Advice

joe316

Hi,

Looking for a bit of advice, going to be coming into a lil bit of money (approx 10k), and wondering whats the best thing to do with it.

Currently have 2 years left on a car loan and a couple of k on a cc, these amount to a little more than the money getting in so I was thinking of depositing the money into the credit union as savings, and getting a loan to clear everything.

The reason why Im thinking of this is that I will be going for a mortgage in the next 12/24 months and would like to be debt free (no car loans, no cc, etc) as far as i know the credit union isnt checked.

Any opinion appreciated.

oldyouth

Personally, I'd clear the credit card debt, which is the highest rate of interest you can pay. It is also the 1st thing that mortgage companies look at, given that it is considered lifestyle spending.

Then, if possible, I'd split the balance as follows. Pay half to the car loan people and lodge half to a savings account. Then I would set up a direct debit to the savings account for the amount you are saving on your previous monthly loan payments

This would have the effect of reducing your debt, establishing a savings balance as well as a monthly savings track record. You don't end you any worse off in the pocket than you are now, so you basically treat your windfall as if you never had it, but your financial position is much stronger

Kennie1

Credit cards can carry an APR of up to 20% so would be a good idea to clear this, but make sure you ask CC company to reduce your limit to say 500 so you dont run up bill again. As you intend to look for mortgage in 12/24 months and car loan finishes in 24 months, I would continue to pay car loan as the banks look for proof of capability to repay mortgage and car loan provides evidence of this. Say your car loan is 300pm and the proposed mortgage repayment is 700pm you would also need to show a track record of saving 400pm over a 6 month period prior to loan application.
Banks are giving between 80/90% loan to value mortgages so you will need a deposit of 10/20% so remainder of lumpsum can go some way towards this deposit. By the way how I know this is that I work in the industry.

broker2008

Yeah good advice. Start with highest interest rates first. Oldyouth's advice is good advice. I wouldn't like to have high credit card debt as well as mortgage starting off. I know I know.