So New Zealand had about half a dozen finance companies fall over awhile back. This has led to a couple companies moving to get as much money into their balance sheet as possible, by offering high interest rates.
I'm thinking of investing around $5,000 - not a large amount by any means, about 60% of my NW(I won't miss the money that much if I lose it, however - it's only 2.5 months of my disposable income) in a 12% CD for 1 year. Alternatively, I am thinking of doing it for 3 years at 11.50% simply because as the interest rates drop over the year or two, I'll have locked in that %.
The firm I'm looking at hasn't got the greatest balance sheet strength(bottom 40% of firms in NZ), however they do have land and buildings to secure investments so I'll hopefully atleast get a portion back.
Do you think this is overly risky? 11-12% seems very tidy, it's currently the highest in New Zealand(The other average ~8-9% to give you a point of reference).
Could this be a sign that the company is going to go under? Should I avoid? It is a legitimate company which offers second mortgages(Mortgages often run from 10% to 18% here in NZ).
I eagerly await your input and thoughts!
P.S. The Reserve interest rate is 8.25%.