In the world of vacation property ownership, timeshares can seem like an attractive option. They offer the allure of a vacation home without the hassle of full-time property management. However, they also come with ongoing financial commitments in the form of maintenance fees and special assessments. But what happens if you stop paying on your timeshare?

The Basics of Timeshare Ownership

Before we delve into the consequences of non-payment, let’s first understand how timeshare ownership works. When you buy a timeshare, you’re essentially purchasing a portion of a property. This gives you the right to use the property for a specific period each year. In addition to the initial purchase price, timeshare owners are also typically responsible for annual maintenance fees and occasional special assessments.

Financial Obligations of a Timeshare

Maintenance Fees

Maintenance fees are usually annual payments made by all timeshare owners to cover the costs of running the resort. These fees can include everything from property taxes and insurance to landscaping and general upkeep. They may also increase over time due to inflation and increased operating costs.

Special Assessments

Special assessments are additional fees that may be charged for unexpected expenses or improvements, such as replacing a roof or updating the clubhouse. These are not regular occurrences but can be significant when they do happen.

What Happens If You Stop Paying on Your Timeshare?

If you stop making payments on your timeshare, whether it’s the mortgage, maintenance fees, or special assessments, there can be serious consequences.

Late Fees and Interest

Initially, you’ll likely face late fees and interest charges on any unpaid amounts. Over time, these can add up and significantly increase the amount you owe.

Damaged Credit

If you continue to miss payments, the timeshare company or lender may report your delinquency to the credit bureaus, which can severely damage your credit score. This can make it harder to get loans or credit cards in the future.

Collections and Lawsuits

Eventually, if you don’t catch up on your payments, the timeshare company or lender may send your account to a collections agency. This can lead to constant calls and letters demanding payment. In some cases, the company may even sue you for the money you owe.

Foreclosure

Perhaps the most severe consequence of not paying your timeshare is foreclosure. If you have a mortgage on the timeshare and you stop paying, the lender can foreclose on the property. This will result in you losing the timeshare and any equity you had in it. Additionally, a foreclosure can stay on your credit report for seven years, further damaging your credit.

Can You Just Walk Away From a Timeshare?

Walking away from a timeshare, also known as “strategic default,” might seem like an easy way out. However, this approach comes with its own set of risks. As mentioned earlier, it can lead to damaged credit, collections, and possibly foreclosure. Furthermore, even if the timeshare company doesn’t pursue these actions, you could still be on the hook for future maintenance fees and special assessments.

Alternatives to Stopping Payment

If you’re struggling to keep up with your timeshare payments, there are alternatives to simply stopping payment.

Sell the Timeshare

One option is to sell the timeshare. However, this can be easier said than done. The resale market for timeshares is often oversaturated, and prices can be much lower than the original purchase price. It’s also important to avoid scams when trying to sell your timeshare.

Rent Out Your Timeshare

Another option is to rent out your timeshare to cover the costs. This can be a good solution if you’re not using the timeshare yourself, but it does come with the hassle of finding renters and managing the rental process.

Negotiate with the Timeshare Company

Finally, you could try negotiating with the timeshare company. Some companies may be willing to work out a payment plan, reduce your fees, or even let you out of your contract if they believe the alternative is you defaulting on your payments.

Final Thoughts

While timeshares can offer a convenient way to enjoy vacation properties, they also come with ongoing financial commitments. If you stop paying on your timeshare, you could face late fees, damaged credit, collections, lawsuits, and even foreclosure. Before making any decisions, it’s crucial to understand these risks and consider alternatives such as selling the timeshare, renting it out, or negotiating with the timeshare company. And as always, seek professional advice before making any significant decisions about your financial future.