Another slight hijack not worthy of a new thread. Many people take out a mortgage with a big solid financial organization because they just feel that, well, that it’s always good to be with a big solid financial organization. When it comes to loans, however, I’ve always felt that it’s better to find the cheapest conceivable loan, to hell with the solidity of the lender. Let them go bankrupt – someone else will just inherit the contract. In fact, it’s best to beat the woods and try to find a lender who, for whatever reason, is desperate to give you good terms (maybe it’s a small town and they’re in a war to the death with another institution). Who cares if they’re about to go under? As long as you get a great deal, it won’t affect you at all if they go belly up.
For deposits and other investments, of course, I take the exact opposite view, but for loans I just want the best deal. Is there any case where this is a bad idea? Is there any situation where your mortgage lender going belly up can be bad for you? If not, why do people go with the big solid organizations, who usually charge higher interest?
I currently live in Canada, where just a few years ago, the big banks were charging a percent more than small, fly-by-night virtual banks. The gap appears to have narrowed, but I think small lesser-know financial institutions still have to significantly beat the rate of the big banks to attract borrowers. I can understand choosing CIBC or RBC for your $100,000 deposit, but why choose them over Joe’s virtual bank for your $100,000 mortgage if you can get a better deal at Joe’s?