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12k to invest

Any help please with this.

We will have 12k to invest no need to touch for 5 years i have posted on here on another thread that we wish to buy a car for 12k using a loan say from asda at 5.9% if we get it at this rate, total payback is 13836.40, my hubby thinks this way would be better as we will still have our 12k at the end of 5 years + interest which will offset the loan interest it seems like a good idea i have tried to do some number crunching using the saga silver savers and northern rock rates but am so confused we do not want high risk just a good return to justify the loan. My hubby is 56 and a tax payer i am a homemaker not paid agghhhh ha ha!! we have both got our isa's maxed so cannot go there
please any help welcome.
cheers woodkitten

Replies

  • woodkittenwoodkitten Forumite
    133 Posts
    Forumite
    albertross wrote: »
    It would only make sense if you could get more than the loan interest rate in the bank, after tax. so you need a savings account paying 5.9% nett. on the whole amount (assuming that you can get a loan at that rate).

    The end of five years argument is spurious, because you will save 12K + interest on the loan over that period.

    Thanks for the reply but i am still confused!!! what do you mean by the last bit? sorry to be a little dim on this but we have not had this before as never had to work one against the other saving v loan i can see hubbys point in once we let the 12k go that will be it, so to invest it in somewhere that will at least pay the loan charge seems a good idea.
  • dunstonhdunstonh Forumite
    113.3K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Forumite
    invest or save? You say invest but then you mention interest which suggests saving.

    I have a couple of clients that have invested and borrowed with car loans and are both well in profit but they understand investments and risk. If you don't understand investments then you shouldnt do it.

    Savings are unlikely to provide enough to show a profit.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesdjamesd Forumite
    25.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper
    woodkitten, assuming that your own income is below the personal allowance then you can get a higher rate of interest on savings than the car loan is charging, so you are likely to be better off with the combination of a loan and saving. Do be sure to open the savings accounts in your own name alone and ask the savings place for the form to declare that you are not a tax payer so can get interest without tax deducted.

    Your income includes all income from all sources in your name (interest on savings, wages from part time work, your half of joint account interest).

    You might also consider using regular saver accounts since they pay higher rates. What you'd do is put the money in one account then withdraw a portion monthly to go into the regular savers.

    On a different subject, do you have a pension in your own name? If not, is your husband contributing any voluntary or personal pension contributions? One of the better pension deals is a pension for a non-working spouse, since the income from their pension income can often be in the tax free zone, while the husband's may be getting taxed if it's over 10,000. This explits the same personal tax allowance opportunity as putting the savings in your name.
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