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Questions to ask when asking about LOCs


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I am thinking of visiting the major banks soon and would just like some input as to what are key things to ask the advisors?

 

I was also wondering, what is the typical amount of interest you pay for a LOC? Is 3% fixed considered high?

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I am thinking of visiting the major banks soon and would just like some input as to what are key things to ask the advisors?

 

I was also wondering, what is the typical amount of interest you pay for a LOC? Is 3% fixed considered high?

 

3% is right now prime, which is the lowest rate anyone is getting. That is historically incredibly low, and while we don't expect it to radically rise quickly (if we did, that includes the banking thinking it, the long term mortgage rate would be rising). Never the less the repayment timeframes are long, so don't calculate things having it at 3% forever.

 

Questions to ask - first I guess note that it is a highly competitive market so differences tend to be small. Little extras matter, and probably in my mind more important is whether you get good service - the entire point of banks giving you a LOC is a testing ground for both of you to see if you can do long term business. Banks are not making much money on LOCs - they can find a lot of other ways to invest the money - but they are very interested in your long term investments, banking, mortgages, and other financial services they will charge for.

 

You want to know exactly what the interesting rate and amount of the LOC are. You want to know when you will get access to the money (all at once, in installments etc)

 

You want to know if that interest rate is secure for the repayment period

 

You want to know what credit card they will give you - it will be a 5000 dollar one most likely but what additional perks will you get. Probably minor overall in the grand scheme of things but people are quite attached to the rebates etc.

 

You want to know how you can access them for their services. For instance at western we had one bank come to our school regularly which is quite convenient. As a side note just to give you an idea of how much banks want our business as staff often the banker will come to the hospital rather than you having to go to the bank. Just think about that for a second.

 

You want to know how the LOC's interest is pay off each month. Small thing but if it comes out of the LOC directly and automatically it is easier. The first bank I was with the interest would some out of the chequing account - which is annoying as I would have to remember when I am quite busy to move money there each month.

 

You want to know the entire repayment plan for it - when will you have to make principal payments - usually post residency but does that include fellowships? Is there also some time to set up your practise etc. You lose a lot of flexiblity when the LOC converts to monthly repayment status so knowing when can be important. You don't get paid right away as a doc - there is lag getting money from the goverment (months for your services - during which you have no income coming in but a lot of new expenses), and you actually have to set up shop etc, start getting patients....

 

What other services do they have for doctors down the line? Do they have services for setting up practices.

 

General questions - how many LOCs do they have (the more they have the more they are used to dealing with student's issues etc). If maternity/paternity leave is possible in your future you might want to ask how that impacts things. it is not that uncommon for students to actually take an extra year (percentage wise small but there are a handful each year for a variety of reasons).

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wow thanks for the detailed response! i never knew there are banks that allow you to access it all at once, I've always thought that you only get ~50k each year.

 

that being said there is almost no earthly reason to need more than 50K a year for the VAST majority of students - there is good reason to restrict it to 50K a year (a lot of discussion about that on the boards - my take is you will have 50K + provincial loans (so in Ontario 17K) + bursaries and any help perhaps from parents etc). If you live reasonably that is 10s of thousands more than you need.

 

everyone is different but controlling spending I think really will help in the long run. There are real dangers in over using the LOC - in particular cash flow problems in residency. For instance I know someone that spent most of their LOC - now has to be pay 650 or so in interest a month and there isn't much left in the LOC to work with for emergencies. No problem, because of course they will be a highly paid specialtist right? Will that is eventually - until then they earn about 3000K a month. Apartments can easily cost 1/2 that in Toronto, Ottawa.... suddenly with all the residency expenses - 2000 exams, 650 a year tuition, 200 a month in medical insurance, 100 for disability insurance perhaps, 1000 a year in parking at the hospital, costs of a car, those interest payments .......... very much so getting squeezed here. Now imagine what happens if the interest rate rises from 3 to 5 percent - which is much closer to the historical norm (we are in record breaking low rates here. Insanely low rates) - that interest payment jumps by 66% to a grand a month. You have 500 dollars a month left after rent and interest payments.

 

That could easily happen in the next 8-10 years which is the sort of time frame you have to consider here - medical school, plus residency, plus fellowship, plus finding a job/setting up a practice. That rate could go higher than that of course as well - we don't really know that far out. Maybe you think you want family medicine - but what if you find out you love something else?

 

Ha not to paid a lot of gloom and doom here :) For starters I ignored the tax you get back in years one and two which is well over 10K and a lot of that medical insurance is refunded as well. Still there are a lot of expenses as well I didn't go over - vacations, furniture, cell phone, up keep on clothes and electronics....

 

Debit can add a lot of stress in the mix - and the limits at the top are hard limits. Nothing to panic about but really I just don't understand why people care that much about some reasonable 50-60K a year limit. If you are getting near that limit there is an issue - that is a big warning sign unless you have unusual expenses (like a family you are supporting, with a stay at home partner, while you go to school - you have to expect to be need to be very careful in such situations). It is depressing seeing residents being forced to live like 2nd undergrads because their debit is maxed out and just trying to survive until they become staff:)

 

(also call me old fashioned - but the life skills in managing money are just that - life skills. They will help make sure your entire life is comfortable, instead of another one of those bitter doctors you hear about that cannot retire because they are income heavy but asset poor. Why, oh why isn't this stuff taught in high school rather than trigonometry or calculus I will never know. everyone needs to know this stuff).

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that being said there is almost no earthly reason to need more than 50K a year for the VAST majority of students - there is good reason to restrict it to 50K a year (a lot of discussion about that on the boards - my take is you will have 50K + provincial loans (so in Ontario 17K) + bursaries and any help perhaps from parents etc). If you live reasonably that is 10s of thousands more than you need.

 

everyone is different but controlling spending I think really will help in the long run. There are real dangers in over using the LOC - in particular cash flow problems in residency. For instance I know someone that spent most of their LOC - now has to be pay 650 or so in interest a month and there isn't much left in the LOC to work with for emergencies. No problem, because of course they will be a highly paid specialtist right? Will that is eventually - until then they earn about 3000K a month. Apartments can easily cost 1/2 that in Toronto, Ottawa.... suddenly with all the residency expenses - 2000 exams, 650 a year tuition, 200 a month in medical insurance, 100 for disability insurance perhaps, 1000 a year in parking at the hospital, costs of a car, those interest payments .......... very much so getting squeezed here. Now imagine what happens if the interest rate rises from 3 to 5 percent - which is much closer to the historical norm (we are in record breaking low rates here. Insanely low rates) - that interest payment jumps by 66% to a grand a month. You have 500 dollars a month left after rent and interest payments.

 

That could easily happen in the next 8-10 years which is the sort of time frame you have to consider here - medical school, plus residency, plus fellowship, plus finding a job/setting up a practice. That rate could go higher than that of course as well - we don't really know that far out. Maybe you think you want family medicine - but what if you find out you love something else?

 

Ha not to paid a lot of gloom and doom here :) For starters I ignored the tax you get back in years one and two which is well over 10K and a lot of that medical insurance is refunded as well. Still there are a lot of expenses as well I didn't go over - vacations, furniture, cell phone, up keep on clothes and electronics....

 

Debit can add a lot of stress in the mix - and the limits at the top are hard limits. Nothing to panic about but really I just don't understand why people care that much about some reasonable 50-60K a year limit. If you are getting near that limit there is an issue - that is a big warning sign unless you have unusual expenses (like a family you are supporting, with a stay at home partner, while you go to school - you have to expect to be need to be very careful in such situations). It is depressing seeing residents being forced to live like 2nd undergrads because their debit is maxed out and just trying to survive until they become staff:)

 

(also call me old fashioned - but the life skills in managing money are just that - life skills. They will help make sure your entire life is comfortable, instead of another one of those bitter doctors you hear about that cannot retire because they are income heavy but asset poor. Why, oh why isn't this stuff taught in high school rather than trigonometry or calculus I will never know. everyone needs to know this stuff).

 

While I understand your point, I don't think it is that unreasonable (unfortunately, it would be better not to, obviously) to spend close to 50K a year.

 

Take Mac (and I realize limits/year are higher for 3 year schools), tuition is 25 000. Rent, 12 000. Obviously that would be much less with roommates, etc., but I don't really want roommates and I think that is reasonable at this point in my life. Thats 37 000 right there without food, transportation, moving expenses, furniture (I live at home, I have nothing, haha).

 

Obviously there are still provincial loans, and being in less debt is better, but it's not THAT hard to spend close to 50 000 even while living reasonably. So I can understand why some people might want the option to access more than 50 000/year, in case of emergency.

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While I understand your point, I don't think it is that unreasonable (unfortunately, it would be better not to, obviously) to spend close to 50K a year.

 

Take Mac (and I realize limits/year are higher for 3 year schools), tuition is 25 000. Rent, 12 000. Obviously that would be much less with roommates, etc., but I don't really want roommates and I think that is reasonable at this point in my life. Thats 37 000 right there without food, transportation, moving expenses, furniture (I live at home, I have nothing, haha).

 

Obviously there are still provincial loans, and being in less debt is better, but it's not THAT hard to spend close to 50 000 even while living reasonably. So I can understand why some people might want the option to access more than 50 000/year, in case of emergency.

 

If all you had was the 50K absolutely - but you will have about 70K to pay with, not 50K (well most anyway will have - of which 10ish is grant money). And for mac a) the limit a year is not 50K, it is higher as they take that into consideration - max amount divided by 3 rather than 4 B) of course it is only 3 years long so the overall expenses are lower in the end. Similar logic I guess - if you are spending close to 66K + 22K from OSAP + plus bursaries/family etc a year and going to mac then something unusual is going on :) That is likely over 90K a year. What emergency would come up that requires 10s of thousands of dollars? Even if it did that is exactly why having a good relationship with your banker can help - as limits are potentially flexible.

 

Rent of 12K is quite normal for apartments - a lot of students (most?) pay less than than that of course (as you mention room mates, some just rent a room although I can see why perhaps getting an apartment is nice upgrade from UG. I comprised and got an basement apartment in London for 600).

 

Last thing I would is anyone to just be scrapping by - in EITHER med school or residency/fellowship. Just be reasonable is all I am saying - and those limits are generously above reasonable in my mind.

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If all you had was the 50K absolutely - but you will have about 70K to pay with, not 50K (well most anyway will have - of which 10ish is grant money). And for mac a) the limit a year is not 50K, it is higher as they take that into consideration - max amount divided by 3 rather than 4 B) of course it is only 3 years long so the overall expenses are lower in the end. Similar logic I guess - if you are spending close to 66K + 22K from OSAP + plus bursaries/family etc a year and going to mac then something unusual is going on :) That is likely over 90K a year. What emergency would come up that requires 10s of thousands of dollars? Even if it did that is exactly why having a good relationship with your banker can help - as limits are potentially flexible.

 

Rent of 12K is quite normal for apartments - a lot of students (most?) pay less than than that of course (as you mention room mates, some just rent a room although I can see why perhaps getting an apartment is nice upgrade from UG. I comprised and got an basement apartment in London for 600).

 

Last thing I would is anyone to just be scrapping by - in EITHER med school or residency/fellowship. Just be reasonable is all I am saying - and those limits are generously above reasonable in my mind.

 

Yep, all true. One thing I would add though is that some provinces don't get as many loans/grants as Ontario, so that's a factor.

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Yep, all true. One thing I would add though is that some provinces don't get as many loans/grants as Ontario, so that's a factor.

 

absolutely - Ontario is more generous for sure. That grant from OSAP really changes the strategy you should use to max things - by structuring things well I think I got an extra 30K from them that way. Not bad at all.

 

One other thing I should mention - IF you are spending more than 25% (the 50K) a year on your LOC early on just remember that the first year may have some new expenses as you set things up etc but your last year is the most expensive one. You have CARMS travel, electives, moving and setting up costs, a 1000 dollar exam, probably a vacation pre residency in the works, and the max interest you will be paying as your LOC will be used etc by then. There is a nice OMA bursary that can really help with a lot of this - although relying on it could be dangerous :)

 

anyway these are all nice problems to have to worry though etc as of course it means you are actually accepted into a program somewhere. Learn how things work, get people you can work with to support you and never be in the dark with how your finances are working. It is amazing how useful a basic financial planning book can be in setting you up for life.

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absolutely - Ontario is more generous for sure. That grant from OSAP really changes the strategy you should use to max things - by structuring things well I think I got an extra 30K from them that way. Not bad at all.

 

One other thing I should mention - IF you are spending more than 25% (the 50K) a year on your LOC early on just remember that the first year may have some new expenses as you set things up etc but your last year is the most expensive one. You have CARMS travel, electives, moving and setting up costs, a 1000 dollar exam, probably a vacation pre residency in the works, and the max interest you will be paying as your LOC will be used etc by then. There is a nice OMA bursary that can really help with a lot of this - although relying on it could be dangerous :)

 

anyway these are all nice problems to have to worry though etc as of course it means you are actually accepted into a program somewhere. Learn how things work, get people you can work with to support you and never be in the dark with how your finances are working. It is amazing how useful a basic financial planning book can be in setting you up for life.

 

Ha! Very true. I need to be accepted before I worry about this. :P

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  • 1 month later...
You need, need, need to talk to a medical loan specialist who regularly does locs.

 

So does it really make a difference what city they are in? I would think it's better to be in the same city of my schooling (Kingston) as it will be easier to contact them in case of emergencies and whatnot.

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So does it really make a difference what city they are in? I would think it's better to be in the same city of my schooling (Kingston) as it will be easier to contact them in case of emergencies and whatnot.

 

I'm pretty sure you can just contact the specialist in your area once school starts if there were emergencies.

 

I started to set mine up in city A, and then had to go home to family, so I had them transfer the forms to city B. But my school is going to be in city C. Not a big deal.

 

The only pro to having done it in city C, that I can see, is that you build a rapport with the person you're most likely to be dealing with in the future.

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Quick question, would I go to a bank for a LOC in my current home city? Or would I be better off going to the bank in the city I will be at school?

 

The only pro to having done it in city C, that I can see, is that you build a rapport with the person you're most likely to be dealing with in the future.

 

For instance, I just opened an LOC with a specialist Kingston where I currently live, borrowed some money (to survive for now and pay a couple debts because I'm broke ha), then had it transfered back to my home branch in Winnipeg (which will take about a week). The Kingston specialist got me in contact with a Winnipeg specialist via email so that I can deal with him in the future. But I'm essentially good to go.

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