Advice needed

[Bradhe]

I have been asked to help sort out a timeshare bought by a friend (yes really...)

Having read all the documents, I think that the relevant facts are:

HGVC Elara resort
1 BR Grand
Odd numbered years
Gold season
Floating week #48
Unit 3XXX
5000 points, odd numbered years

Bought in May 2019
Price $21,750
Closing costs $716
Cash $4500
Note $17,700 at 19% interest
Biannual assessment $883, annual club dues $176

Given this persons financial situation, this was probably not a smart purchase and she needs to find a way out of it.

The rescission period is long passed, and I am assuming that after the years of challenges that they must have gotten the documents are bullet-proof. Am i correct in believing that the only way out is to sell it.

Does anyone have a view as to what this unite right is worth today? (appreciating that it may be underwater versus the note). What is the best way to go about selling it? I have already discovered that there are lots of scam artists out there who want large fees up front...

It appears that Hilton has a first right of refusal on any transfer; will they buy these outright? At what price?

Thanks for any help and advice.

 

[SmithOp]

No good answer here, every other year deeds are worth about 50 cents a point on the resale market, $2500 tops for this one.



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[CanuckTravlr]

Agree with SmithOP. No really good solutions. Can't even sell the unit without paying off the note.

Is 19% considered normal for a loan in the USA? Here in Canada that is a standard credit card interest rate. If possible, the note should be refinanced or transferred to a lower debt cost. The interest alone is $3,363 on an interest simple basis, more if it's compounded more often. If the rate could even be cut in half, that action alone would save over $1,600 per year and the difference could be applied to repay the principal more quickly.

Based on the current situation, the carrying costs are about $3,980 each and every year, not just every two years. Calculated as loan interest of $3,363, one-half of the biennial MFs =$441 and the annual club dues of $176. For a one-week stay that represents a cost per day of almost $570 per night. That is bad enough, but since they only get to stay every two years, it works out to over $1,100 per night.

Elara is a nice location, but for that much per night you can stay in some VERY nice digs in Las Vegas without the credit encumbrance.

Does the person own any property that is not mortgaged to the hilt, that could be used to obtain a secure loan at a (hopefully) much lower interest rate? That, together with potentially renting out the home week (at least until the loan is paid down), is one of the few things IMPO that could be done to at least mitigate this terrible situation in the short term. They now have to deal with the reality of the situation, but I really have to wonder what they were thinking in doing a long-term loan at 19% interest?

 

[Cyberc]

Another thing to add is that she need to pay it off to sell it.

HGVC does not allow a transfer if there is a mortgage on the ownership.

I know this is not what you want to hear but if she can’t afford it I would seriously consider stopping payment and defaulting.

 

[Bradhe]

It is a consideration. That said, my reading of the note is that it is both secured by the property and an unrestricted personal obligation. If she defaults, I have presumed that they will come after her as with any other consumer credit. Anyone know of any recent examples and what happened?

Do they actually buy these things back?. Even at a loss, a clean out would be helpful

 

[CanuckTravlr]

It is a consideration. That said, my reading of the note is that it is both secured by the property and an unrestricted personal obligation. If she defaults, I have presumed that they will come after her as with any other consumer credit. Anyone know of any recent examples and what happened?

Do they actually buy these things back?. Even at a loss, a clean out would be helpful

No, they will not buy it back or allow a transfer unless the note is repaid first, as mentioned above by Cyberc.

I think the loan is not so much secured by the property as it is just registered against title. Since resale timeshare values are typically a fraction of their "retail" price there is nothing really of value against which to "secure" the loan. That's why it is also showing as an "unrestricted personal obligation". But the loan interest of 19% is egregious, unless they have no other loan options.

Defaulting on the loan could lead to credit and other issues and is not necessarily as easy as it sounds. Even if they no longer like the deal, I assume they can at least cover the cash flow requirements, otherwise why would they have signed the agreement in the first place? Did they not know what it was going to cost them? If they sell it they can apply the proceeds (not much) against the loan, but they will still have to pay the loan off first.

If they can't pay off the note, then they may now be stuck with trying to rent it or finding out how to use it to their advantage, at least until they can get the loan paid off. This forum is a great place for learning how to get the most advantage out of what they now own.

If they are stuck with it, the biggest thing they can do to help themselves is to find a source with a lower cost of borrowing so they can at least pay off the 19% loan and reduce their interest costs. This may not be what they want to hear, but they appear to have made the deal with little or no thought, either during or even immediately after they bought it, when they could at least have taken advantage of the rescission period.

It is a tough lesson, but hopefully they have learned to do some research in future before committing to a major purchase.

 

[Janann]

Is 19% considered normal for a loan in the USA?

Its about right for a timeshare loan. She might be able to get a slightly lower rate, but its hard to say without knowing about her credit situation. https://www.bankrate.com/loans/personal-loans/timeshare-loans-primer/

 

[SmithOp]

If she defaults, I have presumed that they will come after her as with any other consumer credit. Anyone know of any recent examples and what happened?

If the debt is written off it will be reported to credit agencies and IRS. She would get a 1099-COD (Cancellation of Debt) which is taxable as income on 1040 Line 21 - Other Income.




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[Hobokie]

Agree with comments made above (they won't buy back until paid off, she won't be able to sell for anything even remotely close to what she paid, etc etc). Might she consider taking out a lendingclub or similar loan which will be at a significantly lower rate? I haven't done this myself to pay off a timeshare, but I got into some financial trouble (almost $10k in credit card debt!) in my early 20s when I was in college and this worked for me! Granted, the rates vary depending on credit score, but SURELY they will be significantly better than 19%....