LOC and MD Financial

[neve6]

Hey,

 

Has anyone, who has gone with MD financial, been able to confirm that the interest rate during repayment remains at prime. MD finanicial is my first choice, but since my rep said she can't confirm the rate will remain at prime I am worried about going with them.

 

Thanks for your help.

[shannn]

It should be

 

Every institution I went to guaranteed me prime + 0% until the end of residency + 1 year (TD, Scotia, RBC)

 

You should check out the LOC thread

 

http://www.premed101.com/forums/showthread.php?t=41729

[rmorelan]

Hey,

 

Has anyone, who has gone with MD financial, been able to confirm that the interest rate during repayment remains at prime. MD finanicial is my first choice, but since my rep said she can't confirm the rate will remain at prime I am worried about going with them.

 

Thanks for your help.

 

I wasn't able to confirm that either from them (in writing, if it isn't in writing then it just isn't confirmed). I got the strong impression that is unlikely that it would not be prime do to market pressures but that wasn't worth the risk to me. I have dealt with enough banks in the past to know that if it is not in the black and white then then anything they say is meaningless

[nemesis]

The interest rate for the MD LoC is the Prime Rate; however, this interest rate is variable, and fluctuates with the Prime Rate.

 

For example, just recently, the Prime Rate increased from 2.25% to 2.50%; therefore, this new (higher) rate would be rate applied to your MD LoC.

 

This is about as good as it gets: no bank will give give you an interest rate that is "fixed" at the current Prime Rate (i.e. you cannot "lock in" the current Prime Rate of 2.50% over the duration of your medical training).

 

Although you don't need to make any interest or capital payments during medical school or residency, interest does accrue during this period. My understanding is that this interest is still charged at the Prime Rate.

 

HTH

[thoughtkinetic]

That was my thinking too. I am pursuing an LOC with MD Financial as well, and the same question arose. The LOC will remain at prime until a year after residency, but prime itself may fluctuate. Kinda confusing!

[TheEggman]

From the MD financial website:

"You can defer the interest until 12 months after you complete residency or choose to pay some or all of the interest at any time. If you choose to defer interest, no monthly payments are necessary during this period because interest accrues within your account and is capitalized monthly on your line of credit."

 

So you don't have to pay back anything until 12 months after residency, and until repayment the interest rate remains at prime. But once you start repayment you will have to negotiate with the bank for the interest rate. You can either make it a fixed rate or keep it variable.

 

However, I doubt any bank will keep the interest rate at prime during repayment. Basically all banks give you a pass on high interest during your studies to try and win your favour so you will stay with them. But once you're working the interest on your loans goes up to normal rates (prime + something or a fixed rate negotiated with the bank).

 

If you do find a bank willing to give you prime after residency simply get that LOC and pay off your old one with it. In fact since there is usually no charge to set up these LOCs you can switch banks basically as much as you want, just keep paying off the old LOC with the new one.

Because of this pretty much all the banks have the same deals for LOC because they know that you can switch.

 

My take on it (and I could be wrong) is that once you start repayment you no longer have a line of credit, it is now a fixed loan that needs to be repaid.

 

I went with MD financial. It's easier, i.e. the rep knows exactly what to do with med students, and the exact same thing as the other banks. You can only access the LOC in yearly increments but I like that, keeps me from overspending . My current bank is also on the exchange network so I'm used to using those ATMs.

[rmorelan]

 

My take on it (and I could be wrong) is that once you start repayment you no longer have a line of credit, it is now a fixed loan that needs to be repaid.

 

 

At a lot of banks they just rolls your LOC from a student line of credit to a professional line of credit - the rate goes up but the LOC stays. The banks isn't going to get in your way of adding more debit you owe them at the higher rate

 

Some people were mentioning the fluctuating prine - that is pretty common in a lot of loans. One of the ways of paying osap back is that way, my personal loc also has the same setup and one type of mortage is as well . I guess that isn't surprising sonsidering the interest rates are historical lows right now - they are going to go up and banks would actually be in trouble if the loc was fixed.

[neve6]

From the MD financial website:

 

 

However, I doubt any bank will keep the interest rate at prime during repayment. Basically all banks give you a pass on high interest during your studies to try and win your favour so you will stay with them. But once you're working the interest on your loans goes up to normal rates (prime + something or a fixed rate negotiated with the bank).

 

If you do find a bank willing to give you prime after residency simply get that LOC and pay off your old one with it. In fact since there is usually no charge to set up these LOCs you can switch banks basically as much as you want, just keep paying off the old LOC with the new one.

Because of this pretty much all the banks have the same deals for LOC because they know that you can switch.

 

My take on it (and I could be wrong) is that once you start repayment you no longer have a line of credit, it is now a fixed loan that needs to be repaid.

.

 

Both BMO and RBC have said the interest rate will stay at prime during repayment. However, with BMO, I will be paying 1% of principal during year 1 of repayment, 2% of principal during year 2 of repayment etc. I am contacting RBC to see what their repayment plan is like.

 

I am not worried about the fluctuating prime rate but more worried about paying prime + some percentage in interest during repayment.

[nemesis]

...I am not worried about the fluctuating prime rate but more worried about paying prime + some percentage in interest during repayment.

 

Yes, I do not think you need to worry about the Prime Rate including a Spread, with the LoC from MD Financial.

 

...but I will confirm with MDM!

[Ollie]

When your loan goes in to repayment (one year after residency) you can either convert it to a loan or to a professional line of credit. The interest rate at this point is negotiable. The rate you can get will depend on a few variables such as the balance and how secure it is (ie if you have assets they can go after if you default). Having said that, you can shop around to different lenders and see who gives you the best deal. If you have a mortgage, there's a good chance at getting a good deal with the same lender. I go in to repayment next year and I plan on insisting on prime and will shop around until I get it!

[apache]

remember prime's near an all time low, over the next 8-9 years id average it out at maybe 4 percent

 

 

That was my thinking too. I am pursuing an LOC with MD Financial as well, and the same question arose. The LOC will remain at prime until a year after residency, but prime itself may fluctuate. Kinda confusing!

[naspec]

For those of you who went with MD financial but already had a bank account with one of the Big 5 banks, are you keeping your old chequing account, or moving all your banking over to National? My bank isn't known for offering great terms on its professional/medical student LoC - it also seems to be the least popular one on these forums - but all its other terms (chequing account, credit card) are pretty good. So I'm thinking of just going with MD for the LoC but staying with my current bank for paying the bills, receiving paycheques, etc. Do you think it'd be an unnecessary hassle to be transferring funds between different institutions whenever I want to use or pay off my LoC?

[shannn]

For those of you who went with MD financial but already had a bank account with one of the Big 5 banks, are you keeping your old chequing account, or moving all your banking over to National? My bank isn't known for offering great terms on its professional/medical student LoC - it also seems to be the least popular one on these forums - but all its other terms (chequing account, credit card) are pretty good. So I'm thinking of just going with MD for the LoC but staying with my current bank for paying the bills, receiving paycheques, etc. Do you think it'd be an unnecessary hassle to be transferring funds between different institutions whenever I want to use or pay off my LoC?

 

I'm using 3 banks (RBC for LOC, PCF and Scotia for other purposes). I don't see what is wrong with that.

 

If you are concerned about moving money between accounts, I would open a PCF account and link your bank accounts so that you can transfer funds from the other banks to PCF and then release those funds to the institution you want to.

[meds2014]

Is PCF the one from Loblaw's? What's so good about it?

[naspec]

Is PCF the one from Loblaw's? What's so good about it?

 

It's completely free without any minimum balance, and they actually pay a little bit of interest on your balance. I think you can use any CIBC bank machine with no extra fees as well.

 

Thanks shannn, how long does it take to move money between the different banks? Does the receiving institution place a hold on the transferred funds?

[TheEggman]

For those of you who went with MD financial but already had a bank account with one of the Big 5 banks, are you keeping your old chequing account, or moving all your banking over to National? My bank isn't known for offering great terms on its professional/medical student LoC - it also seems to be the least popular one on these forums - but all its other terms (chequing account, credit card) are pretty good. So I'm thinking of just going with MD for the LoC but staying with my current bank for paying the bills, receiving paycheques, etc. Do you think it'd be an unnecessary hassle to be transferring funds between different institutions whenever I want to use or pay off my LoC?

 

The way I will be doing it is to pay myself a "salary" using the LOC cheques from MD and depositing them into my checking account at my other bank once a month. I'll just put everything on my credit card and earn points. I want to limit it to once a month so I can spend on a fixed budget and (hopefully) graduate with less debt.

Thats basically what I do now because UWO only pays once a month, so everything on the credit card then pay it off when the paycheck comes in.

[shannn]

Thanks shannn, how long does it take to move money between the different banks? Does the receiving institution place a hold on the transferred funds?

 

It depends on the amount you are transferring

 

With amounts smaller than $1K, I've found it takes 1 business day

 

For amounts over $1K, in 1 business day you have access to I believe $1K of the funds, and it takes a couple of business days for the remainder to clear

 

I'm happy with PCF because it is so easy to transfer money (you just need to link your accounts by setting it up online and then going to a Loblaws with a PCF and giving them a void cheque). The PCF's usually stay open until 9pm too

[future_doc]

Is the prime rate about to go up?

 

Bank of Canada interest rate has risen and therefore, it is a matter of time before this occurs.

[rmorelan]

Is the prime rate about to go up?

 

Bank of Canada interest rate has risen and therefore, it is a matter of time before this occurs.

 

Yup that is right, shortly we will all be paying a bit more on our LOCs.

[future_doc]

And it will likely move up, albeit slowly over time.

[BigM]

Yup that is right, shortly we will all be paying a bit more on our LOCs.

 

Any idea how much the interest went up? And I take it is in addition to the 0.25% increase a few months ago?

[rmorelan]

Any idea how much the interest went up? And I take it is in addition to the 0.25% increase a few months ago?

 

yeah it went up 0.25% which is the standard increase really. Since we are at close to historic lows in interest rates we can really only expect a gradual increase over time. We really can't complain too much considering

[Ollie]

The way I will be doing it is to pay myself a "salary" using the LOC cheques from MD and depositing them into my checking account at my other bank once a month. I'll just put everything on my credit card and earn points. I want to limit it to once a month so I can spend on a fixed budget and (hopefully) graduate with less debt.

Thats basically what I do now because UWO only pays once a month, so everything on the credit card then pay it off when the paycheck comes in.

 

The only problem with this approach is that you will end up paying more interest because you will pay interest on the full amount you withdraw each month rather than paying on the smaller amounts you would use gradually over the month.

 

Once I had to dip in to the LOC (once my savings and student loan were used up), I used the LOC as my only account. I deposited cheques (when I got them from bursaries, etc), deposited my student loan, and just withdrew money/used interac/payed bills off my LOC as I needed it. It works exactly like a chequing account. That way you keep your LOC balance to a minimum and over time it will save you money.

[Nobodycirclesthewagons]

The only problem with this approach is that you will end up paying more interest because you will pay interest on the full amount you withdraw each month rather than paying on the smaller amounts you would use gradually over the month.

 

Once I had to dip in to the LOC (once my savings and student loan were used up), I used the LOC as my only account. I deposited cheques (when I got them from bursaries, etc), deposited my student loan, and just withdrew money/used interac/payed bills off my LOC as I needed it. It works exactly like a chequing account. That way you keep your LOC balance to a minimum and over time it will save you money.

 

Sounds like a good plan, thanks.

[future_doc]

Bank of Canada is considering interest rate hike today and there is expected a 25 basis point rise (o.25%). However, due to sluggishness of the economy, it is far from certain. We will find out in a few hours. The decision will directly affect the prime interest rate paid by med students on the LOCs.