When it comes to most major purchases, borrowing money is a common way to get what you want. The ability to easily do so in today’s culture is the main reason why so many people are in debt. Things that used to be out of reach can be had for “affordable” monthly payments. Since many consumers base decisions like these on how much they make per month, financial setbacks and urgent needs can quickly make a large purchase regrettable. Timeshare loans are no different and it doesn’t take long for buyers to realize they’re in over their head.
Unlike other expensive items with similar price points (car, boat, home renovation, college tuition, etc..), buying a timeshare is usually an impulse decision. When you think about it, this is extremely odd. Most people know little about fractional ownership. In fact, it’s safe to say most of the general public knows more about vehicle features and state colleges than vacation intervals. Consumers spend hours researching vehicles online before even contacting the dealership. Why is it that we’ll spend multiple weekends test driving boats before buying but we’ll sign off on a $20,000 timeshare without much thought?
The answer lies in between the lines of consumer reasoning. With most of these purchases, people know what they want and what to look for. They won’t go to the dealership until they’re ready because the aggressive nature of a car salesman is expected. They want to be prepared so they can call out bluffs while countering intuitively and intelligently. Since the purchase and its value is clearly understood, the desire to enjoy it is already there.
How Consumers Get Stuck in Timeshare Loans.
If you analyze the sale of a timeshare, you’ll realize most people attending presentations are there for the perks. For the most part, they agree to show up because they’ve been incentivized to listen to something they could care less about. They feel the exchange-of-time is worth it because they have no intention or desire to buy. Rarely do they expect to be intrigued. But low and behold, many consumers are dazzled by once-in-a-lifetime opportunities to travel and take out unfavorable timeshare loans to make it happen.
What fails to meet the eye is the simple fact that timeshare presentations, are run by commissioned representatives that make car salesmen look like boy scouts. Since most people don’t anticipate the hard sale, they tend to believe it. Even though pertinent details tend to be left out during the pitch, the strategic excitement and vague possibilities of a new frontier leads consumers to believe they’ve struck gold. But if you’ve bought a timeshare before, you know this is usually short-lived.
Once the reality of the purchase sets in, many come to realize they can’t even book the condo. They figure out the total cost is quite more than they expected and a resale market doesn’t even exist. After seeing the amount of interest that timeshare loans carry, they begin to view the purchase as a burden. All of the jubilee quickly turns bitter and buyers despise what once was seen as a unique opportunity to escape reality in style.
The Psychological Element of the Timeshare Sale.
The timeshare purchase itself is a lot more complex than consumers being in less-than-ideal sales environments with the wrong people. Timeshare companies know how to put people in unknown situations that isolate them, making it easier to persuade. Anyone in the psychology field knows the best way to sell someone on something is to somehow nurture them into believing the decision is theirs. This is exactly what the resort does to close people on timeshare loans.
A dosage of “what ifs” blended with an element of pressure creates a sense of urgency for potential buyers. The perks and capabilities that have yet to be experienced paint a picture of an improved quality of life alongside endless possibilities to create new memories. The idea that the purchase is “affordable” forces them to seriously consider the offer and make a quick decision before it goes away.
Many of our clients talk about the appeal of buying. How they felt like they never went anywhere with their spouse or family. That they barely even went out for dinner, not to mention vacationing anywhere worthwhile. When the purchase was presented in a limited fashion, it encouraged them to take advantage of an ability to spend more time with loved ones and family. Many feel as though the purchase fills a void in their life that they hadn’t previously recognized on their own.
This is why timeshare companies target certain types of households for ownership. They want to pitch people who don’t exactly have the budget to travel lavishly. They want to be able to tell them that they can by persuading them that their dreams are actually within reach. Salesmen are trained to come off as empathetic friends, simply handing out travels deals to help people experience life to the fullest. If consumers knew the real intent behind the sale, they’d never agree. In short, closers reap high commissions.
Unfortunately, deception is a specialty of the greedy. The documentary, Queen of Versailles, shows how timeshare travel is really portrayed by those behind the scenes. Subconsciously, everyone wants to go on vacation, but not everyone can afford it. These corporations know that preying on people that want to travel, but can’t, is a lot easier than pitching those that don’t need a travel bargain. When an opportunity seems too good to be true, lower income households are a lot more prone to say “yes.” Especially when they can borrow money with seemingly “affordable” timeshare loans to experience what higher income families do.
How Misleading Are Timeshare Loans, Exactly?
When consumers make a large purchase, most of them aim to pay it off as quickly as possible. Although debt isn’t being taken as seriously as it should be in the 21st century, most people understand how interest works. But because of the lack of disclosure during the presentation, many timeshare buyers don’t anticipate the purchase costing double or even triple what was presented to them.
In reality, agreeing to buy a $20K timeshare usually ends up costing around $45K over the term of the mortgage. Some of our clients tell us they knew the interest rates were high but they were told they could quickly refinance to lower costs. When they discover this was a lie, they find themselves stuck in a perpetual contract with zero wiggle room. Most refinancing options have certain qualifications that aren’t immediately attainable. Even if buyers restructure down the road, the principal balance remains the same because they’ve been paying off interest the whole time.
Annual fees that come in the form of maintenance and assessment costs also plague buyer’s pocketbooks. Every year, these continue to rise, placing quite the financial burden on buyers. Maintenance fees alone cost $1,200 per year on average. Even when owners pay off timeshare loans or mortgage balances, they’re still obligated to pay these dues every year. You could spend $45K on a 10 year term, and still face a $12K minimum obligation over the next 10 years.
As you can tell, this amount is a lot more than what the initial sales pitch covered. But it’s not the only financial disadvantage that hinders buyer enjoyment. When the purchase doesn’t live up to expectations, many consumers spend more to make it worthwhile. Upgrades normally come in the form of additional contracts with separate timeshare loans and annual dues. What started off as a $20k borrow over 10 years for $167/month actually ends up being $354/month at 17.9% interest, resulting in a devastating financial blow that can surpass $100k over time.
The Importance of Understanding Timeshare Financing.
Over the next few weeks, we’re going to spend a lot of time focusing on the actualities of borrowing money for vacation ownership. Since many of our clients have experienced quite a bit of hardship, we’ve been able to conceptualize their stories and create valuable content that helps you understand the true expense of fractional ownership.
Aside from breaking down travel financing in general, we hope to help you grasp the simple fact that a timeshare property is not an asset but a liability. Even when it comes to refinancing, lowering your interest rates isn’t as easy as it’s said to be. Knowing how timeshare lenders work and what to expect out of a mortgage (or a personal line of credit) will help you navigate the industry with confidence.
At VOC, we know how discouraging the financial burden of a timeshare can be. Timeshare loans are not in the least bit consumer friendly. In addition to all of the other inconveniences buyers experience, the cost is what commonly compels people to get out of timeshare contracts. But you don’t have to feel trapped in your agreement. We hope this article provides you with perspective and helps you make the best decision for you and your family. Sometimes asking the right questions helps you avoid deceit altogether.
If you have any questions about canceling fractional ownership, you can always visit other blogs for more information. If you’re unable to find what you’re looking for, one of our consultants will be more than happy to see how VOC can help. If you’re set on getting rid of the purchase, feel free to proceed with a qualification form below.