What's the best thing to do with redundancy money?

Options
Lorraine1863
Lorraine1863 Posts: 1 Newbie
in Loans
I have a car loan of just over £10000 but also really want to buy a house.

My redundancy is nearly £21000. 

Should I pay off my car loan which finishes in 3 years or keep the money for a bigger deposit on a house? 

Comments

  • TheMilkmansDad
    TheMilkmansDad Posts: 650 Forumite
    First Anniversary First Post Name Dropper
    Options
    whats the APR of the loan? If it's higher than you'd get in a savings account (so around 0.6% easy access) then pay the loan off.
  • phillw
    phillw Posts: 5,594 Forumite
    First Anniversary Name Dropper First Post
    Options
    Check to see whether there is an early repayment charge for paying the loan off early.
  • MEM62
    MEM62 Posts: 4,754 Forumite
    First Anniversary Name Dropper First Post
    Options
    1) Clear the car loan
    2) Re-direct the amount you were paying as repayments into your deposit savings

    Job done!

  • AnnieB2018
    AnnieB2018 Posts: 75 Forumite
    First Anniversary First Post
    Options
    Could you sell the car, clear the loan, buy a cheaper car and so end up with a car and a larger deposit?!
  • macman
    macman Posts: 53,098 Forumite
    Name Dropper First Post First Anniversary
    Options
    It's very unlikely that your car loan APR is less than the rate you will be paying on your future mortgage. If your debt is expensive, then clear it.
    No free lunch, and no free laptop ;)
  • Clive_Woody
    Clive_Woody Posts: 5,855 Forumite
    Name Dropper First Anniversary Photogenic First Post
    Options
    Do you have a new job? If not I would hang on to the money as you may need this accessible in the short term, then consider how you want spend it. 
    "We act as though comfort and luxury are the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about” – Albert Einstein
  • steampowered
    steampowered Posts: 6,176 Forumite
    First Anniversary Name Dropper First Post
    Options
    Having a car loan will reduce the size of the mortgage you can get. The lender will take repayments off your income which reduces the amount they will lend.

    Plus, you can't get a mortgage until you are settled in a new job anyway.

    Pay off the car loan; pocket the interest you have saved; buy a house when you can get a mortgage.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.3K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608.1K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 248K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards