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

[bumbershoot]

We've also observed that some folks have a sense of superiority about this and use a tone I would call "judgey."

Lol, until this thread I’ve rarely felt that people were judging the person, but merely the idea. Until this thread.

I personally always try to tell my story. This was our situation, we financed, then faced a layoff, recognized the razors edge we were on, got better. (That story continues years later with “we slipped back onto the age, bought a house, couldn’t figure out how to be a team anymore, the end”)

It was a risk to get dvc, but even if it’s sold it during the divorce we had several years of nice vacations out of it. Worth it, even with the extra in interest.

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.

The person said it, someone else explained what they could have been meaning (not what it seemed to say), and the person Liked the post. I took that to mean that the explanation was correct; that they didn’t mean it about the OP but for others lurking.

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.

Our rate was 11%. If you feel that’s high, you’re filtering it through a nice amount of privilege. Our used car financing rate, from Chase (before wamu was stolen by them and before we got chase banks in our area), was 25%. 11 was *nothing*.

Be glad you weren’t in that position.

Me paying off that car ASAP got my then-husband better credit. That got him a cc. A cc whose lowest interest rate while we were married was 10%. So....

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

Or...it’s a question. People ask that question about other things, too.

People also ask that as a positive. Will this show up on credit so I can get better credit? It’s a good question to have the answer to.

But I'd rather come across as really judgy and tell everyone its a horrible idea than read another one of those 2009 posts about someone losing their house and being underwater on their DVC.

My dad nearly lost two houses without ever owning a timeshare. My friend nearly lost her condo without owning a timeshare. Timeshares don't make people lose their homes.

We financed DVC in 2009 and thankfully had nothing bad happen as a result. We had continued to resist buying a house before and after that time. If we’d bought a house and cared about being “underwater”
(which only matters if you want to sell it...no one I knew irl wanted to sell their homes, but got big ol’ hurt feelings about owning something that wasn’t worth as much...it was the oddest thing. Why even care? But maybe it was my 12 years leasing VWs that helped me be able to focus on what I was getting from the thing) we could have had bad things happen (emotionally, at least), but the timeshare wouldn’t have been the problem.

As it was, buying the house was kind of the last part of our downfall! Houses are stressful. Dvc helped us. The house didn’t. Sigh.

I don't want to be the reason someone gets foreclosed on.

Aw crisi, don’t put the weight of that on your shoulders.

And comparing people who finance Disney to those who go into credit card debt to pay for their vacations is a foolish way to go. The idea is not to race to the bottom, but rather to put yourself in as good of a position to enjoy life as possible.

But people DO do that. So if it’s putting hotel stays on 20% cards vs taking the 11% through dvc for something they can keep on using for decades, financing is the lesser evil. We don’t live in a perfect world.

I just wonder if people who finance their dvc contract, do they really have the money needed to pay for all the extra costs associated with dvc ownership?

Yep!

We ended up spending an additional $10,000+ per year on maintenance fees, annual passes, dining plans, etc that were needed to actually use the points.

Holy moly. Your vacations are far more expensive than mine. Dining plans cost more than we spend on food oop. We had only two years of wdw APs. Don’t ask about universal APs, though! Airfare was covered by then-husband’s air miles. And I have 160 points, not 800, so the dues aren’t heinous.

However, if a poster is asking about which DVC resort to buy and looking at 20% interest rates

Not sure dvc is that high?

But why would it be advisable to spend all of your money on financing a deal to go to Disney, staying at deluxe resorts, only to not take advantage of what offerings are available to you?

Because Disney resorts are pretty nice. Better than what I can get in the greater Seattle area. And resorts here aren’t close to universal lol.

APs aren’t the only way. Dining plan isn’t the only way (nor the responsible way for me). Etc.

My cousin doesn’t have the parks in her budget. So for our Princess trips I don’t put them in mine. We have had terrific times the last 4 years, doing our cousin trips without parks. People should try it.

 

[Madame]

Every situation is unique & I won’t blast those that do finance, nor those that caution those that do; neither is incorrect.

For us financing our 2 contracts via Disney was never an option as we bought resale. I personally would never pay their rates. Uh-uh.

We are using home equity at 2%. Both our contracts will be paid off within 5 years (3 yrs left). Now, we could have saved up, we’re really good at that (currently have over 105,000$ in education savings for our 3 kids). However waiting would have included the following which would have totally negated our savings based on the low rate:

1. Would have missed out on the pre-2016 minimally restricted contract which allows us discounts including the gold AP (we’ll use these for however long they’re offered with the understanding they’ll not last forever).

2. We bought SSR at $80/pp in 2016. It now routinely goes for between 100-110$. Yikes.

3. We paid 132$/pp for BCV in 2018. Now even stripped are being taken at $140ish. (Which is ridiculous even to a BCV junky like me).

4. As a family of 5 we would have been shelling out serious cash since 2016 to stay onsite - if we could have stayed at a value it would be a different story, but we can’t.

6. I forgot to add that the Canadian dollar has continued its downward spiral since our 2 purchases almost negating the 2% interest we’re paying on a purchase made at a lower exchange rate.

We could have pulled money from our kids’ education funds where it is making money, or worse from our retirement investments. & if things get bad that’s what we’ll do. Financing can be a wise decision if implemented correctly.

 

[AdamsMum]

Some people (like me) just find debt stressful. I purchased my interest in DVC piecemeal. I was still deep in mortgage, kids still to go to post secondary ed. I saved like crazy when the CAD was almost at par to make my purchases. That in itself caused stress. I think in a perfect world paying cash is the best option, but we don't live in a perfect world. The point some people are making about ever escalating prices and restrictions is a good one. If you wait 3 (or 5) years you're going to have to save much more than the cost today. In my experience life sometimes gets in the way of being able to save, but I always pay my bills, so financing occasionally could make sense. By that time you would have had a number of DVC stays under your contract. Personal decision, some people are always going to judge.

 

[Dean]

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?

Personally I feel that all financing is bad, some worse than others. Certainly for a luxury purchase it's a poor choice. But there are lots of variables. I would say that being able to afford the payments and being able to afford the purchase are not the same thing. To me it's about having a good stressful like, planning for the future both short and long term and limiting risk which plays into the other goals. I want to be a good steward of what's been entrusted to me. We've all made decisions that we shouldn't have but I want to make as few mistakes as possible. If you put it our for discussion, comments and opinions are often valid even if not what one wants to hear depending on the specifics of the situation..

 

[we"reofftoneverland]

Great post, op. The reason I argue that people should not use debt to finance dvc is because I am a huge proponent of freedom. You are a serf to the banks if you take out debt. That is just a fact. It becomes almost impossible to flip it around and build wealth if you use financing to buy things. I wish someone had explained all of this early in my life, but I am lucky to some extent that I finally figured it out in my 30s. (Now in my 40s). I want everyone to hear the message and I LOVE how fiscally conservative people tend to be on the dvc section of disboards.
I do not think less of people who use debt— but I do think that they haven’t gotten enough information, or the right information. There is enormous pressure to live a debt ridden life in our culture and it is something you have to fight against every day.

 

[crisi]

Great post, op. The reason I argue that people should not use debt to finance dvc is because I am a huge proponent of freedom. You are a serf to the banks if you take out debt. That is just a fact. It becomes almost impossible to flip it around and build wealth if you use financing to buy things. I wish someone had explained all of this early in my life, but I am lucky to some extent that I finally figured it out in my 30s. (Now in my 40s). I want everyone to hear the message and I LOVE how fiscally conservative people tend to be on the dvc section of disboards.
I do not think less of people who use debt— but I do think that they haven’t gotten enough information, or the right information. There is enormous pressure to live a debt ridden life in our culture and it is something you have to fight against every day.

Its sort of like finding religion.....you want everyone to join you in being interest earners and not interest payers because of the fundamental change that made in your life.

 

[Jelly563]

When I spoke with DVC, the interest rate they offered was 18%. I told them I was SUPER interested, but not at 18%. If they had an interest rate of 6-9%, I would have bought direct. I recently bought a $16,000 resale. I paid half in cash, half financed. Will have financed portion paid off in 1 year. If that makes me a financial idiot, then so be it. But my family is ecstatic.

 

[we"reofftoneverland]

Its sort of like finding religion.....you want everyone to join you in being interest earners and not interest payers because of the fundamental change that made in your life.

Exactly. Which is kind of funny because I am not religious at all generally. But once you flip it around, go from a borrower to a saver/investor, wealth builds incredibly quickly. I am shocked at the amount of wealth dh and I have accumulated in the last about ten years. I know life is complicated and sometimes you have to finance things, but dvc is not something anyone has to finance. Just stay at a moderate or rent. Much better deal, and a deal you are not locked into. You go on your terms, when you can afford it. It’s liberating not having loans on your back. The dvc marketing is intense when you are there, so you have to hold strong. It is hard. That is why these boards are refreshing, people on here remind you all the time... don’t do it. The dvc disboard section is an oasis, a counter culture perspective that gives voice to a lot of the same language the original American revolutionaries used about freedom. Sorry to get so philosophical lol.

 

[BillPA]

I don't get it... I see posts about how to use gift cards to save 5%, and those same people will pay Disney 10%+ to finance a DVC purchase.

 

[DLgal]

Great post, op. The reason I argue that people should not use debt to finance dvc is because I am a huge proponent of freedom. You are a serf to the banks if you take out debt. That is just a fact. It becomes almost impossible to flip it around and build wealth if you use financing to buy things. I wish someone had explained all of this early in my life, but I am lucky to some extent that I finally figured it out in my 30s. (Now in my 40s). I want everyone to hear the message and I LOVE how fiscally conservative people tend to be on the dvc section of disboards.
I do not think less of people who use debt— but I do think that they haven’t gotten enough information, or the right information. There is enormous pressure to live a debt ridden life in our culture and it is something you have to fight against every day.

This is a very narrow point of view.

What really matters is NET WORTH. Debt is a tool that can be leveraged for good. As long as you maintain a positive net worth, there is absolutely nothing wrong with carrying debt. Literally every successful individual and company carries debt, because there are financial benefits to doing so in most cases.

 

[katandmouse]

I have been following along but not posting so far because I don’t really have much to add. But I really appreciate how DISers have been able to have what could be a contentious debate in a respectful and informative manner. It’s one of the reasons I joined the DIS.

I’m really interested in the idea of using our savings to build wealth, and when financing/debt can be beneficial. Could anyone point me to some good resources to learn more?

 

[crisi]

This is a very narrow point of view.

What really matters is NET WORTH. Debt is a tool that can be leveraged for good. As long as you maintain a positive net worth, there is absolutely nothing wrong with carrying debt. Literally every successful individual and company carries debt, because there are financial benefits to doing so in most cases.

To quibble, its a little more complicated than that. I have a friend who has a fairly high net worth - but much of it is tied up in land that is difficult to sell - not liquid at all. He might as well have a negative net worth, since selling that land for its paper price would take years. Selling that land at a discount would take years (its also appraised way too high IMHO). He'd probably be better off without the land, because its paper value enables him to make bad decisions. You really want liquid assets to cover your debts. Having a $1M paid off house doesn't do you any good if you aren't going to sell it to make your DVC payments in a cash flow crunch .

 

[crisi]

I have been following along but not posting so far because I don’t really have much to add. But I really appreciate how DISers have been able to have what could be a contentious debate in a respectful and informative manner. It’s one of the reasons I joined the DIS.

I’m really interested in the idea of using our savings to build wealth, and when financing/debt can be beneficial. Could anyone point me to some good resources to learn more?

Bogelheads is a good board (I don't hang out there, but its a great place). You can look into FIRE sites (Financial Independence Retire Early), they are big on this. I went to college for Accounting/Finance and picked it all up sitting in class.

 

[DLgal]

To quibble, its a little more complicated than that. I have a friend who has a fairly high net worth - but much of it is tied up in land that is difficult to sell - not liquid at all. He might as well have a negative net worth, since selling that land for its paper price would take years. Selling that land at a discount would take years (its also appraised way too high IMHO). He'd probably be better off without the land, because its paper value enables him to make bad decisions. You really want liquid assets to cover your debts. Having a $1M paid off house doesn't do you any good if you aren't going to sell it to make your DVC payments in a cash flow crunch .

Yes, true. I don't really consider homes or land as part of net worth, because I don't own either, LOL! Plus, as you pointed out, it's worth nothing until you sell it, and most people need to live somewhere, right? I meant money that can be liquidated easily, if needed. We use Mint. As long as our "total accounts" number stays green, has six figures, and keeps going up, I'm cool with some debt.

 

[katandmouse]

Bogelheads is a good board (I don't hang out there, but its a great place). You can look into FIRE sites (Financial Independence Retire Early), they are big on this. I went to college for Accounting/Finance and picked it all up sitting in class.

Thank you!

 

[we"reofftoneverland]

This is a very narrow point of view.

What really matters is NET WORTH. Debt is a tool that can be leveraged for good. As long as you maintain a positive net worth, there is absolutely nothing wrong with carrying debt. Literally every successful individual and company carries debt, because there are financial benefits to doing so in most cases.

I do not think we completely disagree. If your net worth covers your debt, then, while you may have debts, you are not technically in debt. I am assuming you are talking about going into debt to invest in something, like a business or stocks? That is different, I agree. Or are you suggesting someone with a large net worth should take out a loan for dvc? To me, that makes no sense.

 

[crisi]

Oh, and katandmouse - the basic game some of us are playing.....

I have a mortgage on my house - it isn't a big mortgage. I got it at a time when the stock market was low (don't try and time the market, but in 2009 good stock was on sale) and interest rates were low. So my mortgage is at 4% - and about $70k. I bought Merck stock with the money - at the time the dividend was 8%. So I make $5600 ($70k at 8%) a year in dividends on Merck, and pay about $2800 in mortgage (I did better before the new tax law because I could write off that $2800), and I basically get $2800 in free money every year. Plus the gain in Merck. And Merck probably isn't going anywhere. (My own situation is more complicated than that - there is diversification in my portfolio)

That's hard to do on a high consumer interest rate - its hard to do now in a high stock market.

 

[DLgal]

I have been following along but not posting so far because I don’t really have much to add. But I really appreciate how DISers have been able to have what could be a contentious debate in a respectful and informative manner. It’s one of the reasons I joined the DIS.

I’m really interested in the idea of using our savings to build wealth, and when financing/debt can be beneficial. Could anyone point me to some good resources to learn more?

Well, simply put, invest your savings (keep a small portion liquid for emergencies, invest the rest in an ETF or mutual fund). Debt (particularly loans like car loans that show a pattern of making on time payments) can increase your credit score, giving you the opportunity to qualify for rewards credit cards and earn free stuff just for buying the things you already do every month. This is basically free money if you pay the balance in full every month.

You use low interest loans to pay for large things, like houses and cars, so that your invested money can earn interest at a much higher rate. It makes more sense to make a $500 monthly car payment on a loan with a 0.9% interest rate than pull $25,000 out of an investment account earning 8% interest annually (stock market average) to buy a car "with cash."

Of course, to score a 0.9% loan, you need excellent credit, which you will only get by having a long history of responsible credit card use and loan repayment.

This is a very basic explanation, but you can apply that much more broadly by tailoring things to your specific financial needs.

 

[we"reofftoneverland]

I have been following along but not posting so far because I don’t really have much to add. But I really appreciate how DISers have been able to have what could be a contentious debate in a respectful and informative manner. It’s one of the reasons I joined the DIS.

I’m really interested in the idea of using our savings to build wealth, and when financing/debt can be beneficial. Could anyone point me to some good resources to learn more?

We invest in the stock market. Just be very careful. The one thing we lost money on was damn GM about 10 years ago. Lol. Get a brokerage account and start small until you become more confident. We use tdameritrade but there are probably better ones out there. Do your own research on companies.

 

[we"reofftoneverland]

Well, simply put, invest your savings (keep a small portion liquid for emergencies, invest the rest in an ETF or mutual fund). Debt (particularly loans like car loans that show a pattern of making on time payments) can increase your credit score, giving you the opportunity to qualify for rewards credit cards and earn free stuff just for buying the things you already do every month. This is basically free money if you pay the balance in full every month.

You use low interest loans to pay for large things, like houses and cars, so that your invested money can earn interest at a much higher rate. It makes more sense to make a $500 monthly car payment on a loan with a 0.9% interest rate than pull $25,000 out of an investment account earning 8% interest annually (stock market average) to buy a car "with cash."

Of course, to score a 0.9% loan, you need excellent credit, which you will only get by having a long history of responsible credit card use and loan repayment.

This is a very basic explanation, but you can apply that much more broadly by tailoring things to your specific financial needs.

Yes, we use credit cards with 0 interest and good rewards programs. I know people advise the low car loan route, but we do not like doing that- just a personal preference.