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An internal exchange happens when you use your timeshare company to facilitate a transaction for you, instead of using your home resort for the exchange.
For example, if you own timeshare property with RCI, RCI can help with an internal exchange of your property instead of utilizing your home resort for the exchange. Of course there will be a slight fee for the service as it is treated just like any other exchange. Keep in mind that priority will be given to any owner wanting to exchange back at their home resort.