Best LOC?

[rmorelan]

Ok first off you have to be careful with the math here because the one factor not mentioned yet is taxes.

 

Most docs will have their money in their company so to take that money out it becomes taxable as personal income - we can argue about the tax rate but to make the math easier lets say the total tax rate is 45% on money beyond a 100K (I am being approximate here).

 

The lower the income you take out the lower your overall average tax rate is. In terms of earning money (but not living well) it makes sense to take out as little as possible and let the money grow in the company. Paying your loan off too fast actually is VERY expensive - you have to earn almost TWICE the amount of the loan to pay it off. Leave that money in the company and it can make a return for you, often higher than the low interest rate on the loan. If you pay it off slower, your effective tax rate can be lower and you actually save money.

 

My point is some docs take a lot longer than a few years to pay off the loan - they may not be lazy about it, they may actually be smarter than the rapid pay off people. So if some doc says they take 10 years to pay something off that doesn't mean they cannot do it faster

 

By the way the same logic works for mortgages.

 

Got to love economics

[DCX]

Ok first off you have to be careful with the math here because the one factor not mentioned yet is taxes.

 

Most docs will have their money in their company so to take that money out it becomes taxable as personal income - we can argue about the tax rate but to make the math easier lets say the total tax rate is 45% on money beyond a 100K (I am being approximate here).

 

The lower the income you take out the lower your overall average tax rate is. In terms of earning money (but not living well) it makes sense to take out as little as possible and let the money grow in the company. Paying your loan off too fast actually is VERY expensive - you have to earn almost TWICE the amount of the loan to pay it off. Leave that money in the company and it can make a return for you, often higher than the low interest rate on the loan. If you pay it off slower, your effective tax rate can be lower and you actually save money.

 

My point is some docs take a lot longer than a few years to pay off the loan - they may not be lazy about it, they may actually be smarter than the rapid pay off people. So if some doc says they take 10 years to pay something off that doesn't mean they cannot do it faster

 

By the way the same logic works for mortgages.

 

Got to love economics

 

Hello rmorlean, thanks so much for your input. Could you please provide me with some more context? I'm guessing the example you provided is for a family physician who is incorporated?? Sorry I do not have much knowledge with billing and taxes so I'm trying to learn more

[Starhivest]

I spoke to a med professional at RBC. I was offered 250k for school+residency, interest rate locked at prime till 1 year after residency, standard stuff.

 

I then asked about the platinum avion and whether I could waive the annual fee during school. The answer was no. People here have posted that they got the annual fee waived so how did they do it...?

 

Instead I was offered a VIP banking package (http://www.rbcroyalbank.com/products/deposits/vip-banking.html), at a reduced fee of $125/year for med professionals. I could get a platinum avion this way for free as a part of the package, but the $125 annual package fee cannot be waived, it's like I'm paying for it anyways. Did anyone manage a better deal than this?

[sirnoodleton]

That's a decent package.

[holiday1001]

I spoke to a med professional at RBC. I was offered 250k for school+residency, interest rate locked at prime till 1 year after residency, standard stuff.

 

I then asked about the platinum avion and whether I could waive the annual fee during school. The answer was no. People here have posted that they got the annual fee waived so how did they do it...?

 

Instead I was offered a VIP banking package (http://www.rbcroyalbank.com/products/deposits/vip-banking.html), at a reduced fee of $125/year for med professionals. I could get a platinum avion this way for free as a part of the package, but the $125 annual package fee cannot be waived, it's like I'm paying for it anyways. Did anyone manage a better deal than this?

best I've seen this year is one year's fee waived, which is what I had offered. I turned it down, and got the Visa Signature Rewards.

 

I went for the the no limits student banking one. I didn't see a need for a higher bank account. Mine comes with unlimited interac interactions, 12 money orders per year. My guy was kind enough to offer me cheques for free (just email him when I want more cheques). I already saved 88 bucks this way, for a total of 200 cheques, 100 from Debit, 100 from the LOC.

[sirnoodleton]

Hi guys.

Well, I did a bunch of research, and he is what I found.

I compiled a list of the TOP travel cards from a few of the best Line of Credit offers from financial institutions. Their LOCs are pretty much the same.

What might separate them is their credit cards.

 

Here is a link to a compilation of lines of credit that was done by UBC.

http://med.ubc.ca/files/2012/02/SLOC-2012-2013.pdf

 

Here is an excel spread sheet that compiles the credit cards.

 

Some are comparable to each other. Others are not.

Remember, these are the top cards, and I'm not even sure that the banks will offer them to us unless a parent co-signs.

 

Here it is http://www.weebly.com/weebly/apps/readDraft.php?draftId=105034883822802961&userId=8887647

[Mourning Cloak]

I love cash back cards. For straight up $$$ back, the best cards are:

 

For groceries and gas: MNBA SmartCash (5% back on groceries and gas x 6 months, and 3% thereafter; 1% on everything else, no annual fee)

https://mbna.ca/RWDapp/home?mc=SMCACN&locale=en_CA

 

For everything else: Capital One Aspire World Mastercard (1.5% back on everything, $100 bonus with first purchase, no annual fee). Yup, they give you $100 for using the card.

http://www.capitalone.ca/credit-card/rewards/cash-back-credit-card/

 

Free money! What's not to love?

[sirnoodleton]

Also a good redeeming schedule comparison.http://www.rewardscanada.ca/ccrewardcompare.html

[sirnoodleton]

I've decided to base which LOC I get entirely on whether or not the bank will offer me the best travel rewards card they have. I will push for them to waive the fees during medical school. Based on the web page above, I'm going to shoot for either NB, RBC, or BMO. The others seem to be less competitive. Most likely will go with either RBC or NB. BMO was giving me trouble when I tried to meet with them.

Cheers

[cnb88]

Make sure you check what happens after the 1 year-post-res time with prime. The credit card matters squat at that point. For example... I was quoted that after residency with RBC it jumps to prime+3.49%.... So if you were to finish right now, it would be essentially 6.5%... Which definitely adds up. Scotia on the other hand is prime for.... Forever actually. It stays at prime even after residency and forever after (as long as you have the loan). You also don't need to make any payments while in med, whereas with RBC you do. The percentage increase after res is really important.... In 6 years' time, prime won't be at 3%... It'll likely be around 5% or more... Meaning you'd be paying 8.5%+ interest on that RBC loan after res... That's almost as much as some of the low interest credit cards!! If you think you can pay off the loan before the end of res, then it might not matter, but really make sure you take that into account when deciding which bank to go with!

[future_doc]

The devil is always in the details.

[holiday1001]

Make sure you check what happens after the 1 year-post-res time with prime. The credit card matters squat at that point. For example... I was quoted that after residency with RBC it jumps to prime+3.49%.... So if you were to finish right now, it would be essentially 6.5%... Which definitely adds up. Scotia on the other hand is prime for.... Forever actually. It stays at prime even after residency and forever after (as long as you have the loan). You also don't need to make any payments while in med, whereas with RBC you do. The percentage increase after res is really important.... In 6 years' time, prime won't be at 3%... It'll likely be around 5% or more... Meaning you'd be paying 8.5%+ interest on that RBC loan after res... That's almost as much as some of the low interest credit cards!! If you think you can pay off the loan before the end of res, then it might not matter, but really make sure you take that into account when deciding which bank to go with!

the ONLY difference is that with scotia, they will automatically pay the interest on your LOC for you by taking money out of the LOC, while with RBC, you have to remember to put some money into your chequing account (whether it's from your own money or from your LOC). so in the end, as long as you remember to put in some money, it doesn't make a difference.

 

as for the repayment, RBC doesn't give you a firm repayment interest rate. it could be higher, lower, or a revolving line of credit vs repayment mode. they just say they can't guarantee you prime after 1yr after residency.

 

you might want to check with scotia that they say in writing that after residency, it will remain at prime.

[deeman101]

 

you might want to check with scotia that they say in writing that after residency, it will remain at prime.

 

You don't have to get this stuff in writing when you bank with scotia. Thats the nice thing about them. The advisors actually care about clients personally. And rightfully so considering how much business this med loc thing is. RBC and MDF just felt like typical bankers trying to snake me. Especially MDF...gave me the creeps. Until you bank with someone worth trusting its hard to know what I'm talking about. Lets just say my advisors had my back on multiple occasions even when they really didn't have to. They could've easily said "thats not a problem I can help you with" and leave me stranded but they never do that.

 

Anyways you might be in for a rude awakening with rbc down the road. Just sayin'. Only thing I like about RBC is you get access to the whole amount right away.

[holiday1001]

You don't have to get this stuff in writing when you bank with scotia. Thats the nice thing about them. The advisors actually care about clients personally. And rightfully so considering how much business this med loc thing is. RBC and MDF just felt like typical bankers trying to snake me. Until you bank with someone worth trusting its hard to know what I'm talking about. Lets just say my advisors had my back on multiple occasions even when they really didn't have to. They could've easily said "thats not a problem I can help you with" and leave me stranded but they never do that.

 

Anyways you might be in for a rude awakening with rbc down the road. Just sayin'. Only thing I like about RBC is you get access to the whole amount right away.

I mean, when you sign the contract, read the terms of repayment. the advisor can tell you one thing but when you to sign it, what it says is what you to abide by. or someone who is currently with scotia can post confirming that it is in their terms that repayment stays at prime. I repeatedly said to my guy, repayment is prime after residency? and he repeatedly said yes. but the terms say otherwise. he then said you might have different types of repayment, so the interest rate may vary based on that... so give it a thorough check!

[future_doc]

Only thing I like about RBC is you get access to the whole amount right away.

 

Yah,but who really needs it. I never touch my annual limit.

[deeman101]

I mean, when you sign the contract, read the terms of repayment. the advisor can tell you one thing but when you to sign it, what it says is what you to abide by. or someone who is currently with scotia can post confirming that it is in their terms that repayment stays at prime. I repeatedly said to my guy, repayment is prime after residency? and he repeatedly said yes. but the terms say otherwise. he then said you might have different types of repayment, so the interest rate may vary based on that... so give it a thorough check!

 

I wouldn't have signed with him after that. And I did read over my terms very carefully. I don't remember all that I read since it was 2yrs ago but nothing of what cnb said is really new or surprising to me. Other than the med loc often gets converted to a small business loc with very similar terms to help you set up your practice.

 

Yah,but who really needs it. I never touch my annual limit.

 

Yea even I don't. Despite my expensive vices, LOL.

[holiday1001]

maybe dig up the term and see if it promises prime rate for repayment?

[sirnoodleton]

I just had a meeting with RBC. I only asked for 200K, said I would get it for sure. THEN, came the more important questions about banking and credit cards.

 

I was OFFERED, without any coaxing, unlimited chequing account with a VISA Infinite Avion with 15,000 bonus points, no fees for the duration of medical school and wait for it...residency. Booya!

 

If NB can't match this offer, including the bonus reward points AND all the extras, I'll be signing with RBC. The reason I'd like to give NB a chance is that they have such good travel coverage. 60 days! and extended warranties of up to 2 years extension (RBC is 15 days and 1 year).. iMacs anyone? extended warranties are expensive. And travel insurance can be pricy too.

 

Anyways,

I think that's pretty much all I'm going to say about that. I will continue shopping around.

Cheers

[aquablue]

Has anybody ever had trouble with Scotia Bank?

 

The only thing so far that I see as a disadvantage is that Quebec student loans can only go through RBC, NB, Caisse, BMO and Laurentian which means having 2 bank accounts at separate banks. The specialist at Scotia also told me that if the total amount of government loan and bursaries exceeded 15k, they will deduct the excess amount from the LOC.

 

Is the RBC LOC comparable to Scotia's? I heard that RBC doesn't guarantee prime for residency and repayment (prime+some %).

 

Thanks

[Dr.Henderson]

Has anybody ever had trouble with Scotia Bank?

 

The only thing so far that I see as a disadvantage is that Quebec student loans can only go through RBC, NB, Caisse, BMO and Laurentian which means having 2 bank accounts at separate banks. The specialist at Scotia also told me that if the total amount of government loan and bursaries exceeded 15k, they will deduct the excess amount from the LOC.

 

Is the RBC LOC comparable to Scotia's? I heard that RBC doesn't guarantee prime for residency and repayment (prime+some %).

 

Thanks

 

RBC is comparable to scotia except no annual limit on funds, 250k vs 200k, and yes prime is guaranteed for residency + 1 year grace afterwards. Student loans have no bearing as far as I know, and shouldn't for any bank- someone with experience with scotia can speak on it. I'm with RBC.

[007antonymous]

RBC is comparable to scotia except no annual limit on funds, 250k vs 200k, and yes prime is guaranteed for residency + 1 year grace afterwards. Student loans have no bearing as far as I know, and shouldn't for any bank- someone with experience with scotia can speak on it. I'm with RBC.

 

I went with Scotia and they told me that my interest rate will ALWAYS be at prime (even after residency and till I pay off the LOC). Also they will readjust the LOC limit to 250k when they make that change in office headquarters (will not take long since all the banks follow one another). My student loans have no bearing on LOC.

[Starhivest]

Has anybody ever had trouble with Scotia Bank?

 

The only thing so far that I see as a disadvantage is that Quebec student loans can only go through RBC, NB, Caisse, BMO and Laurentian which means having 2 bank accounts at separate banks. The specialist at Scotia also told me that if the total amount of government loan and bursaries exceeded 15k, they will deduct the excess amount from the LOC.

 

Is the RBC LOC comparable to Scotia's? I heard that RBC doesn't guarantee prime for residency and repayment (prime+some %).

 

Thanks

 

I'm in the same boat: QC loan must be deposited into one of those 5 banks. I'm gonna keep just a chequing account in BMO from which I can transfer my QC loan deposits to scotiabank (loc, visa, etc)

[aquablue]

I'm in the same boat: QC loan must be deposited into one of those 5 banks. I'm gonna keep just a chequing account in BMO from which I can transfer my QC loan deposits to scotiabank (loc, visa, etc)

 

If you don't mind me asking, who did you contact for your LOC at Scotia? Because I'm starting to think my specialist is misinforming me.

 

Thanks

[holiday1001]

I just had a meeting with RBC. I only asked for 200K, said I would get it for sure. THEN, came the more important questions about banking and credit cards.

 

I was OFFERED, without any coaxing, unlimited chequing account with a VISA Infinite Avion with 15,000 bonus points, no fees for the duration of medical school and wait for it...residency. Booya!

 

If NB can't match this offer, including the bonus reward points AND all the extras, I'll be signing with RBC. The reason I'd like to give NB a chance is that they have such good travel coverage. 60 days! and extended warranties of up to 2 years extension (RBC is 15 days and 1 year).. iMacs anyone? extended warranties are expensive. And travel insurance can be pricy too.

 

Anyways,

I think that's pretty much all I'm going to say about that. I will continue shopping around.

Cheers

HOLY... gimme....

[cnb88]

Has anybody ever had trouble with Scotia Bank?

 

The only thing so far that I see as a disadvantage is that Quebec student loans can only go through RBC, NB, Caisse, BMO and Laurentian which means having 2 bank accounts at separate banks. The specialist at Scotia also told me that if the total amount of government loan and bursaries exceeded 15k, they will deduct the excess amount from the LOC.

 

Is the RBC LOC comparable to Scotia's? I heard that RBC doesn't guarantee prime for residency and repayment (prime+some %).

 

Thanks

 

So this is a reply to your question about the RBC loan, but it's also info and advice for everyone else too

 

I just signed with Scotia (after talking to RBC). Scotia offered me free banking (unlimited transactions), a free gold visa passport (took the momentum cashback instead), NO repayments during med/res/fellowship (any interest payments flip onto the LOC if that makes any sense), one year after med/res/fellowship the loan goes into repayment- at prime. My loan is guaranteed to be at prime for however long it takes me to pay it off. They only give you access to 50k/year (so max of 200k) (however if you only use 20k in year one, you still have access to the 80k in year 2 that would make up 100k) but they may negotiate on that. During res/fellowship, they'll give you 15k/yr to a max total of 275k. There were 2 major stipulations Scotia had: 1) that if you had a credit card with another bank, that it would be closed or that amount would be deducted from the total LOC (so I have a westjet MC with 1k limit- my LOC is for 199k instead of 200k) and 2) that the total of your student loans PRIOR TO being accepted for the LOC is less than 60k. If it's more than 60k, then they deduct the difference- ie 63k in government loans from your UG/masters would mean you'd only get 197k total. They said they don't care about student loans after the fact (ie during med) just what you come in with prior. Basically, they don't want you to be swimming in debt when you're done med, they want you to be able to easily pay it all off when all is said and done.

 

RBC: only offered me free student banking (25 transactions a month). I have an account there and investments, so I could have unlimited banking. If you want that and don't have investments, it would be $10.95, but they may have been willing to negotiate. After I told them the credit card Scotia offered, they offered me any card of my choosing for free (so I could have got the avion that people have been talking about here). It's 250k and they give it to you up front. They didn't mention anything about deducting other cards or student loans >60k. HOWEVER..... I was told that one year after res, the interest on the loan would be prime+3.49% (and the 3.49% fluctuates- it can be more or less). Just to put that into perspective- a person whose one year post-res grace period is up right now would be paying a total of 6.49% (prime is at 3% right now). It's not a lot atm, but when we're done res prime won't be at 3% anymore- it'll likely be at around 5% like it was prior to the recession (if not more). Meaning that you'd end up paying 8.49% (or more) interest on that 250k loan.

 

Now, I crunched some numbers (using resident pay from AB: http://www.para-ab.ca/agreement/collective-agreement/article23-remuneration):

 

Assuming I am in debt to the average amount (around 150k- I'd have a link to that number, but I don't feel like searching for that UBC document) this would be the amount I'd be able to pay back each year:

 

I budgeted 30k/yr for living/emergency expenses as a resident (living like a student but maybe a few more extras like a trip or 2 in there). This includes all fees/courses I may need to take. A first year resident in AB grosses 55k as of right now. Assuming because of school and various other things I have zero tax in first year because of tax credits etc, that leaves me with a decent 25k to pay towards my loan. My loan now sits at 125k after my first year of residency.

 

Second year, same expenses, except my pay is at 60k. Awesome. I'd probably have to pay some taxes now though... I'd be in the second tax bracket b/c I make more than 42k... so 15% of 42k is about 6k plus 22% tax on the remaining 18k... about 4k. Plus AB's tax of 10%- another 6k... So that's 16k in tax total off of the 60k... Let's say I have a bunch of deductions to take it down to 10k in taxes. That gives me a total of 50k after tax, minus my 30k living expenses... gives me 20k to pay down my loan. That leaves me with 105k after second year.

 

Now, if I just want to do FM, that's it. I have one year of grace before my loan would go into repayment with RBC. I'd have one year to pay off 105k of debt to avert prime+3.49% interest. If you go for a 3 year res, you'd be able to likely pay only another 20k or so off of your loan leaving you still with 85k to pay off. (please note I didn't factor in any accumulating interest in these calculations for ease of figuring, but it would be substantial. On one year of 150k, the accumulated interest would be $4500 at 3%).

 

One year after this, with both banks, the loan goes into repayment. You're likely not to be a super ballin' doc right out of res, so it's unlikely that you'll have the 85k paid off by the end of the year, meaning now you'd either be paying 3% with Scotia (assuming prime doesn't move) or 6.49% with RBC on whatever you have left. It may not make that much of a difference on first inspection... you might only have 50k on it after the first year (1.5k with scotia and $3245 with RBC) but there's a few things I haven't factored in in the expense calculations:

 

-marriage/wedding/honeymoon

-children/dependents

-emergencies

-babies/pregnancy

-down payment on a house/condo

-saving for retirement/investments

 

The down payment especially. In order to avoid going through CMHC for a mortgage (for a better mortgage rate/be able to go through banks/brokers), you'll need to have a 20% down payment... on an average home in Edmonton (since I've done all my calculations for AB), 380k (for a detached never mind attached), that would mean 76k you'd need to save up. Just to buy a house. And that 76k would be in addition to paying off the other 50k in loan you'd at minimum still have...

 

Which is why I chose to go with Scotia... it allows me to be able to save, at minimum (as all of my above numbers were ideal numbers) 1.5k a year in interest payments and thus be able to pay off my loan that much faster.

 

If you were planning on a longer residency, already married, and not planning to have kids, I could see where RBC may be a better option because the loan *may* be able to be paid off by the end of a 5 year residency if you continue to live like a student throughout.

 

 

Anyways... that's my long winded explanation of the quintessential difference between RBC and Scotia. The difference in interest can add up to a helluva lot- especially if you're saving up for a home, wedding, or baby or have other expenses that may come up. Also, since RBC only holds the prime rate until one year after res, if you have to do a fellowship, that interest will be at prime+3.49% when you aren't making the big bucks to pay it off.

 

 

I know I seem like I'm really pro Scotia here (which I suppose I am), but my point is: don't look at the minor details like credit card or little bonuses like that. Look at the big picture in the future- the interest. Go with whatever bank can GUARANTEE you IN WRITING what the interest rate will be once you're done med/res. If they won't disclose that to you, don't sign with them. (Obviously they can't guarantee what prime will be at, but they should be able to guarantee the prime+ X% whether X be 0, 1%, 2% or 3.49%). If they say that the +X% fluctuates, ask to see the historical fluctuations. Is it at its lowest now? What's the trend? Make sure you really inform yourself and read through the entire contract before you sign. If there's any information you want on that contract that isn't there, don't sign it because the banks only go by what's on that paper with your pretty little signature on it.

 

 

EDIT: Forgot to add (and can't find where I wrote it so it's going here) that the Gold Passport Visa that Scotia offers comes with 30 000 points. And you don't have to use it for travel, there's a lot of other things (gift certs, home appliances/extras, iPads, etc) that you can use it on too. Not just travel. Not sure if the Avion is the same.