Best place to take a loan from?

[GoofGoof]

I was told we couldn't do that because only hardship loans could be taken from your 401K.

It varies by plan. Some plans will allow a 401K loan some don't. If a loan is not allowed you can make a hardship withdraw if you meet the qualifications, but you still have to pay the regular taxes and in some cases a 10% penalty depending on the reason for withdraw. A hardship withdraw is permanent and cannot be deposited back into the account. Typically a 401K loan can only be for 50% or less of your total account balance and usually has to be paid back relatively quickly (5 years or under). If you borrow to buy a house some plans allow for longer term loans. With dollar cost averaging a 401K loan could be detrimental especially in times when the market is down, but right now the market is pretty strong and could actually be a benefit if there is a drop off over the next 5 years since you would be buying back in at a lower cost than when you took the loan. It's still kinda gambling with retirement money, but is a decent short term plan if you know you can repay it rather quickly.

 

[squidward]

Honestly, at this point, it's all kind of moot anyways. With the talk about Maelstrom being gutted for a Frozen ride and the lunacy of killing standby lines, Disney has just about broken our vacation back. Their short-sightedness along with near Communist way of governing how people spend their time there is really rather disgusting.

 

[unkadug]

Honestly, at this point, it's all kind of moot anyways. With the talk about Maelstrom being gutted for a Frozen ride and the lunacy of killing standby lines, Disney has just about broken our vacation back. Their short-sightedness along with near Communist way of governing how people spend their time there is really rather disgusting.

This has been going on for quite a while. What made you open your eyes in the past four days?

 

[GoofGoof]

Honestly, at this point, it's all kind of moot anyways. With the talk about Maelstrom being gutted for a Frozen ride and the lunacy of killing standby lines, Disney has just about broken our vacation back. Their short-sightedness along with near Communist way of governing how people spend their time there is really rather disgusting.

DVC is a medium to long term decision. IMHO if you aren't sure you will be interested in going to WDW or another DVC location for at least the next 10 years it's tough to justify the purchase. The resale market is strong, but walking away after only a few years is likely to cost you more than just renting the points.

 

[flynnibus]

Not sure why you wouldn't buy into DVC without a loan. Not like most of us have 17k+ to shell out at once.

Then maybe a purchase like this isn't in your best interest... not all things need be accessible to all. If you are going to drop 5k-6k on a single vacation - you can't save up a little?

 

[draybook]

Then maybe a purchase like this isn't in your best interest... not all things need be accessible to all. If you are going to drop 5k-6k on a single vacation - you can't save up a little?

Yeah, but I don't drop 5-6k per trip. I see your point though, but DVC doesn't include the costs of other things. I guess it just boils down to each family's situation and needs.

 

[flynnibus]

Yeah, but I don't drop 5-6k per trip

Also why we aren't the ideal DVC customer

 

[Lynne M]

The number one reason not to finance is that you may well be increasing the cost of your purchase so much that it's no longer more cost-effective than paying cash.

People tend to look at financed purchases in terms of what they're paying per month. "Wow, I can buy DVC for only $200 a month!" I almost never hear anyone talk about what they're paying in finance charges, and how that can increase the purchase cost by many thousands of dollars, especially if you're buying from Disney and paying over the full term of the loan. I saw a breakdown online once, and the interest costs were staggering. Totally ate up any savings on the room costs. I swear DVD makes most of their money off people who don't bother to find out what they're paying in interest.

Yes, you do have options other than buying DVC if you can't do it without financing. You can rent reservations from members. Even if you go through a broker like DVC by Request, you're still saving a bundle off the cash reservation cost. With no long term financial commitment, and zero finance charges, and total flexibility. You own DVC and don't want to go to Disney for a few years? Guess what, you're paying finance charges and maintenance fees anyway. You rent from a member and don't want to go to Disney for a few years? You pay nothing.

If you are considering a purchase with financing, be sure to do the math and figure out what your finance charges will be. And see if it's still cheaper than getting a cash reservation.

 

[Lynne M]

Oops, one more thing......if you're looking into a 401k loan, be sure you read the terms very, very carefully, because they vary by employer. At my company, if you take a 401k loan and then leave the company, either voluntarily or involuntarily, the entire loan balance is due immediately.

It wouldn't be fun to have to cough up thousands of dollars to pay back the loan right after getting laid off.....

 

[stichrules]

Oops, one more thing......if you're looking into a 401k loan, be sure you read the terms very, very carefully, because they vary by employer. At my company, if you take a 401k loan and then leave the company, either voluntarily or involuntarily, the entire loan balance is due immediately.

It wouldn't be fun to have to cough up thousands of dollars to pay back the loan right after getting laid off.....

That may not be entirely true. If you move the money from the 401K yes you must pay it back. But you should be able to leave your 401K with the company. You just cannot add anymore to it or take out anymore loans. This in fact happened to me about 2 months after we took out the loan o th DVC I got offered a Job at another company that I could not pass up. I was able to leave my 401K with old company and continue to pay on the loan until it was paid for and then I transferred it to my new company's 401K. You always should have the option to leave you 401K where it is at, you just cannot add anymore to it.

 

[squidward]

This has been going on for quite a while. What made you open your eyes in the past four days?

When I read about the possibility of taking away standby lines. Of all the boneheaded moves Disney has made to anger the guest in recent months, this has GOT to top them all.

 

[yaksplat]

I use a home equity line of credit to float purchases while I'm paying them off. The interest rate is under 5% and then any paid interest is deductible. To eliminate any interest, you can transfer the debt to a 0%APR credit card if you want to. but you'd have to find one that has a low transfer rate or no fees.

Borrowing from your 401k in a case that is not absolutely dire is one of the worst possible financial decisions that you can make.

 

[Phonedave]

There is no way to economically justify buying direct from Disney these days. The benefits don't justify the steep premium you have to pay.

Or...you know...go somewhere NOT Walt Disney World.

OW! STOP HITTING ME!

That is exactly what I do. Every other year seems about right for us now. I usually do something non-Disney but this year in my off WDW year we did spend 3 nights at HHI DVC but we weren't using our points.

Yeah, life seemed to work out well for us in that way.

I bought my DVC when I was a single parent with two kids (and living in a rental condo). We could easily afford to go to WDW every year. In addition my job had me in the Orlando area every few months, so I would stay for the weekend every so often.

Fast forward to today. Now I am remarried and we have 3 kids between us. I also now own a house again - with all the expenses that go along with it. Even though my wife works, we have less free cash to throw around on vacations (and college is looming its expensive head). Couple that with that fact that airfare has gone from 3 people to 5 and ticket prices are through the roof. Plus we need at least a 1BR so our points don't go as far.

The upshot is we now go every other year. It works out very well. It saves money, gives us a better room, and quite frankly, lessens the amount of disappointment I have when I go to WDW and see all of the garbage they are doing to what was a wonderful place to go on vacation. We are still looking for that ideal second vacation spot (affordable, and yet fun for adults and kids ranging from 9 to 16)

My only regret is that I DID by my points directly from Disney. I did get a developers point bonus, and that turned into a "free" 3-Night Disney cruise for us, but it would have been a LOT cheaper to buy on the secondary market.

-dave

 

[TXDisney]

Can you finance the whole initial payment of let's say between 25-30k from Disney? Is that an option if you sit down with them? I'm sure their interest rate is between 5-10%, but still I might consider becoming a member if I could finance that initial fee.

 

[GoofGoof]

Can you finance the whole initial payment of let's say between 25-30k from Disney? Is that an option if you sit down with them? I'm sure their interest rate is between 5-10%, but still I might consider becoming a member if I could finance that initial fee.

I think they want you to put at least 10% down. The rates can be much higher than 5-10% depending on your credit rating. This is from DVCNews from last August:

Financing a Disney Vacation Club purchase through DVC recently got a little more expensive.

Disney Vacation Club has increased its finance rates on most buyer classifications. Rates vary depending upon the amount of downpayment and credit-worthiness of the buyer. The chart below illustrates the previous and current rates for each category:

Previous Rate Current Rate
Current member, 10% down---11.0%
Current member, 20% down---8.99%
Premium, 10% down11.5%12.0%
Premium, 20% down9.0%9.99%
Preferred, 10% down14.5%14.5%
Preferred, 20% down10.5%12.0%
Standard, 10% down17.5%17.5%
Standard, 20% down12.5%14.5%


Buyers who enroll in the automatic payment program and agree to have funds Direct Debited from a U.S. Checking or Savings account will receive a 1% discount on the rates above.

Rates are for a 10-year loan with no pre-payment penalties.

Terms and conditions are set by Disney Vacation Development and its finance partners, and are subject to change. For complete details contact a Disney Vacation Club sales representative.

 

[TXDisney]

If I'm correct isn't the average price with closing fees around 25-30k for a moderate Disney hotel? So 10% down is only 3k which isn't bad, but those interest rates are pretty high.

 

[GoofGoof]

If I'm correct isn't the average price with closing fees around 25-30k for a moderate Disney hotel? So 10% down is only 3k which isn't bad, but those interest rates are pretty high.

The rates are very high.

Here are the per point prices direct from Disney:

ANIMAL KINGDOM VILLAS***
$155 per point; 100-point minimum purchase

AULANI (HAWAII)*****
$160 per point; 100+ points

Incentive: 15 free points for every 100 points purchased. Buy 200, get 30 free. Buy 300, get 45 free. Incentive points are available every year for the life of the contract.

BAY LAKE TOWER AT DISNEY'S CONTEMPORARY VILLAS****
$165 per point; 100-point minimum purchase

BEACH CLUB VILLAS*
$130 base price; 100-point minimum purchase

BOARDWALK VILLAS*
$130 base price; 100-point minimum purchase

HILTON HEAD ISLAND*
$115 base price; 100-point minimum purchase

OLD KEY WEST***
$130 base price; 100-point minimum purchase

SARATOGA SPRINGS**
$130 base price; 100-point minimum purchase

VERO BEACH*
$115 base price; 100-point minimum purchase

VILLAS AT DISNEY'S GRAND CALIFORNIAN HOTEL****
$165 base price; 100-point minimum purchase

VILLAS AT DISNEY'S GRAND FLORIDIAN RESORT & SPA******
$165 base price; 100-point minimum purchase

VILLAS AT WILDERNESS LODGE*
$130 base price; 100-point minimum purchase


The number of points you need will vary depending on the time of year, size of room and resort you plan to stay at plus how many nights a year. Assuming you are interested in staying 1 week a year in a studio you probably need about 130 points at most. Based on that your upfront cost would be between $16,900 ($130/pt) and $21,450 ($165/pt)

If you decided to buy from the resale market you can get points at some WDW DVC resorts in the $70s. The same 130 points would only cost a little over $9K. It's a big money saver. I believe places like the Timeshare Store have financing options too. I didn't finance, but I'm assuming the rates are going to be about the same.

 

[sxeensweet]

We bought Direct from Disney early last year and our rate was a fraction more than a personal loan (we do have really good credit) and plus we are able to use the interest paid as a tax deduction because it is considered a mortgage so we use our house and our DVC loan to help with our taxes and it did help! We need any extra we can deduct due to what our total income is mostly due to my DH's really good pay. We had just sold his rent house because he could no longer claim a loss due to our new tax bracket so we needed another deduction to take its place that we could use. Also DVD does not report to the credit bureaus so your loan is not on any of your credit reports unless you would default. This is also an added plus to keep our score higher and not show the extra debt and another finance loan on our credit. Yes we paid more and yes I know how much interest I'm paying but it was the best decision for us. We are very happy with our decision to go direct. Also like said before who wants to just spend that much money in cash! That's like going buy your brand new car and always paying cash...uhhhh NO thank you! lol this is just me and DH's opinion.

 

[GoofGoof]

We bought Direct from Disney early last year and our rate was a fraction more than a personal loan (we do have really good credit) and plus we are able to use the interest paid as a tax deduction because it is considered a mortgage so we use our house and our DVC loan to help with our taxes and it did help! We need any extra we can deduct due to what our total income is mostly due to my DH's really good pay. We had just sold his rent house because he could no longer claim a loss due to our new tax bracket so we needed another deduction to take its place that we could use. Also DVD does not report to the credit bureaus so your loan is not on any of your credit reports unless you would default. This is also an added plus to keep our score higher and not show the extra debt and another finance loan on our credit. Yes we paid more and yes I know how much interest I'm paying but it was the best decision for us. We are very happy with our decision to go direct. Also like said before who wants to just spend that much money in cash! That's like going buy your brand new car and always paying cash...uhhhh NO thank you! lol this is just me and DH's opinion.

It's always good to hear another opinion. There is no right or wrong answer in general. It's all a matter of personal opinion and people's individual situation.

If you are looking for more tax deductions there is a small portion of your Maintenance Fees which pays real estate taxes that is tax deductible as well. It's probably negligible compared to the mortgage interest, but a deduction is a deduction. When you get your breakdown of fees there is a category for real estate taxes.

I am personally the opposite of you. I'm practically allergic to paying interest on anything. I feel like its just throwing away money. I do have a mortgage on my house but I'm down to 2.5% interest and it's the only debt I carry. I have never paid interest to a credit card company and I haven't had a car loan in about 7 years. We had a tree fall on our car this past winter during one of the ice storms and it was totaled. We bought a new car with cash. Without car loans for 7 years it wasn't hard to save up the money. Of course I am also not opposed to driving an older car with high mileage.

This is just my mentality and I know it's "unAmerican" of me. There's nothing wrong with financing anything as long as you can afford the payments.

 

[sxeensweet]

It's always good to hear another opinion. There is no right or wrong answer in general. It's all a matter of personal opinion and people's individual situation.

If you are looking for more tax deductions there is a small portion of your Maintenance Fees which pays real estate taxes that is tax deductible as well. It's probably negligible compared to the mortgage interest, but a deduction is a deduction. When you get your breakdown of fees there is a category for real estate taxes.

I am personally the opposite of you. I'm practically allergic to paying interest on anything. I feel like its just throwing away money. I do have a mortgage on my house but I'm down to 2.5% interest and it's the only debt I carry. I have never paid interest to a credit card company and I haven't had a car loan in about 7 years. We had a tree fall on our car this past winter during one of the ice storms and it was totaled. We bought a new car with cash. Without car loans for 7 years it wasn't hard to save up the money. Of course I am also not opposed to driving an older car with high mileage.

This is just my mentality and I know it's "unAmerican" of me. There's nothing wrong with financing anything as long as you can afford the payments.

Yes exactly! I totally agree with paying interest too but sometimes I guess we tend to do the all american thing and borrow. Lol it's a trap I tell you and you are one of the minority that are not getting caught! Haha.
All these people that judge others for there decision or tell them it's crazy is very annoying because like you said as well as long as you can afford the payments why not. That's how I feel too about others and that Is a very personal decision for each individual or family to make, and everyone's situation or desires are in fact different.
Oh and yes we knew about the maintenance fees part too and used that as well. Thank you for mentioning that.
One last thing I want to commend you for not having any debt but your home! That really is something to be proud of and strive for! That's awesome!