debentures and unsecured notes

[Au_Blue#24]

Im no financial wizard, in fact far from.

Whats the story with the debentures and unsecured notes as far as medium term investment goes. You can get about 10 % return for 5 years as oppossed to 6 % for term deposits offered by banks.

Are these dodgy in any way ??

What are the better financial institutes people are dealing with.

Has anyone heard of FinCorp ??

 

[Rob]

Put simply, debentures are just loans secured against a company's assets.

I've seen the fincorp ads in the paper, and the fact that they are offering such high returns almost make them by definition risky. If the company is wound up, debenture holders get priority (and depending on whether they have fixed or floating charge, but thats a longer story), but if there are no assets, or the assets were overvalued, then the debenture holders lose some or all of their money.

Anyone offering a return like 10.25%pa guaranteed does seem dubious. I'd certainly look more into it before investing, it sounds ominously like a second mortgage or something similar. If it was no risk, then they wouldn't be giving you such a high rate of return.