Would you go for short term cash? Poll Discussion

daytonajohn0622

I thought 15000k in 6 months the best, gives you 6 months to find a property and arrange a buy to let mortgage, the rent would be paid over the future period covering the mortgage so in 10 years not only have you equity, but a property as well.
perhaps its a bit simplistic but ..............

Gordon_the_Moron

I don't like to risk my money unecessarily, I've got £10k in the bank now (really) if you can find me a way to turn it into £100k guaranteed in ten years time I'll do two things

1) Admit I was wrong to vote for £10,0000 in ten years
2) Put my money where my mouth is

DO IT!!!

mlrobinson

Normally I'd go for either the £15k in 6 months or £20k in a year, but at the moment my boyfriend is out of work, and has been for a while, so I'd take the £10k now to help pay the mortgage and keep me out of more debt.

wiggers

To turn 10k into 100k in ten years you need to average about 26%. (The 25% figure in my first post is wrong!) I've averaged about 25% over the past 9yrs without really trying too hard and with two fairly major 'adjustments' in the stock market. (.com bubble and 9/11) I know of others who have done considerably better. YMMV - DYOR! But it isn't guaranteed so the bank's offer of 100k in ten years is the safe bet.

dumpty

I think it depends on your age and outlook on life.
Being in my 50's, currently I'd go for £20000 in one year - that's not too long to wait and I'd expect things to be reasonably stable for the next year. That's as far as I think it is reasonable to realistically plan ahead at the moment. Beyond that, things could change radically. If things go really wrong for me after 18 months, and I lose my job etc, the promise of £100000 after 10 years is of no comfort if my house is about to be repossessed!! (I'm sure the mortgage lender would NOT be prepared to accept the promise of £100000 after 10 years as security!!)
Being a bit of a cynic, I would be worried that something may happen during that 10 years which may result in me NOT getting the £100000 after all.
Also, what if I died after 9 years and 11 months? I would not have had ANY benefits whatsoever from this money!

siber

I'm 24 and still at uni - I'll finish this PhD one of these days... - so chose to receive the money next year. At this point, it'll probably be good for lowering my mortgage. Since a mortgage repayment rate is going to be about 8-10% APR or so, this'll be better than any savings account that I could tie it into, especially considering the tax on savings accounts.

£100k in ten years would be too late to help with the times when I'll need a bit of extra cash getting onto the housing ladder/starting a career/buying a new car etc...

wiggers

The thing is, if you accepted the 100k in 10 years offer you could take out a loan in the meantime knowing that it will be amply paid off in the future. Even if you borrowed 10k now at an outragous 20% APR and didn't pay a penny in interest until the end so it gets compounded, you'd still have enough to pay it off in 10yrs (£61,917) and some left over. In fact, you could take out a 50k loan now, pay 10% interest every year and then the 100k would fully reimburse you.

PS. Now I come to think of it, the question is much like the Endowment model for mortgages, except you don't have to pay the bank anything to get the maturity value, which is guaranteed!

Pitchshifter

I would go for the £100K in 10 years. It's simply the largest ammount even with inflation and I can wait (I'm 31).
At my current rate of saving I will save over £130,000 in ten years.

Knowing I'd won £100,000 in 10 years might make me save less conservatively and spend more, invest more riskily and probably have a better time during that 10 years. And probably make even more money than if I'd just saved anyway. Woohoo I'm off to buy 1000 lotto tix. NOT.

zoltix

Therre's no real argument here. Wiggers has already given the best approach, though his maths is slightly out.
Take out a loan now and repay it with the 100000 in 10 years time.

£50835 @ 7% over 10 years is £100000

£55839 @ 6% over 10 years is £100000

Depending on the best rate you can get.

Age doesn't matter - arrange it so it goes in and out of your estate.

Pitchshifter

zoltix wrote: »

Therre's no real argument here. Wiggers has already given the best approach, though his maths is slightly out.
Take out a loan now and repay it with the 100000 in 10 years time.

£50835 @ 7% over 10 years is £100000

£55839 @ 6% over 10 years is £100000

Depending on the best rate you can get.

Age doesn't matter - arrange it so it goes in and out of your estate.

Well I think you'll find people can do what they want, we're all different. That is not the best approach, it is merely one good way of dealing with it if you wanted the money to buy something. Why would you borrow if you didn't need the money, do you like paying interest?
As far as the rates you show they are pure fantasy. If you can wait then you should wait, unless you have a means of investment that will yield a higher return than the loan. In which case borrow as much as you can anyway.