£5k lump sum - what to do with it

joannawilsonbrown

i have inherited £5000 and i can't decide what the best thing is to do with it. my options are:

pay £5000 off my car (0n which i still owe £7500)
put £5000 towards moving house. i currently live in a flat with my daughter and we are desperate for somewhere with a garden.

i have a healthy monthly disposable income..but feel like this might be our only chance to move house. on the other hand if i could pay my car off, we would be £200 per month better off.

what to do?!

Marisco

Hi Joanna, welcome to the boards. Only you can decide, but if it was me, and I was having no problem paying the car payments, I'd go for moving:) I love a garden, so can understand why you want one.;)

nogoodwithmoney11111

Regarding the car - depends on the type of finance you have (car company, bank loan) but if you could repay early, the settlement figure may be less than if you kept paying the £200 over the full term, ie you would save yourself some interest, plus put the £200 a month into a regular saver account (one of those ones that works for a year with a max £250 monthly deposit) and get 6 or 7%, therefore getting an effective interest savinsg rate of about 11 or 12%!!! (ie loan at 10% APR = 5% flat so saving 5% flat and earning 6 or 7% flat = 11 or 12%)

AND not having a loan outstanding means you would be able to borrow more/be more likely to be able to borrow for a new house.

It really is up to you based on what makes you feel best - having money in savings or getting rid of a monthly payment. At this level of funds its all a bit academic (still VERY nice to get a sum like that!!!!!!) as you could work out the most mathematically efficient use iof the funds but we are talking about benefiting by maybe £150 maximum over a period of time.

The "feel good" factor of seeing the car in the drive and saying "thats mine" or looking at a bank statement and seeing "money towards a house" would probably give greater satisfaction........but thats just my view as someone that was in debt for ages and didnt have a penny in savings and felt liek walkign a tightrope a mile high with no safety net!!!!!

- I inherited about £9k earlier this year and I paid off the final chunk of our debt with it which was a no brainer for me as the interest rates were :eek: and i felt like doing cartwheels everywhere.

RenovationMan

Use it to start an ISA, then add to it each month until you have enough to either pay off the car loan completely or have enough to put down on a house, or just save it for a rainy day.

joannawilsonbrown

fantastic advice...thank you so much! Jo