what's best way to use small lump sum?

[kate73]

hi,

forgive me for a prob daft question but i have acquired a lump sum of EUR3,000 and want to know what best thing to do with it is? to put into a savings account or just put it towards either car loan or mortgage?

it's not that much so does it make much of a difference? can't imagine it will make much of a difference to the remaining 185,000 mortgage??

i'm chicken about investments :-(

thanks,
K

 

[ClubMan]

Various possibilities:

• Put it on deposit at the highest applicable rate (see the Financial Best Buys and www.itsyourmoney.ie lists of high rate accounts on offer and the many existing threads about maximising deposit interest returns) as a "rainy day" fund. If you don't already have one then this might be a good idea although €3K could be too little or too much depending on your lifestyle and normal living expenses.
• If you are planning to make any purchases such as a car etc. then use some or all of it to avoid borrowing. Maintaining savings while borrowing often makes little sense.
• Put it off the mortgage - you might be surprised at how much a €3K accelerated lump sum capital repayment off a €185K mortgage can save you in the long run especially if you keep to the normal scheduled repayments and thus reduce the effective term and cost of the original mortgage. Use Karl Jeacle's mortgage calculator to estimate the potential savings. If you do choose to do this then agree in writing with your lender that the lump sum is a capital repayment.