Be particularly cautious about finance companies that do related-party lending
What are the risks?
Related-party lending
Be particularly cautious about finance companies that do a lot of related-party lending – where money is lent to people or businesses with links to the company or management.
Finance companies may just be fronts for channelling funds into other projects that related parties - like shareholders and directors - are interested in.
A finance company that we looked at loaned $2.8 million to a subsidiary holding company, $1.1 million to a subsidiary insurance company, and made a personal loan of $225,000 to the director. This was all in the last two years.
Finance companies that lend your money in this way should be avoided. To find out how you can tell if a company does related party lending, see Read the fine print.
Tip
Avoid companies that do a lot of related-party lending. They're just recycling your money around the same group of companies.
Important
Like you, we can't predict the future - which means we can't guarantee the performance of any company or investment. Consumer NZ does not endorse any specific company, scheme or investment. ConsumerSaver is a good starting point - but, before you commit, we strongly suggest you seek independent financial advice. See our full disclaimer.
