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when do LOCs become payable?


Guest choti

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Most "med student LOCs" I'm familiar with work in that you pay interest on the amount you've withdrawn from the second you withdraw that amount. Repaying the actual money you've taken out though, usually starts 1 year after the end of your residency, with RBC at least and MDM too I believe.

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Guest Koppertone

Keep in mind that all interest money paid is deducted right out of your LOC (so you never have to actually PAY it yourself unless you spend all of your credit by the end of the year). Keep this in mind when budgeting your expenses for the year.

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Guest UWOMED2005

A couple things:

 

1) There is a difference between "payable" (ie having to make principal payments) and having to pay interest.

 

2) It is nice to have loans non-"payable" as a resident because your liquidity (access to cash AS A RESIDENT) is poor but long term you WILL be able to pay the loans. . . and fairly quickly.

 

3) Govt Loans are currently payable as soon as you graduate and their interest rate is HIGHER than most LOCs. This means you have a higher interest rate AND you have to make interest payments. So it's currently best to consolidate. . . BUT there's talk of giving residents interest-free AND non-payment status, in which case it would be better to hold on to the govt loans

 

4) Most commercial LOCs do NOT require principal payments until after residency is completed. But they do charge you interest from the day you borrow.

 

5) SOME commercial LOCs may jack up the interest rate above prime during residency. CHECK THIS OUT BEFORE. I had a few classmates almost get burned with BMO LOCs that jacked up the interest rate during residency. . . this may have changed, check it out for yourself.

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Guest Kirsteen

Hi there,

 

LOCs from commercial banks are essentially flexible mortgages. That is, you can carry them for life if you wish and the bank will happily collect interest on any outstanding LOC balance that you have. As mentioned by UWO though, upon graduation, if you have any space within your LOC, since LOC interest rates are generally lower than those of most other interest-bearing products, e.g., credit cards, student loans, etc., it's wise to pay as much as you can off of the latter items with the LOC and save on interest charges.

 

Cheers,

Kirsteen

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Guest coastalslacker

It is mentioned above that because the rate of interest on governement loans is higher than that which you pay on an LOC, you should consolidate your debt into the LOC.

 

This seemed intuitive to me also until I learned that you receive a tax credit on interest paid on government student loans, but not on interest paid to the banks for an LOC. So, even if you pay more interest to the govt, getting some of it back when you do your taxes might make paying back the LOC first a better move. "Might"- you'd have to do the numbers for your particular situation. As mentioned above, there seems to be a possibility that a portion of one's govt loans will be forgiven in the future-the chance of getting free money would be another incentive not to pay off your governemt loans right away with cash from your LOC.

 

I love having accountants in the family.

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Guest UWOMED2005

MD Management is willing to to do the math with you on whether consolidation is a wise move or not.

 

For most graduating med students in 2005, that extra 2.5% interest more than wiped out any income tax credits. At least that was the case for me.

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