lower interest rate will also reduce your monthly payment.
- Earlier payoff: If you can reduce your interest rate, you could continue making the same monthly payment amount, applying the extra amount to your principal balance. This will help you pay off the loan faster.
Cons
- Fees: Some loan refinancing include origination fees, which can reduce the amount you’ll save.
- Your credit could affect your ability to refinance: Finding a lender willing to refinance a timeshare loan is difficult. If you have less-than-ideal credit, the process can be even more challenging.
Alternatives to refinancing a timeshare refinance
It’s also important to weigh all your options when considering a timeshare refinance. Below are a few alternatives you could consider.
Rent out your timeshare
Instead of going through the refinance process, you could rent out your timeshare if you’re not planning to use it each week. This will allow you to cover some of your costs, making it more affordable.
Pay off your current loan
If affordability isn’t an issue, you could consider using a lump sum to pay off your timeshare early. This will allow you to maintain the timeshare but avoid future payments other than maintenance fees and taxes.
If you choose to go this route, make sure it doesn’t interfere with other financial goals you may have.
Talk to your current lender
If your credit score has improved since you applied for your original loan, you can discuss your options with your current lender. They may be able to reduce your interest rate, saving you money.
Consider an exit
If you’ve decided that owning a timeshare isn’t the right decision for you, you can start looking into ways to exit. However, it could be a little more complicated if you still owe money on a timeshare loan.
As a starting point, discuss with the timeshare company to see if they would be willing to buy back the timeshare. Otherwise, you could work with a third party to resell your timeshare.
However, be aware that reselling on the secondary market means you’ll take a large hit on your original purchase price due to a much higher supply than there is a demand.
The Bottom Line
If you have a timeshare that you don’t use as much as you should or the payments are straining your finances, a timeshare refinance could be a good option. You can make the best decision possible by understanding the process and the pros and cons.