Banking Options

[pubert]

I'm sure most us will need to dip into a line of credit at some point during our time in med school. Here are the links to each of the big 6 banks' professional student areas. If a bank offers something of value above and beyond what the others are offering, then I have included a highlight. If anyone finds other things that they think warrant a highlight I'll edit this post to include them.

 

As a former finance guy I'll tell you that all of the banks want your business. They will all offer you "perks" in the form of "free" accounts, transactions, etc. Beware of hidden fees! Depending on your desire for convenience some of the perks might make sense for you. However, for the majority of you you should focus solely on the interest rate that the bank offers you. All of the lines of credit will offer you free access to your money via cheques. My suggestion is to find the best interest rate and then sign up for a PC Financial Chequing account which will truly give you free banking. Deposit your cheques into your own PC account and then use the debit card provided (you get free Interac transactions and free banking at CIBC machines).

 

The only bank with a posted interest rate is National Bank. If anyone has received a LOC with an interest rate less than prime, please share which bank offered you this, so that the rest of us can take advantage.

 

National Bank

Highlight = Prime + 0%

 

TD (P + 1.0%)

 

CIBC

 

RBC (P + 0.0%)

Highlight = 12 free money orders

 

BMO (P + 0.0%)

Highlight = 15 year payoff period after school

 

Scotiabank

Highlight = Option to allow interest to accrue instead of monthly interest payment

 

 

(Quoted Rates to Classmates P = Prime = 3.0%)

[Erk]

On a convenience note, scotia, RBC, and cibc have terminals at foothills. Scotia's is closer to where we will have classes; RBC is in the hospital main entrance; CIBC's is down by Timberline cafeteria, which is a bit off the beaten path but somewhere many of us will probably go daily.

 

Not one of the core things, but convenience is not something to shake a stick at.

[NewfieMike]

I had a meeting with a financial advisor at TD about the professional student LoC.

 

He really had no idea what he was talking about.

 

I know this was only an experiment of n = 1, but I've heard before that MD student LoC's are relatively new for TD, and so people are going to be less likely to have a grasp on the process.

 

TD was appealing to me because my other bank accounts/VISA/auto-insurance is all in the same bank, so I wanted to keep it all in the same institution. Looks like I will be checking out RBC (haven't heard anything bad).

 

Oh, interest rate at TD was prime +1% (aka 4% yearly)

[pubert]

If you are going for convenience, then make sure you account for what it's costing you. In NewfieMike's case, TD was going to charge an additional 1% over National Bank's posted rate. Hypothetically speaking, if he maxed out his LOC each year, he would be paying more than $500 more per year in interest costs than he would at National Bank. By the end of med school he would be paying $1,500 more per year. So yes, while it is nice to have your banking all in one place, and it is nice to be able to use the machine in closest proximity to you for free, the convenience normally does cost you... a lot!

 

Thanks for the heads up on TD. Let us know what your experience with RBC is like.

[HBP]

I had a meeting with a financial advisor at TD about the professional student LoC.

 

He really had no idea what he was talking about.

 

I know this was only an experiment of n = 1, but I've heard before that MD student LoC's are relatively new for TD, and so people are going to be less likely to have a grasp on the process.

 

TD was appealing to me because my other bank accounts/VISA/auto-insurance is all in the same bank, so I wanted to keep it all in the same institution. Looks like I will be checking out RBC (haven't heard anything bad).

 

Oh, interest rate at TD was prime +1% (aka 4% yearly)

 

You're meeting with the wrong person. You have to meet the rep who specifically deals with professional student line of credits.

[0593202]

When I went to bmo it was prime, 50000 max a year, 200000 total

[UCUCUC]

Another note, I tried calling the number given on the RBC website for Nick Butler (the "med loan specialist" listed on their site for UofC) and his number doesn't appear to go anywhere. Calling the RBC branch and try to set up an appointment with him or anyone else that does professional student loans doesn't seem to help either, I just ended up with one of their usual financial consultants...

[rmorelan]

You're meeting with the wrong person. You have to meet the rep who specifically deals with professional student line of credits.

 

exactly - a regular loan manager is simply not going to work - we have seen that year after year - there are just too few of us overall from most of them to have a clue how to process them correctly. I have seen the wrong rates, the wrong amounts, the wrong terms........

 

usually you can contact the bank in the city of the school you are going to as they are more experienced and can point you to the right place. I did that in first year, and actually had the paperwork send over from London to my home town once we worked everything out.

 

Anyway - make sure you get prime, and make sure in writing it stays at prime during residency (not all do - nasty surprise!). Those are probably the main points I guess

[HBP]

exactly - a regular loan manager is simply not going to work - we have seen that year after year - there are just too few of us overall from most of them to have a clue how to process them correctly. I have seen the wrong rates, the wrong amounts, the wrong terms........

 

usually you can contact the bank in the city of the school you are going to as they are more experienced and can point you to the right place. I did that in first year, and actually had the paperwork send over from London to my home town once we worked everything out.

 

Anyway - make sure you get prime, and make sure in writing it stays at prime during residency (not all do - nasty surprise!). Those are probably the main points I guess

 

What about prime during repayment? Is that not commonly offered as well?

[Hopeful_Waitlister]

I'm having a terrible time securing a line of credit. My issue is that I have been in school for quite a while and have generated a lot of government student loan debt. So, even though I have good credit, my debt to income ratio is poor. Does anyone on here have experience in this type of situation? I have yet to find a proper rep to speak with though. Does anyone know who the RBC rep is for UofC? Basically, I have a wife and three small children, so she is unable to work, or at least work enough to offset the cost of daycare and we would like to be able to secure a line of credit that would allow us not to stress about our finances for the next few years. If anyone has any suggestions or experiences to share, I would really appreciate it. Thanks.

 

PS My wife almost lost it on the manager at our local TD branch today.

 

Does anyone have the contact info for the other big bank reps for UofC students? Thanks.

[xIcewind]

No contact info, I just walked into a branch and asked to speak to a representative with knowledge of a professional line of credit.

 

I had (still have) 0 income so I don't see how anyone could have a worse debt to income ratio than me.

 

If all else fails, I think MD Financial is a great alternative. I am personally not with them, but have heard good things, and you can always call in and talk to one of their representatives about your financial information and ask for advice.

[papaya100]

I also have previous student debt (just started paying it back) and am planning to get a line of credit (not yet back in Canada, therefore must do it when I arrive in Calgary). But I didn't think this would be a problem...

 

Have other people applied for a line of credit with previous student debt? Is this something I should be worried about?

[NewfieMike]

Perhaps I can help.

 

I found getting a LoC secured was tough too. I went to BMO and spoke to a girl who said there was no way they'd do it without a co-signer. I told her that was nonsense and I didn't want it. She recommended I spoke with their lending specialist, Rob Andrews.

 

Rob has dealt with TONS of these, and we did the whole application over the phone. He said the co-signer issue is only needed when students are going to school internationally or have a bad credit rating.

 

The guy was really helpful. I signed for my LoC last thursday and the funds became active today. 3.000% interest rate. I strongly recommend sending him an email.

 

robert.andrews@bmo.com

[Vdoon]

Helpful post! Thanks!

[Mithril]

What about prime during repayment? Is that not commonly offered as well?

No, it is not common. I was about to sign with BMO before I fully read the terms and conditions. BMO offers your LoC at their base rate - 1%, which is the deal that professional students get. After your residency, you enter your repayment period and you go back to their base rate, which is actually prime + 1%, ie. 4% at the current prime rate. Other banks may also try to pull a fast one on you, so it's very important you read the fine print. Because of this I'll be going with RBC.

 

TD does the same thing. I negotiated prime for my student LoC while being a student/in residency, but it would go back to their base rate a year after being done residency. No thanks.

 

I suggest to everyone to make a list of questions and ask your financial advisor the questions one by one.

[The Law]

exactly - a regular loan manager is simply not going to work - we have seen that year after year - there are just too few of us overall from most of them to have a clue how to process them correctly. I have seen the wrong rates, the wrong amounts, the wrong terms........

 

usually you can contact the bank in the city of the school you are going to as they are more experienced and can point you to the right place. I did that in first year, and actually had the paperwork send over from London to my home town once we worked everything out.

 

Anyway - make sure you get prime, and make sure in writing it stays at prime during residency (not all do - nasty surprise!). Those are probably the main points I guess

 

Thanks for the advice rmorelan. That's a very good point. The BMO guy I spoke with today hasn't done any of these and he had told me the interest rate will go up during residency. I think he is probably not informed, so I will have to discuss with him again. TD says on their website that during residency (up to 7 years), interest stays at prime. I was leaning towards BMO, but this is a very important point to clarify.

[interviewee42014]

Has anyone worked with CIBC? Thoughts?

[Uli]

Hello All!

I'm definitely in need of this LofC! Am I to understand that access to it is fairly immediate? Also, can anyone speak to the benefit/disadvantage of paying interest as you go vs. the interest capitalizing during your studies?

 

Thanks:)

[LETSDOTHIS!]

Hey folks,

 

I went to every single bank with the exception of Scotia to figure out this LOC situation after reading all these posts. There is definitely some misinformation on this thread predominantly caused by individuals asking questions to bank representatives who have NO IDEA what they are talking about.

 

Briefly, regarding interest rates, the going rate is at 3% as mentioned, ie. Prime. One should refrain from accepting a LOC from a bank at any rate higher than this because it is simply not competitive. All the banks supplied 3% once I mentioned what their competition was doing. THEY WANT YOU! They want your interest payments so you have the leverage use it and make sure you get prime... speak with the right person though.

 

Scotia, I have been informed also has prime and 200k so that makes almost everybank. Regarding interest payments, you have to pay it back on a monthly basis or else your credit rating will drop. The only bank that lets you build it up is Scotia... which one can argue is nice for students but in reality it is simply hiding the fact that interest is accruing on interest... you'll pay less in the end with the other banks.

 

lastly remember that prime is a variable rate and is predicted to rise 2-4% (I believe more in the 2% range) within the next 3 years so make sure your calculations take that into effect.

[pubert]

Hello All!

I'm definitely in need of this LofC! Am I to understand that access to it is fairly immediate? Also, can anyone speak to the benefit/disadvantage of paying interest as you go vs. the interest capitalizing during your studies?

 

Thanks:)

 

Just to clarify some of this, the ABILITY to accrue your interest is a definite positive! It essentially opens up a significantly larger dollar value for you to draw funds from, and in reality it does not result in higher interest payments unless you choose to take advantage of access to the additional funds.

 

As a simplified example, if you borrow $50K on the first day of the first year at 3%, you'll owe $1500 in interest at the end of the year.

 

Interest Paid: If you borrow from your line of credit to pay your interest (as you most likely would since if you had another source of funds you shouldn't borrow), then you will be $51.5K in debt at the beginning of year 2 and you will only have access to $150K-51.5K = $98.5K. You will then be paying interest on $51.5K.

 

Interest Accrued: If your bank allows you to accrue the interest then you will owe $50K + $1.5K = $51.5K at the beginning of year 2. This is the amount you will be paying interest on. However, you only accessed $50K from your line of credit so you should have access to $150K-50K= $100K because you did not have to borrow $1500 to pay off the interest.

 

In both cases your liability at the end of year 1 is $51.5K, and this is the amount on which you will be paying interest. THE INTEREST AMOUNT IS THE SAME IN BOTH CASES. The difference is that the ability to accrue interest means that you have a larger amount of credit from which you can access funds ($98.5K vs $100K). By the end of med school if you chose to utilize the extra ~$1500/yr then it is true that you will pay more interest, but only because you borrowed more money. The best part of the interest accrual option is that it's your CHOICE whether you pay interest monthly or not, and choice is good!

[pubert]

Note: The above is assuming that your bank will not reduce access to your LOC based on the outstanding interest. Haven't heard of them doing that to a LOC before but check with your bank for clarification.

[LETSDOTHIS!]

- 50k x 0.03 = 1500 correct... unfortunately interest is compounded daily... you will owe more than 1500 at the end of the year with this calc.

- also don't forget that as you use your loan to pay off interest you owe more money on that loan each time.

- Bank of Canada released a statement that interest rates will be increasing in the fall... your calculations are fine to show an example, but people be aware that the current lending rate will not be YOUR reality and you should plan for a higher rate, (5% supplies room for error).

- One can argue that working in the summer to produce the funds to pay off interest monthly on whatever you spend from your LOC is also a great way to ensure interest doesn't hit you in 4 yrs.

- There is another assumption made in the calculations above... an individual who takes out 50k on Sept 1st 2011 will not owe >50k on sept 1st 2012... unless they used their LOC to pay off the interest from that period...something one should be warry of doing. Try to use other sources of funding to pay off the interest...interest on interest is not a good way to go when interest rates are about to rise.

- This whole convo is also a bit unrealistic as very few people take out 50k from their LOCs in the first year on the first day..and if you do... are you accessing government student loans, are you budgeting, etc?

[Uli]

Thanks for the information everyone!

[pubert]

I understand what you are saying and yes, my illustration was an oversimplification (as I pointed out). The point being made is that, ALL ELSE BEING EQUAL, you are better off having the OPTION to accrue interest. The fluctuations in prime interest rates are a moot point when comparing accrual vs monthly interest payments. Simple interest vs compound interest is also a moot point in the comparison. As my example illustrates, the liability at the end is the same (except if you borrowed more under the accrual option), thus the interest being paid on that liability is the same. If you are in a position that requires utilizing your LOC then it is a reasonable assumption that you will need to use your LOC to cover the interest payments. The only difference is that with the accrual option you have access to additional funds if need be. UofC students don't have the option to work during the summer, but nothing prevents you from paying down your interest under the accrual option if you do have access to other funds at better rates. There is no situation where being forced to pay the monthly interest gives you an advantage over having the option to accrue the interest.

 

With all that being said, YOU STILL HAVE TO PAY BACK YOUR INTEREST EITHER WAY.

[pubert]

Just heard from a friend at Dal that she successfully negotiated ("demanded" as she put it) a free Avion card to go along with her RBC student line of credit. Apparently her line was "you gave one to X so I want one too." If you're choosing RBC then you should definitely look into this... 15,000 bonus points and the $120 annual fee waived seems like a pretty decent deal for the bank that most people seem to be choosing anyways.