In the past few days there have been a few headlines that most folks who knew about the subject would say, “Well that was obvious wasn’t it?”:
- Former baseball star admits to steroid use. The only thing new here is that the player in question is admitting to it (mostly because he wants to take a job back in baseball). No surprise there, kind of obvious really
- A man who kept a “pet” tiger was mauled to death by the creature. The surprising part is that the beast hadn’t done it sooner.
- Snow falls in Ottawa in January, OK that is a trick one, but not very surprising, and certainly not a big news story.
- Financial bloggers see tough times ahead, again, not a surprise either.
Financial Surprises
In contrast I was surprised to see that my Secured Line of Credit and my Unsecured Line of Credit had the exact same interest rate (that has since changed markedly). For those unaware typically a secured line of credit has a lower interest rate because it is secured against something of higher value (e.g. a house), and an unsecured line of credit is simply the bank figuring you are a reliable enough person to loan money (and presumably pay it back in a timely fashion).
My guess is this is a fiduciary anomaly, and will soon be remedied by my bank, but given I don’t use the unsecured loan vehicle, maybe it won’t be? I’ll keep watching to see if and when my bank notices this interesting situation.
What will I be surprised by next? Free Banking?
With secured/unsecured lines of credit – often times the secured lines are also much larger. Lending someone $5k-$20k unsecured probably isn’t any riskier than lending $100k-$200k+ secured, given that the transaction costs in recovering the secured money through repossession likely exceed the total value of the unsecured loan. To be honest, I’m surprised that the interest rates are usually substantially different.