Go Pies!

Hi Barefoot,

La Trobe Financial offers amazing rates on term deposits -- 5.2 per cent for 12 months and up to 7 per cent for 24 months. You always say ‘if it’s too good to be true, it probably is’. (In fact, they sponsor Collingwood -- so that’s a worry!) I have $70k from a property sale and am looking to park it somewhere for 12 months. Should I check them out?

Paul

Hi Paul,

I wouldn’t do it. Then again, I’m a pretty conservative dude when it comes to lending my money out.

The truth of the matter is that La Trobe is lending your money out to people the banks won’t touch -- that’s why the interest rates they offer are so good.

Right now, everything is hunky dory: Australia has just notched up a record-breaking 25 years without a recession. But the law of averages says there’s a recession coming, and probably soon. And in the last recession depositors got screwed chasing higher interest rates.

The question you need to ask yourself is whether getting an extra 4 per cent on your money -- $2,800 a year -- is worth the risk of losing some of your capital, given that you’re not covered by the government deposit guarantee (which you would be if you put your money in a bank, up to $250,000).

Scott