All About Short-Term Notes

by David Jenyns on February 22, 2008

When considering where to invest a small sum, one largely overlooked avenue is the consumer finance company. Two major types of finance companies are consumer finance companies and sales finance companies. The former for the most part make small loans for short-term notes and the latter finance retail sales made on the installment plan, such as automobile and refrigerator time sales. Both of these constitute what is known as consignment notes.

In the early part of 1961 one finance company was advertising regularly in the Wall Street Journal. It called its offering of consignment notes 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. The company, upon receipt of the check, made out a thrift note, which resembles a bond or share of stock. This note is returned to the investor as evidence of the $100 invested. If the depositor chose to leave his money in, the company would keep both principal and interest. Deposits in building and loan associations are really the purchase of shares in the association. The association has no obligation to pay a fixed rate of interest.

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