How to Finance a Timeshare

There are different options you can consider.

Many people dream of owning vacation homes. But the reality is that owning a vacation property can be a very expensive prospect. Not only do you need to come up with a down payment on that home, but you also need to cover the cost of insurance, property taxes, and maintenance on your own. That's why a timeshare could be a better solution.

With a timeshare, you get access to a property for a preset amount of time each year. You might, for example, buy into a timeshare that gives you a week-long stay every calendar year in a popular beach or ski area.

There are ongoing costs to owning a timeshare, and those can vary based on the property you buy into. But you'll also have an upfront cost to grapple with. And if you don't have the money in savings to pay for a timeshare purchase outright, then you'll need to explore options for financing it.

Unfortunately, you can't turn to a mortgage loan to finance a timeshare purchase. The reason? You're not actually buying a home you own. Rather, you're buying the right to use a property. But while a mortgage may be off the table, here are two other options you can explore.

1. A home equity loan

If you own a home already, and you've built up equity in it, you may be able to borrow against that equity in a fairly affordable manner. The great thing about home equity loans is that you don't have to use those funds for improving or fixing up your own home. So you could take out a home equity loan and use it to finance your timeshare.

2. A personal loan

Often, the companies that sell timeshares will try to match you up with a lender who can set you up with a loan to finance your purchase. You could go that route or look at other personal loan lenders and see which one is most affordable.

A personal loan lets you borrow money for any purpose, so you could take one out and use the proceeds to cover the upfront costs associated with your timeshare. It's a good idea to shop around and see what interest rates different lenders are offering, keeping in mind that the higher your credit score, the less interest you're likely to pay.

Should you buy a timeshare if you can't pay for one outright?

If money is tight and you're worried about falling behind on any sort of loan payment, then it's best not to purchase a timeshare. But if you can swing the ongoing fees and monthly loan payments, then you may find that a timeshare is a good purchase -- especially if you have a favorite vacation spot that's gotten increasingly difficult and expensive to book.

Just keep in mind that when you buy a timeshare, you don't actually own property -- whereas if you buy a vacation home, you can build equity in it and eventually sell it at a profit. So you may want to take the time to consider both options carefully before moving forward with a timeshare purchase.