Windfall of 23k. Where to put it.

[Gettingby]

Age:
38
Spouse’s/Partner's age:
44

Annual gross income from employment or profession:
E20,000
Annual gross income spouse:
E20,000
Type of employment:
Private Sector and Self Employed taxi driver

Expenditure pattern:
Not huge lifestyle spenders, but not very good at budgeting

Rough estimate of value of home
E360,000
Mortgage on home
E263,000 - we've been paying our mortgage for 2 years now.
Mortgage provider:
KBC
Type of mortgage: Tracker, interest only, fixed rate
Variable
Interest rate
Variable interest rate of approx. 3.7

Other borrowings – car loans/personal loans etc
18k loan from credit union over 6 years
10k loan from a relative
Credit card has about 500 on it now down from a few thousand

Do you pay off your full credit card balance each month?
Pay it in chunks when have the cash. It's under control now and hope to pay it off with a couple of payments.

Savings and investments:
E5,000 in credit union tied up to loan.
E4,000 in deposit account (being saved to repay loan to relative) Drip feeding 135 per month into this from rent-a-room scheme.

Do you have a pension scheme?
No.

Do you own any investment or other property?
No just the family home.

Ages of children:
3 and 6

Life insurance:
Yes. (Tied up to mortgage.)

What specific question do you have or what issues are of concern to you?
We received 23k from a relative as a gift and I'm wondering where will it make the most impact as we owe quite a bit of money and our salaries aren't great.
We 'net' about 650 a week but if one of us can't work it goes down to about 320 for that week. (I'm hoping my calculation of our 'gross' salaries accurately reflects our weekly net.

I was thinking of using the money to pay off both our personal loans.
My husband needs to get a car as with the new taxi legislation his 98 isn't good enough and we will have to pay about 7k for this.
We were going to take out a credit union loan for this car. We have about 3k in the account and hoping he can borrow about 10, then pay back the 3k to the relative who's money we are using to have in the account..

We are getting 23k as a gift from a generous relative and with all of our bills/debt,s we don't know where to put it to make the most impact for us.

Our mortgage is 1370 a month. (We rent a room so receive 500 towards the mortgage. It was used to save to pay back the relative below until they were paid off.)
Loan from credit union of approx. 18k and paying 265 over 6 years or so.
Personal loan from relative for 10k which we have 4k saved for.
We run two cars and need to purchase another one (taxi) as the one we have is 1998 and out of date for the new regulations. Hoping to get a decent one that will do us for approx 7k.
(we were going to get a credit union loan for this.)

We also need/want the following:
A small extension for an extra bedroom for us to rent out to students as a source of income as we are in the city.
Bathroom is in a bad way and needs to be done up (since the 70's).

We are bringing in after tax about 650/700 a week.

Any advice would be greatly appreciated.

I thought myself the best option would be to pay the credit union loan for 18k. Pay the relative the 10K back.

But maybe this isn't the best option as I know it's hard to get credit these days are are we better off keeping the loans.

The vice is also tightening for us in relation to tax increases, insurance increases, and the possiblity of interest increases too.

Thanks again for any tips. I read the forums a lot and enjoy them.


Prior to this happy news, I was toying with the idea of asking the mortgage company to give us interest only mortgage for six months and use the rest to tackle the personal loans. Not sure if this is a good idea though.

 

[Brendan Burgess]

What relationship is the relative to you? You may have to pay up to 25% gift tax on the gift.

You seem to have a lot of loans and savings at the same time.

Your most expensive loan is probably the Credit Union.
You have €18k loan - probably at 6% = 1,080 ( check though, it could be higher)
You have €5k deposit - probably at 1% = 50

So you are paying 1030 on a net loan of €13k which is 8%

Cash: €23k + 4k in savings
Pay tax: € 6k
Pay off credit union: €13k
Cash left: €4k

Borrow €3k from Credit union to buy new car.

Gift tax
Ask a separate question on this in the tax section before you get the gift. It might be better to split the gift in two depending on the relationship with the donor.

Brendan

 

[Gettingby]

What relationship is the relative to you? You may have to pay up to 25% gift tax on the gift.
My husband's father. As far as I am aware, he can give him a certain amount before tax.

You seem to have a lot of loans and savings at the same time.
I have. I had borrowed 25k from a relative to pay for building work. I paid 15k back, but I guess I am holding on to about 5k that I saved to pay back relative and thought it would be a good idea to drip feed some of this into husband's credit union account for a year before asking for the loan for the taxi. I planned on then getting him to borrow the cost of cab, plus the deposit and return the deposit back to the relative along with the rest of the cash owed to them. (Basically using the cash to boost my husband's chance of obtaining credit from his credit union.)

Your most expensive loan is probably the Credit Union.
You have €18k loan - probably at 6% = 1,080 ( check though, it could be higher)
Yes. This is my credit union account. As far as I know the loan is 9percent interest as it was for 'home improvement'. The credit union were very good to me as the bank wouldn't loan us the money at the time.

You have €5k deposit - probably at 1% = 50
I had to put the deposit in there so that they would allow me to borrow the 20k at the time. I can't do anything about this until the debt is paid. And after getting the short shrift from the bank, I would like to keep a relationship with my credit union. (The loan is now down to about 17-18k, I'd imagine.)

So you are paying 1030 on a net loan of €13k which is 8%

Cash: €23k + 4k in savings
Pay tax: € 6k
Pay off credit union: €13k
Cash left: €4k

Borrow €3k from Credit union to buy new car.

Thanks a million Brendan for the advice. (If I don't owe tax due to the relationship with the gift donor, I am assuming I would use this to pay back the other relative their 10k)
We are both useless with money and I guess that is how I seem to have cash in bits and pieces and loans, etc. I am trying to get a handle on it.
and have cleaned up my act a bit I started with the credit card which at one point was about 9k owed and have it down to 500.

Gift tax
Ask a separate question on this in the tax section before you get the gift. It might be better to split the gift in two depending on the relationship with the donor.


Will take advice on this.

Thanks again and kind regards.

Thanks Brendan. That's fantastic advice.