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Deposit Offer: Is this a good deal?

  1. #51

    Join Date
    Dec 2018
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    129

    A reminder that there is no such thing as a free lunch.


  2. #52
    tck
    tck is offline

    Join Date
    Jul 2015
    Posts
    88

    Haha. Despite all that, I took it because my IRR is still 7 - 12% depending on the trajectory of HIBOR if I hold till maturity.


  3. #53

    Join Date
    Nov 2005
    Location
    Cramped island
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    3,312

    most people takes this up on bonds.. but OP was told he can terminate this anytime from 2nd year onwards.. then its no longer a bond...


  4. #54

    Join Date
    Oct 2018
    Posts
    37

    Yes, it's too good to be true, but I did read the fine print, and asked for clarifications, and it does seem to be legit. The only problem is if P goes up. Above 6.7% i better return the money borrowed, because I have to pay more than 4% to borrow money (the rate of money borrowing is P-2.7%), while they give me 4% for the million I deposit. So 4% is the minimum I receive. Not too bad, right? Much better than bonds, and apparently safer. They said it's as safe as a saving account.

    The money they lend me comes from a sister institution of BOC. Another Chinese bank (very large) whose name I can't recall right now.

    I don't know. Can it be that the bank has to increase its reserve and does it through this?


  5. #55

    Join Date
    Oct 2018
    Posts
    37

    So I ended up doing it, as the interest rate paid increased by 0.38.

    They have a guaranteed income of 4.38% for 5 years. I only need to deposit 15% cash, and I can borrow the remaining 85% at P-2.7 (currently 2.45%), which I need to return after 3 years (they said they will lend me the money again, but at conditions to be determined in 3 years). Minimum investment is USD144,000 (but I only need about 15% of cash). You need to prove to have 130,000 USD in the bank, either shares, bonds or cash to be able to do this plan.

    Potential caveats:
    - P increases by 1.9%, wiping out the benefit of borrowing the 85%, if I repay the borrowed money within one year I have charges, after the first year no charges.
    - If I withdraw the money within 5 years I have to pay some charges (5% during the first year, 4% during the second year, 3% during the third year, etc.).
    - If I invest the 85% they lend me, and the market crashes, I might not be able to repay the debt in 3 years, so I have to stop the plan. and I lose 3%. This is why I am looking at bonds. If I invest in bonds with a yield of 4% I get about 6% in total with my investment (if P doesn't change), which is fine with me.

    I am happy with these potential caveats. This is done with BOC Life, if anybody wants the details of the agent, just send me a PM.


  6. #56

    Join Date
    Oct 2006
    Location
    Hong Kong
    Posts
    13,147
    Quote Originally Posted by john_1122
    So I ended up doing it, as the interest rate paid increased by 0.38.

    They have a guaranteed income of 4.38% for 5 years. I only need to deposit 15% cash, and I can borrow the remaining 85% at P-2.7 (currently 2.45%), which I need to return after 3 years (they said they will lend me the money again, but at conditions to be determined in 3 years). Minimum investment is USD144,000 (but I only need about 15% of cash). You need to prove to have 130,000 USD in the bank, either shares, bonds or cash to be able to do this plan.

    Potential caveats:
    - P increases by 1.9%, wiping out the benefit of borrowing the 85%, if I repay the borrowed money within one year I have charges, after the first year no charges.
    - If I withdraw the money within 5 years I have to pay some charges (5% during the first year, 4% during the second year, 3% during the third year, etc.).
    - If I invest the 85% they lend me, and the market crashes, I might not be able to repay the debt in 3 years, so I have to stop the plan. and I lose 3%. This is why I am looking at bonds. If I invest in bonds with a yield of 4% I get about 6% in total with my investment (if P doesn't change), which is fine with me.

    I am happy with these potential caveats. This is done with BOC Life, if anybody wants the details of the agent, just send me a PM.
    This sounds like an investment linked life insurance policy financed by a loan. Is your lending secured?

  7. #57

    Join Date
    Oct 2018
    Posts
    37
    Quote Originally Posted by pin
    This sounds like an investment linked life insurance policy financed by a loan. Is your lending secured?
    Yes, that's what it is. Yes, everything is secured. It seems fine. The money is actually borrowed from NCB, so BOC seems to be promoting NCB?

  8. #58

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    3,312

    NCB is part of BOC IIRC.. maybe the branch you went to previously was part of the ncb chain and they only swap the signboard..

    4.38% p.a. guaranteed life insurance policy is actually quite high.. not sure where they find the returns for these.. interesting..


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