The Pros and Cons of No Interest Credit Cards

When you have a purchase of significance to make, like a brand-new kitchen appliance, or you want to stop paying high-interest charges on your credit card debt, zero percent credit cards can seem like a lifesaver.

With one swipe of the plastic or a few clicks online, you’ve now got that television you’ve had your eye on. Or if you use the no interest credit card to pay off your debt, the bills that made you nervous stop showing up in the mailbox. And since these zero percent credit cards seem to be available everywhere you look, it must be reasonable to use them as part of ongoing financial management. Right?

Is this kind of offer too good to be true, though?

Well, when they’re judiciously used for brief periods of time, these types of credit cards can bring financial relief and/or help you buy that big-ticket item. In this guide, we’ll explore some of the short-term ways that a no interest credit card can be useful, along with downsides to watch out for—some of them significant. Finally, we’ll share another strategy to fund purchases or pay off debt that might work better for your financial plan.

The Advantages of No Interest Credit Cards

There are certain situations in which using credit cards without interest is logical. Let’s say, for example, you’ve got a credit card with a hefty balance and a high interest rate. You know, though, that your income tax refund is coming soon, and plan to use it to pay off the credit card.

So, you might think, why not pay off the high interest credit card now with one that has no interest for six months, and then pay off THAT credit card with your refund check? This is commonly referred to as a credit card balance transfer, and if all goes as planned, yes, this makes good sense.

Or, let’s say you want to make a large purchase, perhaps a new desktop computer for your home office, and you have added the monthly payments to your budget, so you’ll have your balance down to zero before the credit card interest kicks in. Again, if all goes as planned, then you’ve successfully bought your computer on credit without having to dealing with any interest charges.

No interest credit cards aren’t no interest forever. They just offer 0% interest for an introductory period, often of about six months, and then the interest rate goes up. In short, it’s only advantageous to use a no interest card as a way to eliminate debt or fund a purchase if you know you can pay the card off before the interest rate rises.

The Problems with No Interest Credit Cards

Let’s take another look at the first scenario described above. In this scenario, you paid off your high interest credit card with a zero interest one. Your plan is to wipe out the balance on your new card with your income tax refund. But as you already know, life doesn’t always proceed as planned. Refund checks get delayed, cars break down unexpectedly and need emergency repairs, and so forth.

In those instances, you can ultimately lose the benefit of zero interest and get caught up in a high-interest trap. These zero interest credit cards only come with no interest during an introductory period, which is often only six months, although it can sometimes be as long as 18 months.

Once your introductory period ends, the card reverts to its “regular” interest rate and annual percentage rate (APR). It’s only human to see the “zero percent” part of the deal and not see what the regular rate would be, especially when you had a solid plan in place to pay off the balance during the no interest period.

To make the situation worse, sometimes if you have a remaining balance at the end of the introductory period, the company collects interest on the entire principal, rather than the remaining balance. So, in that case, nothing was really free.

Problems can also arise even before the introductory period ends if balance transfer fees exist. Typical fees are about 3% of transferred balances, with some as high as 5%. So if you’re applying for a no interest credit card, be sure to double-check to see how balance transfers work. If a balance transfer fee does apply, do the math and make sure it’s worth it. After all, a 5% balance transfer fee on $10,000 is $500.

Here’s another twist. Sometimes, the zero percent deal only applies to new purchases. In that case, using the card to transfer your debt balance isn’t a good idea. Read all terms closely before making any decisions. As yet another potential catch, late payments may trigger a clause that ends the introductory zero percent rate immediately with a penalty APR kicking in. These rates can be as high as nearly 30%. Seriously.

If you get caught in a cycle of balance transfers, going from one zero interest credit card to another, this can have a negative impact on your credit score. And if your plan is to close the high interest credit card you just paid off, that could also have a negative impact. Think of it this way: If you’ve had a particular credit card for several years, this signals stability to the credit bureau, especially if you’ve at least made minimum payments on time. Closing it may signal something else entirely.

Here’s a final scenario with potential landmines. When you apply for a card, you won’t know what your actual transfer limit is until the card is approved. While you might request a certain amount, it’s the issuer who decides, based on your income and other factors.

And if you planned to transfer a balance that’s bigger than what’s available on your new card, you would either need to transfer a partial amount or apply for additional zero percent credit cards. This strategy doesn’t streamline your bill paying in the least.

You’ll need to carefully navigate a timeline to get the benefits of zero interest credit cards. Most will only give you 60 to 90 days to transfer balances. If you wait too long, then the deal is off. Sometimes the balance transfer takes a week or two to process. During that time, you’ll need to make payments on your other card(s), and waiting for the balance transfer to clear eats into the time you have with 0% interest.

Popularity of Zero Interest Credit Cards

A article from January 2018 notes that the average person in the United States has a credit card balance of $6,375. This is an increase of almost 3% from a year ago, and that’s per person, not per household. Overall, the total amount of credit card debt in our country is the highest to date, more than $1 trillion in 2017.

People take out zero percent credit cards with the best of intentions. But, when you pay off one credit card with another, you’ll then have more credit cards available to use. The end result is often increased debt, ultimately at high interest rates. Fortunately, better options exist.

Personal Loans Can Be Another Option for Paying Off Debt

No interest credit cards aren’t your only option for paying off debt. You can also pay off high interest credit cards with a personal loan. With SoFi personal loans, you can likely reduce the interest rate you’re paying on credit card debt. To get a sense of what you can save, use our personal loan calculator.

There aren’t any origination fees and because there are no prepayment penalties, you can pay off your loan at any time. With a fixed-rate personal loan, you never have to worry about your interest rate going up, so you can break the vicious cycle that credit card debt can create.

And SoFi wants to help set you up for repayment success. If you lose your job, we’ll temporarily pause your payments. Interest that accrues during the forbearance period will be added to the principal once you resume making payments. Our Career Team will even help you find a new job!

If you’re ready to get started, you’ll appreciate our easy online personal loan application and our seven-day-a-week customer support. Get started now!

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


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Saving Money as a Family

Perhaps you define your family as you and your partner—or maybe you have a house full of children. No matter how big or small your family is, you have goals to achieve and dreams to accomplish.

Sometimes, you’ll already be able to fund them, but, often, you need to save money to make these dreams comes true, and here you’ll find strategies you can customize for your own family’s wants and needs. When thinking about which strategies are best for saving your family money, always keep your goals in mind.

Ask Yourself These Questions:

1) What are you saving for? Are you saving to create an emergency fund for peace of mind? Will your goals then transition into a savings plan for a fabulous summer vacation?
2) How much do you need to achieve your goals?
3) Where can you cut expenses to free up cash flow and make it easier for your family to save?

Now, look at these tips and customize as needed to help achieve your goals.

Optimize Your Mindset for Saving

If you approach your new saving strategies with excitement, seeing them as an opportunity to accomplish family goals, not only are you probably more likely to be successful, but the process will also be more enjoyable.

With this attitude, strategies that might have seemed too challenging in the past can suddenly be transformed into an adventure. Plus, when the entire family is participating, you naturally create momentum to achieve goals and celebrate progress.

From “Should Have” to “Should” to “Will”

When it comes to money management, virtually everyone has some “should have” items to put on their list:

•   I should have started saving earlier in my life.
•   I should have created a better budget.
•   I should have [Fill in the blank and know you aren’t alone!].

Now, take those thoughts and turn “should have” into the present tense:

•   I should start saving.
•   I should create a better budget.
•   I should [fill in the blank].

Next, make it stronger by changing “should” to “will”:

•   I will start saving.
•   I will create a better budget.
•   I will [fill in the blank].

You’re ready to take positive steps to save. Here are some additional tips to help your family keep the right attitude:

•   Don’t compare your financial situation to anyone else’s. Create a plan that works for your financial situation and goals.
•   Create a savings plan and stick to it.
•   Celebrate successes.

Freeing up Cash Flow to Save

As a starting formula, calculate these three sums:

•   Net monthly income (after taxes)
•   Monthly expenses: housing/utilities, car payments, student loan payments, credit card payments, etc.
•   Subtract the second amount from the first and determine how much money you can save out of what remains.

Now, what expenses can you eliminate to free up even more cash flow? Do you have automatic withdrawals for services that you don’t really use anymore?

One place where families can often cut back is food:

•   Create a monthly budget for food expenses, including grocery shopping and eating out.
•   Determine what role restaurants will play in your family budget. Some families are more than willing to give up eating out as part of their new lifestyle, while others like to keep some dining out dollars in their monthly budget.
•   Many families find it helps to plan meals before they go grocery shopping. If that’s you, create a list to follow at the store. If possible, go without any small children who may have different ideas about what you should buy.
•   Manage leftovers well and make sure you use food before expiration dates.

Check contract payments and see if you can get better prices for your home and car insurance, cell phone bills, cable contracts, and more. Will your current vendors match pricing available from their competitors?

Two more ways to free up cash flow are:

•   Determine what loans are close to being paid off: How much will that payoff boost your ability to save? If it’s by a significant amount, consider focusing your energy on paying off those bills.
•   Consider consolidating high-interest credit cards and loans into a low-interestpersonal loan.

Saving My Family Money: Tips for Parents

Children tend to follow the lead of their parents, so how you present any changes in your daily routines is crucial. For example, if you realize that you’re blowing a whole lot of money on game machines at a local pizza place, get creative!

Start making pizzas at home with your kids—complete with silly faces made out of pepperoni and veggies and followed by family game night. The first time you do this, your children might be frustrated, but your enthusiasm and creativity can turn the tide.

If you realize that you overspend on birthday celebrations for your kids, cut back on gift-giving costs but turn the present-opening experience into a game. What if you hid the presents and gave the birthday boy or girl clues to follow? Play music in the background, making it louder when your child is getting closer and lower it when he or she is going in the wrong direction.

Use visuals to help your children become part of the family savings plan. You can create colorful charts to show your youngsters how much you want to save and your progress. Give each one of them fun piggy banks and invite them to start saving. Once there is enough money in a child’s piggy bank, you might take him or her to the bank to open a savings account, and make it a time of celebration.

And most important, pay attention to how you talk about money and saving around your children. Be positive instead of dwelling on the negative. Don’t apologize for giving fewer or less expensive gifts—make the most of the new traditions.

Saving for the Future

As you build up an emergency savings fund (say, three to six months’ worth of living expenses) and otherwise begin to reach your goals, saving for the future may transform into investing. And, although the terms “savings” and “investing” are sometimes interchangeably used, there are stark differences. For example, when you’re building up your savings, you are likely:

•   Adding money to a cash management account in regular increments
•   Saving with a specific purpose in mind for those funds, whether it’s a rainy-day fund or a down payment on a new house
•   Focusing on shorter-term financial goals over the next two to three years

When you invest, you take on a degree of risk. Investments aren’t FDIC insured (like a bank account), and account balances are subject to market fluctuations.

But often, people invest in light of longer-term goals, whether it’s funding your kid’s college education or planning for retirement. Bonds, and mutual funds, are very common investments, as are ETFs.

At SoFi, we believe that everyone should have the ability to invest in their family’s future, and they should be able to access quality investment management. So, even if you’re new to investing, you can start quickly and easily with an initial deposit of $100.

When you make an investment appointment online, you start by letting us know which of these areas is of interest to you:

•   SoFi Invest® Overview
•   Debt Management Strategies
•   Home Ownership Planning
•   Planning for Children
•   Financial Checkup
•   Financial Independence and Retirement Planning Strategies

To benefit from today’s automated investment technology and the insight of professional human advisors, contact SoFi. Because our advisors don’t receive commissions, they don’t try to sell you anything that isn’t in your best financial interest. Instead, they can help create a plan that’s customized for your unique needs and goals.

SoFi is ready to help you invest as a family. Start today by signing up for an investment account with SoFi.

SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.

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I Due: How To Tackle Student Loan Debt Without Sidelining Your Marriage

Getting married soon? Congratulations! Just be warned—there comes a moment in many weddings when half the guests suddenly slip away to watch a big game (just follow the cheers to find your wedding party).

Football especially is a pretty good analogy for a wedding – after all, in both football and marriage, you’re either tackling things together or you’re being tackled by them. Money is a common example of this (in marriage, not football), as the growing number of couples dealing with student loan debt can attest.

Whether the loans belong to you, your spouse or all of the above, once you get married it doesn’t really matter anymore. Paying off debt is now something you can tackle together. It may be tough, but with open communication and planning you can work as a team to get that student loan linebacker off your, er, back.

So what’s the best strategy for taking down student loans without letting them clobber your marriage? Here are five tips for proactively – and collaboratively – running a play that could help lead to the big pay-off: a debt-free happily ever after.

Tip #1: Create Your Big Financial Picture

Preparing to take on a big financial goal usually requires some conversation and preparation upfront. Before making any decisions, sit down and talk about your short- and long-term financial objectives, and make sure you’re both on the same page (or as close to it as possible). This can be an overwhelming topic, so see if you can break it down into chunks.

Have you established a household budget? How do student loans (and paying them off) fit into your long-term and short-term goals? Should you start aggressively paying off debt, or might it be better for you to ramp up over time? What other factors (e.g., buying a home, changing careers, having children, etc.) could affect your decisions?

Not only can this exercise help give you more clarity to create an action plan, it can also actually be kind of fun – after all, planning a life together is part of the reason you got married in the first place. The key is to listen to each other and remember that you’re both on the same team.

Tip #2: Take Advantage of Technology

Once you’re clear on the big picture, it’s time to get into the weeds. Many people have more than one student loan, often with multiple lenders, so a good place to start can be to gather all of your loan info in one place. You can use an online student loan management tool to collect this information, compare student loan repayment options, and even analyze prepayment strategies.

After crunching the numbers, your debt payoff strategy may include putting extra money toward your loans each month, which means creating and sticking to a budget that supports that goal. Platforms like Mint and Learnvest can help you aggregate household accounts and track spending.

Note: tracking your spending so precisely may feel like ripping off a bandage at first, but over time, this kind of discipline can help you better see where your money goes and help you make conscious choices about your spending. And once you have your budget in place, these apps can be set up to alert you both when spending is getting off track.

Tip #3: Define The Who, What, When

Whether your finances are separate or combined, you’ll probably want to come to an agreement on how to collectively pay all of your financial obligations. Many couples address this based on each person’s share of the total household income.

For example, if one person makes 40% and the other makes 60%, the former might pay 40% of the shared bills and the latter might pay 60%. Others find it simpler and more cohesive to have one household checking account and pay all bills from there.

However you decide to split things up, it could make things much easier to agree upon a plan that accounts for everything, because missed payments can potentially impact your credit (and/or your spouse’s), making your future financial objectives that much tougher to achieve.

Tip #4: Look For Opportunities to Optimize

Okay, so now you’ve established a plan and a budget, and you know who’s on point for each bill. You’re on the path to getting student loan debt off your plate. Is there anything else you can do to speed up the process?

Short of winning the lottery, the most common ways to accelerate student loan payoff are prepayment (meaning, paying more than the minimum) or lowering the interest rate, the latter of which is most commonly accomplished through refinancing.

If you qualify to refinance your student loans, you have a few possibilities: you can lower your monthly payments (by choosing a longer term) or lower your interest rate (which could also lower your monthly payments) – or you could shorten the payment term, and that means you could save money on interest over the life of the loan – money that could come in handy for those other financial goals you’ve both agreed to pursue.

Tip #5: Be on the Same Team

Living with debt is stressful for any couple, but being part of a relationship has its advantages, too. There’s a reason that weight loss experts often recommend finding a “buddy” to help cheer you on and keep you honest in your diet and exercise journey – and the same applies for achieving a big goal like paying off student loan debt.

Keep it positive and keep the lines of communication open, and you may even find that the journey to being debt-free makes your marriage even stronger – so you can take the hits that come your way as easily as your favorite team does.

Check out SoFi to see how you can save money by refinancing your student loans.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


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How to Save for a House While You’re Still Renting

Millennials, that rather maligned generation of people born sometime between 1980 and 1995, are often the butt of jokes for being the “boomerang generation .” You know, because they seem to leave the comfort of their parent’s homes only to return again when they realize they can’t find a job or pay the bills in post-collegiate life.

And sure, many young people do indeed return to the welcome embrace of mom and dad, but it may not be because they want to. In fact, most would rather be living the American dream of owning their own home.

According to 2017 data from Apartment List , 80% of millennials want to buy a home one day. However, if you’re wondering, “How long does it take to save for a house?” there are a few things you should know.

Most of those same millennials noted in their responses that economic hardship (thanks to mounting student loan debt , low wages , and an unstable economic environment) will likely delay their homeowner dreams. And for many, it comes down to the fact that they can’t seem to save enough for that dreaded 20% down payment.

As the data additionally showed, 68% of millennials have less than $1,000 for a down payment in an account right now. Another 44% said they have not saved anything for a down payment at all. And 39% said they aren’t saving for a down payment on a monthly basis.

But, if buying a home is a top priority for you, there are ways to make that happen. Here’s how to save for a house while you’re still renting.

5 Tips to Save for a Home While You’re Still Renting

Pay Down Your Debt First

In order to save for a house, it’s imperative that you figure out a plan to pay down your existing debt. And for 30% of millennials , that means paying off more than $30,000 in student loans. And though that may seem like a monumental amount of money to pay off, there are ways to do it.

First, if you’re a full-time employee, reach out to your company’s HR department to learn more about student debt repayment assistance. Though Inc reported just 3% of companies in the U.S. currently have this type of assistance, it’s still worth a try.

Gain home-buying insights
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As a more drastic measure, you could always think about going into a profession that offers partial or total student loan forgiveness (such as teaching in certain public schools), or moving to a state that will also help pay off your student loan debt just for moving there (including Alaska, Wyoming, Washington State, Florida , and more).

For a much easier fix, you could always think about looking into student loan refinancing. If your current interest rate seems unreasonably high, check out SoFi’s student loan refinancing options. By dropping your interest rates, you could significantly reduce both your payments and the length of time you’ll be making them. Which in turn could help you save for a house even while getting out of student loan debt.

Create a Budget That Will Help You Spend Less and Save More

Look, we’re not saying eating avocado toast at brunch on Sundays is really breaking the bank, but indulging in luxurious habits day after day can really add up. Creating and sticking to a realistic budget can help you spend less while saving for a house. To get there, all you need to do is follow these simple steps.

Gather your data: Figure out how much you’re earning each month (after tax), along with how much you’re currently spending. Add it all up including cell phone bills, insurance, grocery bills, rent, utilities, your coffee habit, the dog walker, gym membership, etc. Don’t miss a dime.

List your current savings: Are you currently putting money into an IRA, 401(k), or other savings plan? List it, so you can see what you’ve already got in the bank.

Really dig in and be harsh about your spending: Can you cut back anywhere? How about on that gym membership? Maybe it’s time to join 24 Hour Fitness over Equinox. How’s your takeout habit? If you really want to save for a house, you may need to learn to cook. And next time you go shopping for new clothes, make sure to clean out your closet first to ensure you actually need to buy new dress shirts.

This, admittedly, is the worst step in the budgeting process, but it’s crucial to be honest with yourself about your spending. Look on the bright side, all that hard work could help you get a new home years sooner.

Finally, remember to check in on your budget every so often and adjust as needed. For example, if you land a new job, get a promotion, or are given an annual raise, perhaps you can be adding that money to your savings account, or put it toward paying off your loans. Whichever one feels more important to you is OK, so long as that extra cash isn’t going toward more weekly lattes .

Invest With a Wealth Management Account

If you’ve paid off your debt, set realistic budgeting goals, and are raking in some dough to add to a savings account, you’re already on the right track. Now all you need to do is put your money to work for you. To make that happen, consider opening a SoFi Invest account.

With an online investment account, you can set targeted goals that are personalized for you. In this case, your goal would likely be to purchase a home within a set number of years, and SoFi can help you figure out an investment plan accordingly.

After setting a few targeted goals, you can work with a real-life financial advisor who will walk you through how to strategically invest your money so that it works for you. And we will never push you to take more risk than you want to—tell us what your risk tolerance is, and we’ll work with it. Our financial advisors will cost you $0, so no need to budget extra for that.

Automate as Much of Your Finances as Possible

This is a lot of information to process, but once you get through all the work upfront, you can start automating as much as possible. For example, have a portion of your paycheck automatically go into your savings account each month.

Then, automate a certain dollar amount to head to your SoFi Invest® account. The rest can then go into your checking account and be divvied up at will. This means less stress for you and more time designing your dream home on Pinterest. Just remember to invite us to your housewarming party when it all comes together.

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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.


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How Timeshare Financing Works for Vacation Property

Dreaming of swaying palm trees and fruity drinks topped with tiny turquoise umbrellas, or escaping to a ski villa up in the mountains? While many of us would love to own a vacation home in our favorite destination, the expense is not always feasible. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice. Here’s a look at what timeshares are and some timeshare financing options.

What Is a Timeshare?

A timeshare is a way for multiple unrelated owners to own a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of one’s own.

Timeshares are a popular way to vacation. In fact, 9.9 million U.S. households own a timeshare, according to the American Resort Development Association (ARDA). The average price of a timeshare in the United States is $22,942 . Though this figure can vary widely depending on the location, the size and quality of the property, the length of stay, time of year, and the rules of the contract.

How Do Timeshares Work?

Timeshares usually fall into two broad categories: deeded or non-deeded. With a deeded ownership structure, each owner owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they are allowed to use it. For example, a property that sells timeshares in one-week increments, would have 52 deeds, one for each week of the year.

Non-deeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year, or a floating period that allows you greater flexibility in choosing when to use the property. Your lease will expire after a predetermined leasing period.

Timeshares may also offer one of a handful of options for timeshare use periods. They may be fixed-week, meaning you can use the property during a set week each year. There may be floating weeks which allow you to choose when you use the property depending on availability. A timeshare may offer fractional periods that allow you to use the property for a longer period. And finally, you may be able to purchase points that you can use in different timeshare locations at various times of the year.

Choosing a Timeshare

When you purchase a timeshare, you’re sharing the property with a number of other timeshare owners and you typically have the right to use the property at the same time every year.

You can trade days with other owners and sometimes even try out other properties around the country (or around the world) in a trade. In addition to the initial purchase price, you’ll also be required to pay your share of the maintenance fees that cover the costs of property upkeep and cleaning. These maintenance fees often increase over time with hikes in cost of living. There are also service charges that timeshare owners may have to pay, such as fees due at booking.

Once you’ve considered the financial responsibilities that come with the timeshare and your budget, choosing the right place often comes down to where you want to be and what you need in terms of space and amenities.

Are Timeshares a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they are not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time—and can easily get to—you may end up spending less than you would if you were to purchase a vacation home.

Financing a Timeshare

When you buy a home, you typically finance it with a mortgage. When you buy a car, you can finance it with an auto loan. But timeshare financing has no direct market. The developer of the resort may offer you financing, but beware: these offers often come with very high interest rates, especially for buyers with lower credit scores. In fact, ARDA reports that the average interest rate on a timeshare financing loan is 14% over 10 years, with rates reaching as high as 20%.

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Because a home equity loan uses your house as collateral, it is likely that you will be given a lower interest rate compared to the rate on a timeshare loan offered at a developer pitch. Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets IRS requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you are taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan or vacation loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence is not at risk in the event of default, and securing an unsecured personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.


Q: Can I rent my timeshare to someone else?

A: Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases your timeshare resort will allow you to rent out your allotted time at the property.

Q: Can I sell my timeshare?

A: Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Q: Can I transfer ownership of my timeshare or leave it to my heirs?

A: You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.

The Takeaway

Timeshares are often thought of as a way to guarantee vacation time in your favorite location each year without having to buy a second home. If you do your homework and weigh the risks, they can be a good way to vacation with family and friends and make a lot of memories along the way.

Thinking about using a personal loan for timeshare financing? Check out SoFi to check your rate in just a few minutes.

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