Do you own a timeshare you can no longer afford? Try to get rid of it without going through a foreclosure. A timeshare foreclosure may cause the following consequences:
1. Lower Credit Score
A timeshare foreclosure can damage your FICO score. The impact is greater if you had a high credit score.
Foreclosures are public records. Credit agencies have access to the information. So, even when your timeshare lender or company does not report the foreclosure to a bureau, your credit score will still drop points.
2. Future Credit Issues
Foreclosures create future credit problems for former owners. A poor credit rating may lead to credit denial or high-interest rates.
You may not get another mortgage until after up to seven years after a foreclosure. Getting a car loan or a credit card after a foreclosure may also be tricky.
If you have existing cards, you’ll be lucky if companies don’t cut the credit line or even close the account.
3. Potential Employment Issues
It’s hard to get a job when you have a bad credit report. Some employers consider the credit ratings when making employment decisions. If your foreclosure appears on your credit report, such employers may not consider your application.
4. Deficiency Judgment
In certain states, timeshare foreclosures may lead to a deficiency judgment. If the debt you owe exceeds the foreclosure’s sale price and there are no state prohibitions, the lender goes after the balance.
For instance, if your timeshare debt is $20,000 and the sale price when foreclosed is $15,000, your lender may want the $5,000 deficiency.
5. Tax Implications
There may be tax implications if your writes off the balance you owe them after foreclosure. The deficiency amount may then become part of your taxable income in the next financial year.
You may face several consequences if your lender forecloses your timeshare. Principally, a timeshare foreclosure may adversely affect your credit rating. A bad credit report may, in turn, affect your ability to get a job or affordable future loans.