If you are a timeshare owner and are no longer able to afford your timeshare loan, you may have no choice but to default on the loan. Defaulting on a loan basically means that your property is being foreclosed and taken away from you. Before purchasing a timeshare, buyers should always be aware of finances and whether the possibility of defaulting exists for them. You should never buy a timeshare property unless you are sure that this will be something that you can afford for years to come. If you feel that you may default on your timeshare loan, there are some things you can expect during the process.
Bad Credit Rating
There are two drastic things that can happen when you default on a timeshare loan. Timeshare financing is always a tricky business and you should be aware of what can happen if you default. First, you can expect your credit to be greatly affected. Foreclosure of timeshare property will be visible on your credit history. You may not feel this is a big issue at the current time, but it can be an issue in the long run. Your credit rating will affect all future purchases and loans that you may be trying to receive.
Loan Denial and High Interest
If you are ever interested in taking out another loan, whether it be on a home, timeshare, car or other type of property, the lender will take your foreclosure into consideration and may deny your loan. Lenders typically will not want to give loans to those who have not been able to pay them off in the past. However, if you are given a loan, you will usually have a higher interest rate than those who have not previously foreclosed on a property. All of this can happen just because of your credit rating and the previous foreclosure. Credit is not something that you would want to mess with unless it is absolutely necessary.
If you do default on a timeshare loan, the lender will report your foreclosure to the IRS. When this situation is reported, the IRS will be informed of the amount of money you owed on the timeshare property at the time of the foreclosure. They will also be aware of the property value when you originally purchased it. This may be added to your tax information at the end of the year.
If it is possible in your current situation, sell your timeshare rather than foreclose on the property. Selling your timeshare will typically not harm your credit and will keep you free of problems with the IRS. If defaulting on your timeshare loan is the only option that is available to you, first try contacting your home resort and discussing the problem to see if there are any other options or ways in which they are able to help you.