Short Term Notes and Deposits

One of the least known investments as far as the general public is concerned is the deposit in a finance company or a short-term note of a finance company. In light of the lack of general knowledge of finance company notes and deposits it is surprising that there is the large volume of such obligations outstanding.

Two major types of finance companies are (1) consumer finance companies and (2) sales finance companies. The former for the most part make small loans and the latter finance retail sales made on the installment plan, such as automo bile and refrigerator time sales.

In the early part of 1961 one finance company was advertising regularly in the Wall Street Journal. It called its offering to the public “Thrift Notes.” The prospective investor could write in to the head office of the company and secure a financial statement on the company together with an application blank to fill in and return to the company together with his check to purchase thrift notes. Any sum of $100 or more could be invested.

The company, upon receipt of the check, made out a thrift note, which resem bles a bond or share of stock. This note is returned to the investor as evidence of the $100 invested. It stated that the thrift note was for a term of six months and the interest rate was 6% per annum. At the end of six months the company repaid the $100 with interest for one-half year $3.00. Investment - Read More.