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Saturday, May 26, 2007

Fixed deposit with a finance company

Dear Mr Tan,

I wish to deposit $80,000 in a fixed deposit with a bank that pays the highest interest rate.

I also that the finance companies generally pay higher interest rates than the local banks. If you are a senior citizen 55 yrs old and above, you even qualify for a higher rate.

Should I put my money with the finance company?

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REPLY:

A finance company is financially less secure than a bank. That is why they have to pay a higher interest rate. But, I think that the risk of failure is quite small, in Singapore.

If you are willing to take the risk, then it should be all right. Perhaps, you should put half of your money in a finance company and the other half in a bank.

Always, spread your risk.

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