Beware the great debenture

Open the business section of any daily newspaper and you can't miss the advertisements for debenture bonds.

Finance companies of all names and reputes are begging to give you anything from 7 per cent to 11.5 per cent interest, way more than banks would offer.

Mostly, they are preaching to the converted.

"There is a lot of money in fixed-term investments," researcher David Hindley says.

"At the same time, people are wary. For ordinary investors, it's very difficult to work out which placements are risky, and which aren't."

Debentures are unsecured debt backed only by the integrity of the borrower.

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