short term, conservative investing

December 22, 2005 7:37 PM

I just got a $50,000 home equity loan to remodel our kitchen, but we might not pay the contractor for 3 months. Can I do anything with the money to make a little interest, at least to cover the 5.9% interest, before then? Right now it's in our savings account.

I realize they start charging us the monthly interest immediately (although I don't know why they don't just wait for you to take it out before doing that, since they're making interest on it as long as it's in our account, right?). 3 month CD? Some kind of special short term blue chip account?

posted by luriete to work & money (7 comments total)

I think what you're looking for is probably a cash management account... if not some sort of short-term term deposit. The "might" in your query makes me favour the former - if it were a definite 3 months, then a term deposit would be the go.
posted by pompomtom at 7:59 PM on December 22, 2005

It's too late for you but this advice might help others: it's a much better idea to get a line of credit rather than a loan like this, because you only pay interest on the money you withdraw as opposed to the entire amount. The interest rates are usually very good too.

You won't get anything close to the 5.9% they are charging you elsewhere without shouldering some additional risk. If it was that easy to earn 6%, trust me, the bank would be investing in *that* rather than your kitchen renovations.
posted by unSane at 8:00 PM on December 22, 2005

Probably the best you'll do (while maintaining the ability to withdraw anytime) is an internet savings account. HSBC Direct is the current best at 4.25% and a $25 bonus for opening (promo code: start).
posted by letitrain at 8:51 PM on December 22, 2005

4.25% plus a $25 bonus (equivalent to another .20% for $50,000 in the account for 90 days, so really 4.45%) is probably better than what you'll find with a 3 month CD, and certainly offers more flexibility. (Of course, that assumes that HSBC keeps the rate that high, which it does NOT guarantee to do.)

A brief search of the web found a 4.35% 3-month CD, with the site saying that Wells Fargo and similar offered between 1.2 and 2.5%.
posted by WestCoaster at 9:57 PM on December 22, 2005

My investing friend tells me debentures on a merchant bank are a good option for short-term investments like this. Low but non-zero risk, decent returns.

Usual disclaimers - I am not a financial adviser and you really should talk to one. WRT internet financial advice, you get what you pay for...
posted by polyglot at 5:30 AM on December 23, 2005

ING Orange Savings was been recommended to me just the other day (by a Financial Planner) as a home for money that we need to keep liquid. You access it over the Net and transfer money directly into and out of your more traditional savings and checking. Rates appear to be 3.75 right now (23 Dec 2005).

http://home.ingdirect.com/open/open.asp
posted by deanj at 8:05 AM on December 23, 2005

Listen to unSane. Do you have the ability to close this loan early? Because you're bleeding money right now and it's unlikely you'll find something that will pay you 6% interest over the next three months so you can at least break even. Lines of credit are your friend in these situations. It's like a well that you only need to draw certain portions of money from when necessary.
posted by quadog at 10:58 PM on December 23, 2005