Why is financing so disfavored for DVC on the boards. . . and for that matter, why do so many judge those who use it

[Mickey of the Villages]

My wife and I recently bought 3 contracts. One might say we got caught up in Pete's exuberance about DVC (e.g., The DVC Shows and Patreon podcasts) but we've wanted to do it for years (like since 1996). We researched it several times over several years. No one needs to worry that we don't know what we're getting into and we know that there are no guarantees other than use of our points and annual maintenance fees.

We paid cash for one contract (150 points CCV direct) and used financing for two more (100 points at CCV direct and 300 points resale OKW through Timeshare store). During the weeks we spent finally deciding to buy and the months since then we've noted that many people are of the opinion that one should only buy DVC if you can pay cash. We've also observed that some folks have a sense of superiority about this and use a tone I would call "judgey." This is top of mind because yesterday I read a thread in which the OP asked whether Disney would just take back her 3 year old contract because she couldn't really use it any more and one individual essentially responded that the OP should not have financed something they couldn't afford. Affordability was never mentioned by the OP - just that it couldn't be used. That exchange has led to this post.

I've had mortgages, car loans, student loans, credit cards - I've used all the financings. Sometimes really stupidly - mostly really stupidly. I would argue that the use of financing for DVC is one of the smartest ways I've ever used debt.

I get it that the Dave Ramsey's of the world think all debt is from el Diablo and I would agree that debt should be managed well but to say that it cannot be used for something like DVC is foolish in my opinion. And the judgement of others' decisions in this regard should be met with an old fashioned: nobody asked you and its none of your business.

Have you noticed this?

 

[Jennasis]

Some people are just anti-debt particularly on luxury items. How people spend their money is nobody else's business.

 

[Brett Wyman]

Its just the nature of internet messaging boards.

 

[crisi]

Some people are just anti-debt particularly on luxury items. How people spend their money is nobody else's business.

Except when it is. Someone else's bankruptcy costs everyone else money. Someone else's foreclosure costs everyone else money. Someone dying in debt costs everyone else money. Where do you think the money to make up those things comes from? It comes from increased pricing and higher interest rates/

Why people are down on financing - and I'm not, necessarily. Because MOST people who do it do it because instant gratification is more important than fiscal responsibility. Because MOST of the time when you finance, your ROI for DVC moves way out, and it becomes less of a deal - especially in comparison to renting. Because most timeshare financing either involves putting your house on the line (equity financing) - which screwed a lot of people over in 2008-2010 - and which I don't want to see happen again - or happens at interest rates too high to be responsible.

(I dislike Dave Ramsey, my dislike of debt comes for people being financially illiterate.)

 

[gharter]

I think many of us look at debt for a vacation as a bad thing. DVC is not an investment, it is prepaying long term vacations. Taking out a loan (taking on debt) to be able to do that does not seem to make financial sense unless you can pay it off quickly.
If you choose to finance a DVC purchase that is entirely your choice.

 

[Brett Wyman]

Why people are down on financing - and I'm not, necessarily. Because MOST people who do it do it because instant gratification is more important than fiscal responsibility. Because MOST of the time when you finance, your ROI for DVC moves way out, and it becomes less of a deal - especially in comparison to renting. Because most timeshare financing either involves putting your house on the line (equity financing) - which screwed a lot of people over in 2008-2010 - and which I don't want to see happen again - or happens at interest rates too high to be responsible.

Is that true? I know every time I log into my Amex or bank account they are offering my upwards for 40k in personal loans with no equity required. Why are people financing DVC against their homes?

 

[_auroraborealis_]

That said, dvc typically is 8-14% interest. At that rate, your ROI/time to break even extends considerably.

I do see people figure ROI based on sales price and exclude the interest. On a 15000$ contract, the interest is not minimal.

 

[crisi]

Is that true? I know every time I log into my Amex or bank account they are offering my upwards for 40k in personal loans with no equity required. Why are people financing DVC against their homes?

Those are the ones that are high interest. In order to avoid high interest loans, people use home equity.

 

[Mickey of the Villages]

. . . Someone else's bankruptcy costs everyone else money. Someone else's foreclosure costs everyone else money. Someone dying in debt costs everyone else money. Where do you think the money to make up those things comes from? It comes from increased pricing and higher interest rates . . .

I disagree with this. The use of financing allows for a much MUCH larger economy. The use of debt is what is allowing WDW to exist. In some cases, yes, one cannot repay some or all of what is borrowed but in the vast majority of cases all the principal plus the interest is recovered. This use of leverage allows everyone to benefit from a larger economy. Money is not like pie - the more or less someone else has does not affect your slice.

 

[Brett Wyman]

Those are the ones that are high interest. In order to avoid high interest loans, people use home equity.

Mine says 5.75%

 

[_auroraborealis_]

We also see people ask if it shows.on credit all the time. That is like a warning flag.

 

[DisneyOutsider]

Financing future vacations at 9% is just a poor financial decision, and that's a hill I'm willing to die on . I personally don't care if you decide to finance or not... it's your money... but I don't think I'm alone in that opinion, and that's probably why you're getting the general vibe that you're being judged.

 

[crisi]

Oh, the other thing....

When I was younger, like most young adults, we had debt. A mortgage. My husband had some student loans. There was a car loan. Some credit cards.

The point in time where I moved to "my money makes me money" from "I pay other people for use of their money" my life changed. At this point in time, I have one six figure income every year that comes as the result of investments. Would you like to have tens of thousands of dollars coming into your life every year that you don't need to work for? Hopefully, the answer is yes, because that is how you are going to live to your current standard of living when you retire - social security (if it exists) isn't going to cover Disney vacations...and its going to take you years to get there. You aren't getting there by taking on debt indiscriminately.

 

[MickyLynn]

People are using home equity because banks have gone right back to advertising it like its NBD.

I do find it a bit disingenuous when people banging the ROI drum point out that DVC, like any timeshare, is not an investment vehicle. Look at your cash vs your cost over the life of the loan vs the time you can spend on vacation. If it balances to you, its worth it.

Also, if you pay off early you haven't incurred those costs anyway and maybe got a better deal than if you waited 3 years. So...its personal.

 

[Lumpy1106]

Because math. Not judging, but I went to a lot of trouble to convince myself that even a resale contract made any sort of sense financially. A direct contract with financing? I'd be out for sure.

 

[crisi]

Mine says 5.75%

Check your fine print, if you are getting a long term 5.75% loan from AmEx, you have great credit and probably don't need to finance (and therefore, are probably one of the people who possibly SHOULD finance). My mailings like that are teaser rates....5.75% for a bit. But 5.75% is adding $872 to a $15000 loan in the first year alone. Finance at 5.75% for five years, and you'll pay $2300 in interest. I have better things to do with $2300.

 

[katriscari]

Yes, I have definitely noticed this. We financed too (a small, direct 100 point OKW 2057 contract) with plans to have it paid off in 2-3 years. I don't regret it and wish I would've done it when we first started researching the process because it would've been a lot cheaper, and I probably would've had it paid off already!

 

[MickyLynn]

Financing future vacations at 9% is just a poor financial decision, and that's a hill I'm willing to die on.

Still better than financing an increasingly expensive vacation every year on a credit card, which is where most people are.

 

[Brett Wyman]

Check your fine print, if you are getting a long term 5.75% loan from AmEx, you have great credit and probably don't need to finance (and therefore, are probably one of the people who possibly SHOULD finance). My mailings like that are teaser rates....5.75% for a bit. But 5.75% is adding $872 to a $15000 loan in the first year alone. Finance at 5.75% for five years, and you'll pay $2300 in interest. I have better things to do with $2300.

Its 5.75 for 0-36 months up to 40k. We do have fairly high credit ratings. But I get where you going. People doing this probably aren't in the same situation.

For us personally we don't keep 30k liquid. It tied up in investments, etc. So its sometimes easier to finance for 24-36 months than liquidate assets. We do not own DVC though, just saying that as a generalization that not everyone financing is trying to cause a new recession due to mismanagement of money.

 

[DLgal]

People are judgy because it is no different than putting vacations on a credit card and taking years to pay them off. No one really thinks this is a good financial strategy. Also, the interest is quite high on these timeshare purchases through Disney.

People finance cars, but I don't think too many people finance a $50,000 luxury car over 10 years at 10-12% interest. This would be like doing that.