Premed 101 Forums

# Lines of Credit for Medical Students (Scotia is the best option)

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16 minutes ago, ysera said:

For scotia the interest is calculated daily. 0.037 / 365 * amount owed compounded daily. It comes out to a bit more interest than if it was compounded monthly.

You are mistaken that it's compounded daily. It is calculated daily, and added to the balance at the end of each month. Therefore it is compounded monthly.

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22 minutes ago, GTA Med Advisor said:

You are mistaken that it's compounded daily. It is calculated daily, and added to the balance at the end of each month. Therefore it is compounded monthly.

It appears I was, even better, though the difference is negligible really. My bad!

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Thanks very much everyone! That clears up a major misconception I had about the interest rate, I understand now that it's 3.7%/year rather than 3.7% every payment period.

It sounds like interest is applied to the total funds withdrawn to date, rather than just the funds withdrawn during the current payment period. I'd like to get a sense of how much that interest can amount to over time. Could anyone let me know if the following looks correct?

With the example of spending \$20 000 for tuition, I now see that the monthly payment is \$20 000*3.7%/12 = \$61.67. The next payment period, interest would be charged on the \$20 061.67, but I'll ignore the compounding effect for simplicity's sake. So another \$61.67 would be charged the next month, and every month thereafter. The LoC remains interest payment only for 2 years after residency. Assuming 4 years medical school + 2 years residency + 2 years post-residency, that's 8 years of paying interest on this \$20 000 expense. At \$61.67/month, that comes out to \$5920. Is it correct that when all is said and done I'd pay about \$5920 due to interest on this \$20 000 expense?

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34 minutes ago, striders02 said:

Thanks very much everyone! That clears up a major misconception I had about the interest rate, I understand now that it's 3.7%/year rather than 3.7% every payment period.

It sounds like interest is applied to the total funds withdrawn to date, rather than just the funds withdrawn during the current payment period. I'd like to get a sense of how much that interest can amount to over time. Could anyone let me know if the following looks correct?

With the example of spending \$20 000 for tuition, I now see that the monthly payment is \$20 000*3.7%/12 = \$61.67. The next payment period, interest would be charged on the \$20 061.67, but I'll ignore the compounding effect for simplicity's sake. So another \$61.67 would be charged the next month, and every month thereafter. The LoC remains interest payment only for 2 years after residency. Assuming 4 years medical school + 2 years residency + 2 years post-residency, that's 8 years of paying interest on this \$20 000 expense. At \$61.67/month, that comes out to \$5920. Is it correct that when all is said and done I'd pay about \$5920 due to interest on this \$20 000 expense?

mostly correct - although you have a hard time ignoring the compounding as you go on - you are underestimating the total a bit as you know.

Also most are 2 years post end of training not end of residency. For instance I am a fellow and I am still in "interest only" land until 2 years after I am done. That will be 2 years likely after the end of the this academic year. Relevant because you don't want to have a giant bump in payments the nano-second you get out in the world - you may not have a job for a bit (normal) and also it is extremely common for there to be a ramp up phase for new doctors (regardless of field - include radiology as it happens).

The other factors is the interest rate - none of us know where that will really go over that time period so the true total could again be higher or lower etc.

Edited by rmorelan

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19 hours ago, striders02 said:

Thanks very much everyone! That clears up a major misconception I had about the interest rate, I understand now that it's 3.7%/year rather than 3.7% every payment period.

It sounds like interest is applied to the total funds withdrawn to date, rather than just the funds withdrawn during the current payment period. I'd like to get a sense of how much that interest can amount to over time. Could anyone let me know if the following looks correct?

With the example of spending \$20 000 for tuition, I now see that the monthly payment is \$20 000*3.7%/12 = \$61.67. The next payment period, interest would be charged on the \$20 061.67, but I'll ignore the compounding effect for simplicity's sake. So another \$61.67 would be charged the next month, and every month thereafter. The LoC remains interest payment only for 2 years after residency. Assuming 4 years medical school + 2 years residency + 2 years post-residency, that's 8 years of paying interest on this \$20 000 expense. At \$61.67/month, that comes out to \$5920. Is it correct that when all is said and done I'd pay about \$5920 due to interest on this \$20 000 expense?

Lets assume you borrowed 20k at the beginning of a 30 day month.

the interest is calculated as 20000 * (.037/365) * 30 = 60.82. Next month, its the same thing but replace 20000 with 20060.82.

i confirmed this by calculating the interest on the money i borrowed in july for tuition. Its definitely how its done, but on a leap year or odd months you have to change 365 and 30 respectively. And if you borrow something in the middle of the month, you have to do some additional calculations to get the exact number. For example i borrowed in multiple intervals during last month so I had to do multiple calculations for my exact number keeping in mind the number of days from when I borrowed each amount to the end of the month.

If you want i can give you my excel sheet, send me a pm if interested.

Edit: just so I don’t have to reply to everyone that messaged me, I left for a cottage without my laptop this morning (different time zone, it was night for me when I originally made this comment) I will send everyone the excel sheet next week when I get back. Sorry!

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31 minutes ago, ysera said:

Lets assume you borrowed 20k at the beginning of a 30 day month.

the interest is calculated as 20000 * (.037/365) * 30 = 60.82. Next month, its the same thing but replace 20000 with 20060.82.

i confirmed this by calculating the interest on the money i borrowed in july for tuition. Its definitely how its done, but on a leap year or odd months you have to change 365 and 30 respectively. And if you borrow something in the middle of the month, you have to do some additional calculations to get the exact number. For example i borrowed in multiple intervals during last month so I had to do multiple calculations for my exact number keeping in mind the number of days from when I borrowed each amount to the end of the month.

If you want i can give you my excel sheet, send me a pm if interested.

To add to the confusion, expect every month (billing cycle) to be a different amount of days. A number of factors play a role in that, including weekends and holidays. Your "bill date" is usually set to a specific business day of the month, and the actual date will vary month to month. For instance if your bill date is the first business day of the month, it will likely be on the 1st of the month most months, but it can also be on the 2nd, 3rd, or 4th of the month due to weekends and holidays as banks are not open and bill are not generated on those days. So you could technically have a month with only 25-26 actual days of interest on it, or up to 34+ days of interest on it. All depends on the billing cycle. The difference between 26 days and 34 days of interest could be substantial, and often confuses people. Say month 1 had \$200 in interest for 28 days, and you paid down \$1000. Logically you'd think that the interest next month would be lower. But if there were 34 days of interest charged on the next billing cycle, your interest could be say \$260. It won't make sense since you actually owe less in principal than last month, but take into account the days and it makes sense.

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16 hours ago, Human Being said:

Thanks for the informative response buddy. Mind sharing what the bank has done to keep you happy all these years? What should I be on the look out for?

Again I would say some of this is mindset - I am more interested in big picture stuff than I am about some of the little details people can obsess over.

That being said you obviously want the big stuff - prime -0.25, at or near the top of the max LOC range people are getting, student package with no banking fees, and a good credit card (although the exact details of that is someone I find people again obsess over ha. Personally I have a legacy 1% cash back card with the fee waved each year. For those that do a lot of travel some of the travel cards works may work better.)

Beyond that is where it gets important I think - your bank is going to be one of your first professional relationships - you in the end will have one with an accountant, lawyer and so on. These are business relationships and I expect to be treated as a valuable client. You want someone you can work with, talk to, answers your questions, suggests options that work in your benefit. Of course you need to do your own homework (same goes in my opinion with the lawyer and accountant side as well - never be ignorant completely of an important part of the business side of your practice ha).

So my banker helped me arrange for a mortgage when it was trickier to get one (which turned out to a profitable enterprise for me), and mistakes when they are made (and no one is perfect) were fixed promptly and rare. There was a smooth transition along the entire course of my training, and when competitors adjusted my bank did in turn as well without being asked to do so. As an added touch his is also one of the very few bankers that I have worked with to help solve other people's LOC problems. It isn't all one sided as well I suppose - I have helped him understand what we want  to improve their LOC package. Ha, and before someone asks no this isn't an financial arrangement where I profit in any way - I just don't like people being ripped off, and yeah if people do professionally good work they should be rewarded.

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Thanks so much again everyone, really appreciate the help! This gives me a much better understanding of how interest is applied to the LoC

3 hours ago, rmorelan said:

mostly correct - although you have a hard time ignoring the compounding as you go on - you are underestimating the total a bit as you know. ﻿

Thanks for all your insight. I had a quick question about the compounding - if one has the ability, is it advisable to pay the interest each month, to prevent an 'interest-on-interest' compounding effect? In that case it seems the LoC interest would function as simple interest, albeit the simple interest would be applied on successively larger sums of money as one continues to withdraw from the LoC. Or is it standard practice to just do interest-to-balance transfers (in which case there is an 'interest-on-interest compounding) and pay off a larger sum down the road, when one has more income?

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1 hour ago, striders02 said:

Thanks so much again everyone, really appreciate the help! This gives me a much better understanding of how interest is applied to the LoC

Thanks for all your insight. I had a quick question about the compounding - if one has the ability, is it advisable to pay the interest each month, to prevent an 'interest-on-interest' compounding effect? In that case it seems the LoC interest would function as simple interest, albeit the simple interest would be applied on successively larger sums of money as one continues to withdraw from the LoC. Or is it standard practice to just do interest-to-balance transfers (in which case there is an 'interest-on-interest compounding) and pay off a larger sum down the road, when one has more income?

If you're withdrawing more money down the line, what would you be paying off the interest with? I mean, if you have some source of income then you can go for it and make payments every month, there's no penalty. But generally it's not a great idea to keep a large amount of savings and draw from your LOC.

Basically, to pay for things you should:

1) Use government student loan (0 interest while in school)

2) Use any savings that are earning less than 3.7%

So for most students that would mean that they have no choice but to use the LOC to pay for the interest on it. Obviously compounding isn't fun or ideal, but taking out money at all isn't fun or ideal. We're all going to be able to pay it off, so don't let it keep you up at night.

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On 8/10/2019 at 11:59 AM, Human Being said:

I'm leaning towards RBC but still not sure.

Scotia:

• LOC limit up to 350K
• Prime -0.25%= 3.7%
• Full limit available first year
• Get 2 credit cards with \$5K limit each and annual fees waived: Gold AmEx and Passport Infinite ; if you spend certain amount in first few months then get points
• ScotiaOne Chequing account: unlimited transactions, 2 free e-transfers a month, overdraft protection, free cheques
• Interest on funds borrowed form LOC is charged to your LOC so don't have to worry about transferring money to checking account
• Once you have graduated and the 2 year grace period is over you can either: 1. Convert LOC to Loan w/ payments amortized over 10 years 2. Convert LOC and to Personal LOC 3. Convert to Business LOC.

RBC:

• LOC limit up to 350K
• Prime -0.25%= 3.7%
• Full limit available first year
• Get 1 credit card with \$10K limit and annual fees waived indefinitely: Avion Visa Infinite ; get 45,000 welcome RBC points.
• Get RBC VIP Banking Chequing Account: can use any banks ATM, unlimited e-transfers, overdraft protection, 12 free bank drafts, cross debit free, free cheques, free safe deposit box.
• Have to transfer funds from LOC or elsewhere to chequing account to pay for interest charged for money borrowed from LOC

Bottom Line: I think Scotia offers better credit cards, RBC offers better chequing account, RBC is more flexible with the repayment and says that you will have this LOC your whole life as long as you are practicing whereas in Scotia you have to go in and convert the LOC to whatever you want after.

What do you guys think? RBC also has the best customer satisfaction rating out of the big five banks in Canada...Scotia ranks last.

I met with both a Scotiabank and RBC rep and both were from the Healthcare advisor lists they show online. Both were great, really knowledgable so it really came down to what was most important to me.

After thorough conversation, I went with RBC. They have the VIP and Avion visa guaranteed free forever, and I like the fact that I don’t have to convert to the professional line, and there is no grace period.

One thing my advisor noted, their business loan and homeline plan line of credit interest is now also at prime-0.25%. Very important for me as I have a less than 98k joint mortgage with my sister, and we have been with Vancity ever since. We’re up for renewal and it’s pretty sweet my sister may get that home equity line of credit at prime-0.25%, if we get approved. My mom’s a physician as well and has a commercial operating line at TD, so that business loan at prime-0.25% might do wonders for her.

It seems in one appointment RBC won me and my family over with all the prime-0.25% for the personal, business and mortgage so that was pretty satisfying.

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13 hours ago, striders02 said:

Thanks so much again everyone, really appreciate the help! This gives me a much better understanding of how interest is applied to the LoC

Thanks for all your insight. I had a quick question about the compounding - if one has the ability, is it advisable to pay the interest each month, to prevent an 'interest-on-interest' compounding effect? In that case it seems the LoC interest would function as simple interest, albeit the simple interest would be applied on successively larger sums of money as one continues to withdraw from the LoC. Or is it standard practice to just do interest-to-balance transfers (in which case there is an 'interest-on-interest compounding) and pay off a larger sum down the road, when one has more income?

that is not much different than saying if you that had then money should you pay off the loan (the interest each month becomes the loan balance - so you really just paying of parts of the loan).

but how would you do that? where would that money come from? You cannot use the LOC to do it - that is just the same compounding with the math done different

You will also be a student in med school up to your eyeballs in work, and your focus has to be on making sure you figure out what speciality you want and then getting that speciality (in a sense the only purpose of medical school ultimately is matching to residency. Kind of a bleak way of putting it I guess but it does focus things). If you go out and earn the types of sums required to pay off the basic interest eventually we are still talking about 500-1000 a month for many people in the end (tuition alone for say for years is over 100K, then there is living expenses etc. It does add up). Working that much would be distracting.

The trick is to use the LOC appropriately, and balance it out. Don't spend so much that the LOC becomes a distraction, don't worry so much about it that become yet another distraction. Always keep in mind the LOC also has to be around with some room etc for your residency - because that is another period of your life where you honestly won't know exactly what your financial needs will be (and many residency positions are in very expensive cities - many people consider themselves luck just to pay off the interest in residency and not go into debit further. Others still find themselves digging a deeper hole as it were).

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18 hours ago, pacerpacer1 said:

I met with both a Scotiabank and RBC rep and both were from the Healthcare advisor lists they show online. Both were great, really knowledgable so it really came down to what was most important to me.

After thorough conversation, I went with RBC. They have the VIP and Avion visa guaranteed free forever, and I like the fact that I don’t have to convert to the professional line, and there is no grace period.

One thing my advisor noted, their business loan and homeline plan line of credit interest is now also at prime-0.25%. Very important for me as I have a less than 98k joint mortgage with my sister, and we have been with Vancity ever since. We’re up for renewal and it’s pretty sweet my sister may get that home equity line of credit at prime-0.25%, if we get approved. My mom’s a physician as well and has a commercial operating line at TD, so that business loan at prime-0.25% might do wonders for her.

It seems in one appointment RBC won me and my family over with all the prime-0.25% for the personal, business and mortgage so that was pretty satisfying.

Scotiabank doesn't convert it to a professional line of credit?

Is the professional line of credit available to you indefinitely after residency at prime - 0.25%?

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Scotiabank doesn't convert it to a professional line of credit?

Is the professional line of credit available to you indefinitely after residency at prime - 0.25%?

With RBC, yes. It’s new. It is available to you at prime-0.25 as long as you have a medical license.

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Scotiabank doesn't convert it to a professional line of credit?

Is the professional line of credit available to you indefinitely after residency at prime - 0.25%?

Yes, basically RBC said as long as you’re either a student, resident or practicing physician, you get the line of credit at prime-0.25% forever. First years only apply once and they have it forever.

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Scotiabank doesn't convert it to a professional line of credit?

Is the professional line of credit available to you indefinitely after residency at prime - 0.25%?

Based on my understanding: You have to come back after your 2 year grace period is done to convert to the professional line of credit with Scotia - whereas in RBC, you apply once and you have it forever. One of our family friend said he had to basically re apply when he finished residency with Scotiabank and he didnt get the full 300 he was approved for originally

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Just wanted to double check on criterion 3 of RBC's ipad offer this year: set up 2 bill payments to a service provider in online/mobile banking. Those are one-time payments, right? Like if I pay go in to the app and pay my internet bill and hydro bill manually then I fullfilled the criterion, right?

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7 hours ago, pacerpacer1 said:

Based on my understanding: You have to come back after your 2 year grace period is done to convert to the professional line of credit with Scotia - whereas in RBC, you apply once and you have it forever. One of our family friend said he had to basically re apply when he finished residency with Scotiabank and he didnt get the full 300 he was approved for originally

With Scotiabank when you say "convert" it doesn't mean you have to apply for it or anything, it's just a formality you have to go in to sign a couple of papers for. You get to keep the same limit and everything, you just have to give a couple of signatures to convert it from a student LOC to a personal or business LOC. There's no application, credit check, or anything like that. Your family friend either did that a while ago when no banks were doing this, or he missed the cutoff (1 year/2 years after finishing, depending on how long ago he went in to do it).

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1 hour ago, DistressedMedStudent said:

Just wanted to double check on criterion 3 of RBC's ipad offer this year: set up 2 bill payments to a service provider in online/mobile banking. Those are one-time payments, right? Like if I pay go in to the app and pay my internet bill and hydro bill manually then I fullfilled the criterion, right?

Yes

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11 hours ago, pacerpacer1 said:

Based on my understanding: You have to come back after your 2 year grace period is done to convert to the professional line of credit with Scotia - whereas in RBC, you apply once and you have it forever. One of our family friend said he had to basically re apply when he finished residency with Scotiabank and he didnt get the full 300 he was approved for originally

When was that done? Because one of the issues on the board (and comparing things in general) is that we often have immediately current plan at bank X vs older version at bank Y. These LOCs have improved a lot in the past 5 years in terms of almost every aspect really.

Which again shows that things in them can and will change. I don't have 100% faith that they won't collectively change for the worse down the road either. I always hesitate on putting current terms in to any 10 year plan (because 10+ years is often what we are talking about here).

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Can someone summarise what TD is offering for med students? Are they competitive?

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4 hours ago, DistressedMedStudent said:

Can someone summarise what TD is offering for med students? Are they competitive?

Most people go with RBC or Scotia but when I was making the decision couple months ago TD was really more or less similar in what they offered. For me it came down to my Scotia rep having the most experience with medical students.

And you can always switch banks so the major banks will try to more or less offer similar packages, except BMO for some reason which didn't seem interested at all.

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On 8/10/2019 at 2:59 PM, Human Being said:

I'm leaning towards RBC but still not sure.

Scotia:

• LOC limit up to 350K
• Prime -0.25%= 3.7%
• Full limit available first year
• Get 2 credit cards with \$5K limit each and annual fees waived: Gold AmEx and Passport Infinite ; if you spend certain amount in first few months then get points
• ScotiaOne Chequing account: unlimited transactions, 2 free e-transfers a month, overdraft protection, free cheques
• Interest on funds borrowed form LOC is charged to your LOC so don't have to worry about transferring money to checking account
• Once you have graduated and the 2 year grace period is over you can either: 1. Convert LOC to Loan w/ payments amortized over 10 years 2. Convert LOC and to Personal LOC 3. Convert to Business LOC.

RBC:

• LOC limit up to 350K
• Prime -0.25%= 3.7%
• Full limit available first year
• Get 1 credit card with \$10K limit and annual fees waived indefinitely: Avion Visa Infinite ; get 45,000 welcome RBC points.
• Get RBC VIP Banking Chequing Account: can use any banks ATM, unlimited e-transfers, overdraft protection, 12 free bank drafts, cross debit free, free cheques, free safe deposit box.
• Have to transfer funds from LOC or elsewhere to chequing account to pay for interest charged for money borrowed from LOC

Bottom Line: I think Scotia offers better credit cards, RBC offers better chequing account, RBC is more flexible with the repayment and says that you will have this LOC your whole life as long as you are practicing whereas in Scotia you have to go in and convert the LOC to whatever you want after.

What do you guys think? RBC also has the best customer satisfaction rating out of the big five banks in Canada...Scotia ranks last.

You were able to secure the Avion Visa Infinite? I thought they only offered Platinum?

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Hey Everyone,

I know people have been saying its taken a week or more to have their LOC up and running after speaking to an advisor. However, do you have access to the credit cards before that time? I have a few large purchases to make and I would like to be able to capitalize on the rewards of the new cards.

Thanks!

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14 minutes ago, dwightschrute123 said:

Hey Everyone,

I know people have been saying its taken a week or more to have their LOC up and running after speaking to an advisor. However, do you have access to the credit cards before that time? I have a few large purchases to make and I would like to be able to capitalize on the rewards of the new cards.

Thanks!

usually yes - it is only the LOC part that requires all the extra hoops.

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1 hour ago, dwightschrute123 said:

Hey Everyone,

I know people have been saying its taken a week or more to have their LOC up and running after speaking to an advisor. However, do you have access to the credit cards before that time? I have a few large purchases to make and I would like to be able to capitalize on the rewards of the new cards.

Thanks!

Just keep in mind that it will usually take up to a week or two after you sign papers for the actual credit cards to arrive in the mail. You'll have to wait until you receive them in order to use them. Timeline would go as follows:  apply > approval > sign papers > wait for cards to arrive in mail. Let them know that you'd like them sooner than later to make some big purchases.

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