Following a gruelling sales presentation and subsequent high pressure tactics from a timeshare salesperson, you are likely to feel worn down, tired, and thus vulnerable. Though you know that you cannot afford the timeshare that is being pressed upon you, the salesperson insists that the dream holidays they are selling are within your reach. At this point, the salesperson will start pushing timeshare loans…

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A word of advice: if you are being presented with the idea of a finance agreement for a timeshare loan, it really means that you cannot afford it. Unlike buying your home with a mortgage or obtaining finance to buy a car, a timeshare is a luxury purchase. Consider it this way – if you wouldn’t take out a loan to buy yourself a Lamborghini, why would you take one out for a resort unit you’ll use for a fortnight a year, or usually less?

If you applied for this loan at your usual bank, would it be approved?

It may be tempting to accept the offer of a loan, particularly when you’ve been approved knowing that you wouldn’t have been elsewhere, but remember that there is a good reason why banks do not approve certain applications for credit.

Whilst banks are looking after their own interests, there are regulations in place for consumer protection, too. Loan providers are required to perform what is known as ‘due diligence’, assessing the financial status of the applicant and the contents of the application to ensure that it is affordable for the applicant. Equally, of course, where a consumer defaults on a loan, this costs the financer money.

The timeshare industry is rife with high pressure persuasion, as we know. Their, often successful, attempts to persuade purchasers to sign up to loan agreements that they cannot actually afford has led to some high profile cases of lenders being taken to Court and found at fault.

Barclays Partner Finance

One of the most well-known of these was the case of Barclays Partner Finance (formerly operating as Clydesdale Financial Services). 106 claimants rose up against Barclays regarding the funding of their timeshares. There are law firms launching class actions against Barclays Partner Finance at the time of writing. There is one case of a couple in their late seventies, who were approved for a £40,000 loan for timeshare, despite living on a small pension alone. Clearly, this would never have been approved by any reputable lender.

Barclays Partner Finance do not limit their unscrupulous loan approval to timeshare, by the way. Along with working in partnership with timeshare companies, such as Silverpoint Vacations, they also finance loans for vehicles for those with poor credit, and have no qualms about pursuing them when it inevitably transpires that they are not in a position to pay.

Shawbrook Bank

Shawbrook Bank, in collaboration with First National Trust Company, offered a huge number of people finance for obtaining a timeshare. Loans were approved quickly, allowing developers with whom the financiers had a relationship the ability to push through applications and secure a deal before applicants could think twice.

British residents were permitted to finance their timeshare with unsecured loans through Shawbrook to the tune of up to £50,000. As with BPF, adequate due diligence was often not carried out. Over £9 million had to be set aside to cover the resulting defaults on £14.7 million worth of high risk loans.

Shawbrook admitted that due diligence and risk assessment was not performed properly, blaming a ‘breach in their risk management system after an update’. Shawbrook’s Finance Director handed in his resignation shortly after the news broke, though insists that it was unrelated to their timeshare loan scandal.

The ruling against Shawbrook Bank set a legal precedent. This means that subsequent cases of the same nature will be judged on the same terms. Wherever Shawbrook Bank was found to be at fault, so too will any newly emerging court cases against timeshare finance companies.

Next up, Link Financial Ltd. One Ms Wilson was approved for a loan of just over £20,000 by Link to fund the purchase of a timeshare product.

It was found that Wilson had falsified information on the timeshare loan application, though it is unclear as to whether this was of her own volition or on the prompting of the timeshare salesperson.

Wilson, finding herself subsequently unable to maintain the loan repayments and maintenance fees on the timeshare, stopped paying. The timeshare contract was thus rescinded by the resort and the finance company began steps to recover the sums due under the loan agreement.

Wilson claimed that there was an ‘unfair relationship’ at play, a relationship between the timeshare resort and Link itself. Initially, the court held that no such unfair relationship existed as there was no proof of high pressure selling and no contraventions of the 1992 Timeshare Act could be found. Because of the false information regarding her income on the timeshare agreement, the lower court ruled against Wilson, ordering she pay £41,000 including Link’s interest and costs.

Understandably devastated, Wilson appealed. She reiterated her claim that the contract was unfair on the grounds of terms in the contract related to rescission and forfeiture. With the timeshare already repossessed, she could not rely on its sale to reduce the loan debt. This time, the High Court agreed that this constituted an unfair relationship, and she should have been permitted to use the capital value of the timeshare contract to pay back the Link loan, either fully or in part.

The timeshare company was unable to give the Court information about the retained capital value of the timeshare, and – as such – the Court ruled that Wilson had no further financial obligation towards Link or to the timeshare company. She would no longer have to pay that £41,000.

Also, the misinformation Wilson provided on her application form came into play. The contract should, it was ruled, have been rescinded on these grounds but was not. As such, the relevance of this aspect was much less than it may otherwise have been had Link not acted erroneously themselves.

Another point that is interesting in the Wilson case is that neither Link nor the timeshare company itself were able to provide an expert witness to tell the Court what the actual value of the timeshare was when sold. This gives rise to more questions: was the timeshare nothing? And if so, surely it could not have been sold to Wilson for £20,000. Was Link aware that the timeshare itself had no value, considering no evidence as to its value could be provided? It is these unanswered questions that contributed to the ruling that an unfair relationship existed.

Over the years, we have encountered many such situations, speaking with countless individuals who have been affected by improperly granted timeshare finance. Our job is to help such people to understand their rights, and to help them assert those rights where desired.

How Much Do These Timeshare Loans Cost?

Loans of the type mentioned in these three examples tend to be sold with interest rates typically around 17.6% APR over a 15 year period. For a timeshare priced at, for example, £10,600, when fees and interest are added, the consumer will be obliged to pay a whopping £29,000 overall. This explains why these loans are so unaffordable!

What About Financing With A Credit Card?

Hearing these stories of timeshare trouble, some may consider it a better idea to pay for a timeshare on credit card. Though credit cards do offer some protections not available with unsecured loans, the ramifications of late payments can be even greater than those of defaulting on a loan, including vastly increased interest rates for a single late payment.

How About Home Equity Loans?

Though taking out a home equity loan to pay for a timeshare will incur less interest than a finance agreement through your timeshare company or via credit card, plus any interest could be tax deductible. However, the risks are even higher. Should you default on a home equity loan, your actual home could be lost.

I Could Get Approved For A Personal Loan

If you have good credit, then taking out a personal loan to finance timeshare could be an option that alleviates the need to go via these dubious loan providers above. Nonetheless, remember our first warning: if you wouldn’t take out a loan for a luxury car or similar product, why would you take one out for a timeshare? When all is said and done, timeshare is rarely a cost-effective way to manage your annual holidays, and is often more trouble than it is worth. Think very carefully before you commit yourself to what could be a lifetime of fees.

Bankruptcy

In the worst case scenario, your timeshare finance agreement could destroy your financial life altogether. The only way out may be filing for bankruptcy.

Before you commit yourself to the lengthy and damaging process of bankruptcy, however, it is important to get further advice. Get a timeshare expert to look over your timeshare contract to establish whether or not it is actually legal in the first place.

Many timeshare contracts are now being ruled null and void, with a significant amount being eligible for compensation. It is difficult to establish this alone, whilst a timeshare legal expert will be equipped with the knowledge and experience necessary to spot any illegal clauses in the contract or issues with the timeshare in other ways.

If you are in a situation where you are filing for bankruptcy because of a culmination of financial issues, however, it is likely you will have accrued significant arrears on your timeshare maintenance and/or loan repayments too. On filing for bankruptcy, the official receiver will contact the timeshare company to inform them of the situation and ask for details of any outstanding charges on your account. These will be dealt with by offsetting the proceeds from selling the timeshare against what is owed.

You will be asked to present the timeshare contract along with a full list of outstanding charges and all paperwork relating to the timeshare finance agreement. The agreement will then be forwarded to the company dealing with the sale of the timeshare, something that we can help with, as we provide you with information about legitimate timeshare resale companies who will be prepared to take on your timeshare.

To Summarise

The main takeaway from this is that you should avoid getting involved with any finance for timeshare whatsoever. Whether funded from your own pocket or via a timeshare loan, timeshares can be financially crippling and poor value for money. Nonetheless, if you are already embroiled in a timeshare finance agreement, there are plenty of legal precedents and steps that can be taken to extricate you from this cumbersome financial burden.

Get in touch with our friendly team of timeshare experts who will be able to guide you through the process of freeing yourself from timeshare and its financial obligations for good. The sooner you do so, the sooner you can regain control of your finances and look forward to the freedom of booking holidays when and where you want, unfettered by the bonds of long-term contracts and commitments.

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