What Happens If I Stop Paying My Timeshare Loan?
Increasing ownership costs, dwindling utilization, and growing aggravation with timeshare loans can lead anyone to want to stop payments. Many timeshare owners come to a point where the numbers just don’t make sense, despite the timeshare loans staying high, accumulating interest, and maintenance costs increasing yearly.
Unfortunately, with the timeshare loans and the marketed upgrades, costs just keep increasing. Consequently, what exactly occurs when timeshare payments stop? Unfortunately, the answer depends on the contract, the specific loan type, and how the developer wants to deal with the oversight.
These consequences can be and usually are negative. It is understandable why many timeshare owners come to us for advice on timeshare loans, as we have spent years communicating the risks and timelines for these loans in understandable terms.
Of course, many timeshare owners feel uncomfortable, as many feel there is no way out, no help. Most feel trapped. But these owners should remember there are companies such as Resort Victory. These companies can be beneficial as they assist timeshare owners in legally stopping timeshare loans without damaging their long-term finances.
So let’s take a closer look at what happens when timeshare payments stop.
The Nature of a Timeshare Loan
Timeshare loans are not the same as mortgages on a property. The interest on timeshare loans is exorbitant, usually a variable 14-20% annual rate. A timeshare loan usually defaults, and so does the mortgage loan without property value. More often than not, timelines come attached to hidden financing costs.
Here is what most owners do not initially realize:
- Timeshares do not gain value over time, if at all.
- Mortgages on timeshares can be difficult to get out of.
- Loans are not the only thing struggling timeshare owners have to deal with, as timeshares also come with maintenance fees that last indefinitely.
- Developers essentially set up the deals so that they get to reap the profits first.
- This is an industry standard that some timeshare owners become significantly overleveraged due to years of financial sacrifice.
- If you stop making payments, do not be surprised if you receive immediate collection communication from the developers.
Phase 1: Collection Communication Begins
If you stop making payments on a timeshare mortgage, the developer will not realize that they are not getting the money you owe right away. After you miss one payment on a timeshare, the developer will attempt communication and document the attempts.
At first, communication will be friendly; however, after 30 to 60 days, it will become more and more aggressive. Developers do not want to send your account to collections because not making payments means they are losing money.
Once a timeshare mortgage is severely delinquent, it is much more difficult for the developer to recoup the money from you.
In the beginning, many owners feel inclined to make upgrades or refinancing changes. These changes do not help; worst of all, they can lock you deeper into the contracts. This is about the time many owners look for help, like Resort Victory, realizing the problem will not solve itself.
Phase 2: Late Fees, Penalties, and the Growth of Interest.
As time goes on and payments continue to be missed, the remaining loan balance increases.
You may be subjected to:
- The a late fee for every missed payment.
- The interest compounds on the unpaid balance.
- The penalties described in your contract
It is not unusual to see your balance increase in the thousands. Friendly reminder: timeshare loan contracts generally allow developers to impose hefty penalties once the loan goes into default.
This is very overwhelming, especially in your state of feeling trapped. Owners often report that the late payment balance becomes so exorbitant that it becomes unattainable to catch up on the payments. This is hopelessness, and then many owners desire to stop payment completely.
But the next risks increase.
Phase 3: Suspension of Usage Rights
Once your loan payment ceases, most resorts will cut off your timeshare usage. Even if you pay for maintenance fees, they reserve the right to block your access.
The consequences of suspension may include:
Your inability to make reservations, the inability to access bonus weeks, the inability to make exchanges, and the inability to receive any owner presents or perks granted to members.
It’s understandable to think that this is unfair, but the reason is that the loan is linked to ownership credits. If the loan is in default, they may consider your account inactive.
At this stage, the contract remains legally binding, the debt is still owed, and the resort has the ability to pursue collections, all while the resort is providing no services. It means the account is not benefiting in any way.
At this time, many owners find they really need to find an exit strategy.
Phase 4: Credit Implications
At this stage, your account is facing collections and credit implications. If the developer has not recovered the missed payments, the account is typically sent to collections, which can escalate the situation.
Typically, here is what happens:
- The resort may make use of an in-house collections department first, and if that is unsuccessful, they will often sell or assign the debt to an external collection agency.
- Your credit can be impacted. Many owners are surprised to find that, even if a timeshare has little to no resale value, the loan will still be counted as a legitimate debt. Falling behind in payments can have an impact on your credit report.
A tarnished score may impact:
- Loan approvals
- Mortgage rates
- Car financing
- Credit card applications
- Rental applications
It is a real risk, although it is not immediate in every case. This is another reason professional timeshare cancellation services like Resort Victory exist. They work hard to prevent owners from reaching this stage of risk by resolving the contract.
Phase 5: Possible Foreclosure
Timeshare foreclosure differs from foreclosure on a property. You are not losing a piece of real estate that appreciates. However, you are defaulting on a legally binding contract.
A foreclosure can be:
- Judicial (court-administered)
- Non-judicial (not court-administered, depending on state laws)
Foreclosure is often the final step the resort takes to remove you from the contract, although the process can still affect your credit and may lead to negative consequences that are financial in nature.
Many owners assume that by initiating foreclosure, the issue solves itself. But this is not always the case. Some developers continue to report negative balances, and others pursue deficiency balances, and may keep reporting negative marks even after the contract is terminated.
Letting a timeshare reach foreclosure is usually not the best course of action.
Phase 6: Continuing Maintenance Fee Liability
One of the most common misconceptions surrounding timeshare ownership is maintenance fees. Upon stopping payments on the loan, the maintenance fees do not go away.
You can still be charged for:
- Certain fees are incurred yearly
- Additional unique expenses
- Levy payments
- Increased utility payments
- Housing association fees
Unpaid maintenance fees are aggressively pursued by Developers and HOAs. They can assign these fees to debt collection even if your loan is already past due.
This dual debt: loan + timeshare maintenance fees poses a long-term economic threat for a lot of owners who aim to stop timeshare payments.
Does Stopping Timeshare Payments Ever Lead to Criminal Charges?
No, debt tied to timeshares is not a crime. It is a civil issue. There can be no arrest due to unpaid maintenance fees or timeshare loans. There are significant implications affecting your financial situation, and your credit will be damaged and negatively affecting your future.
Why Do Owners Stop Paying Timeshare Fees?
This is not an issue of choice for most people when it comes to stopping payments. They stop payments due to feeling trapped. In a nutshell, owners walk away for these reasons:
- There is a steep increase in fees charged annually.
- Refusal to pay maintenance due to access restrictions, travel disruptions, or changes in facility availability.
- Financial constraints occur, layoffs, health issues, or even retirement.
- Interest rates are significantly high on loans.
Once the burden becomes too heavy, owners seek relief. However, stopping payment is often not an efficient or clean resolution. This is where a legitimate cancellation pathway becomes crucial.
The Safer Option: Legal Timeshare Cancellation
Through legal cancellation, owners can sever timeshare obligations without the risk of foreclosure or other long-lasting financial consequences. Rather than going months and months without paying and waiting for the timeshare company to send it to collections, a legal cancellation proactively stops the contract, and there is legally no other obligation.
This means no more timeshare maintenance fees, no more interest accruing, and no more detrimental holds on your credit. A cancellation company has the legal expertise and the knowledge of the timeshare developer’s contract complexities to escort you through the steps needed for an exit.
This saves you the headache of navigating through collections, aggressive resort strategies, and impenetrable contractual language. With the right cancellation company, you can resolve the cancellation far more quickly and far more easily than you would alone.
Why Resort Victory Is the Go-To Solution for Many Owners?
The main selling point of Resort Victory is the hassle-free integration of experience, honesty, and real results. Owners especially value the walkthrough of the contract, the straightforward, honest advice, and the comprehensive handling of the cancellation process. Resort Victory eliminates the intimidation, collections, and predatory financial practices to provide the clients complete ability to escape the unwanted timeshare.
