Financial Advice

Use a Lump Sum to Pay Down Debt

If you've received a lump-sum payment from an inheritance, tax refund or commission off of a large sale, you might be wondering what the best use of that money is. One thing you should consider is paying off debt, whether it be a mortgage, auto loan or credit card debt. When you pay off debt, you're receiving a guaranteed return on your money -- you're saving the interest you would otherwise be paying on the loan. Depending on the type of the loan, and especially for credit cards, that return might be greater than anything you could receive by investing the money. In addition to saving interest payment, you'll also repay the loan sooner, freeing up extra cash at the end.