Funding Dental School (Uwo/schulich)

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[rmorelan]

OK my main question is whether or not making monthly interest payments vs. delaying those payments through Scotia would make a difference in the TOTAL AMT OF INTEREST I'm paying.

 

In this case, I have a fixed amount being provided by my parents monthly and wouldn't be using the LOC to pay off interest.

 

Here's my math which made me think I'd save more with RBC, initially. (Assuming prime is 2%)

 

SCOTIA:

At month 1: balance is $1000 and interest is $20 --> paid with LOC

at month 2: balance is $1020 and interest is $20.4

at month 3: balance is $1040.4 and interest is $20.808 and so on..

Total interest = 20 + 20.4 + 20.808 = $61.208

RBC:

at month 1: balance is $1000 and interest is $20 --> paid with real unborrowed $

at month 2: balance is $1000 and interest is $20

at month 3: balance is $1000 and interest is $20 and so on..

Total interest = $60

 

HOWEVER If I put the amount I would have paid in interest towards actual tuition/paying the LOC, then it looks like I'd save more with Scotia. I think this is what you guys are trying to explain to me? Not sure if this is right. It just made sense at the time I was doing it.

 

SCOTIA:

at month 1: balance is $1000 – 20 = $980 so interest is $19.6

(Minus 20 because the monthly interest I would have paid with RBC is now put towards paying off actual tuition/the LOC thereby reducing the overall balance of the LOC)

at month 2: balance is $980 + 19.6 – 20 = $979.6 so interest is $19.592

(Minus 20 for another monthly interest payment I would have made with RBC)

at month 3: balance is $979.6 + 19.592 - 20 = $979.192 so interest is $19.58384 and so on..

Total interest for 3 months = 19.6+19.592+19.58384 = $58.77584

 

I am probably making this way too complicated but I like to see the numbers. Is the above logic correct?! I feel like I'm off. I'd like to think that in the end, regardless of the plan I choose to go with, the total amount of interest I have to end up paying is the same.

 

you are

 

the simple truth is if you put the same 20 dollars against the LOC from either bank you will end up at the same place. The only different is minor differences due to timing (the earlier you put money into the LOC the smaller the interest - but within a month we are taking amount very small amounts and that doesn't apply to your example.)

 

there is a small logic flaw (a small one there) with the scotia example - to owe 20 in interest to RBC at the start of the month at your 2% per month interest (which is insane interest by the way - 24% a year or 8 times the actual amount rate we currently pay- actually a bit more with compounding, so you have enhanced any effect considerable) you would have had to OWE the 1000 for a full month as the rate is 2% per month. Owe the 1000 for a month, then you owe 20 in interest. Thus when you get to your scotia example the 1000 you are stating would again have to be OWED also for a month for the example to be the same - thus you would owe as well 20 in interest, which you just immediately pay off and thus are at the same spot. If you somehow get an example 20 dollars into the mix to actually start a month at 980 as you state then somehow you actually found 20 extra dollars to pay against the LOC (20 for interest and 20 for knocking it down to 980). That is cheating Mentally switch all your examples to be at the end of a month, and again to be exactly the same the 20 payment from outside must also only show up at the end of the month as well. You cannot get money at the start of the first month unless you get it again in BOTH examples (in your model you owe the tuition at the start of the month - again you cannot put 20 from your parents to it because you don't have that money yet until the end of the month).

 

as for your first example - of course as you know scotia is more as no where in the example do you actually pay anything to the LOC

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[thestar10]

LOL shit. I have no idea how I managed that 2% interest per month thing haha. Major oops on my part and extremely horrifying.

 

So to simplify things, the bottom line is that it makes no difference whether I pay interest now or later. It is simply a matter of convenience. I will be paying the same amount (or at least very very close to it) in the end.

 

Yes?

Correct. Its simply a matter of convenience and maybe a couple extra buck here or there but nothing significant.

[rmorelan]

LOL shit. I have no idea how I managed that 2% interest per month thing haha. Major oops on my part and extremely horrifying.

 

So to simplify things, the bottom line is that it makes no difference whether I pay interest now or later. It is simply a matter of convenience. I will be paying the same amount (or at least very very close to it) in the end.

 

Yes?

 

yes this is true

[( ͡° ͜ʖ ͡°)]

Correct. Its simply a matter of convenience and maybe a couple extra buck here or there but nothing significant.

 

yes this is true 

 

Awesome.

 

Thank you both for all your help. Definitely relieved some serious anxiety

[ottawaliquid]

The actual cost of the interest is really low.. especially when prime is at 2.85.

 

Either situation doesn't really make much of a difference. I did like that RBC released the whole amount at first whereas Scotia released it in chunks.

 

I also like both automatic payments and the automatic withdraws from the LOC so that I don't have to worry about being short on a mortgage payment or other expenses.

 

The interest on interest arguement against Scotiabank is pretty weak though considering how low the interest is IMO

 

Event if you had 100,000 outstanding the monthly interest would only be 237.50 and interest on that would amount to .56

[rmorelan]

The actual cost of the interest is really low.. especially when prime is at 2.85.

Either situation doesn't really make much of a difference. I did like that RBC released the whole amount at first whereas Scotia released it in chunks.

I also like both automatic payments and the automatic withdraws from the LOC so that I don't have to worry about being short on a mortgage payment or other expenses.

The interest on interest arguement against Scotiabank is pretty weak though considering how low the interest is IMO

Event if you had 100,000 outstanding the monthly interest would only be 237.50 and interest on that would amount to .56

Not just weak but actually doesn't exist ( it all boils down to,if you pay off part of the loan you owe less - not surprising )

 

One caution - the interest is insanely low at the moment. We have no,idea how long that will last. Plus even at a low value the monthly interest when you owe say 200k still adds up,to a significant hit to,the cash flow. Just be wise with the loc.

[ScotiabankMedsAdvisor]

Hi there, I'm located in Toronto and just visited Scotia + RBC regarding their LOC for dental students. However, I still have some questions about Scotia I hope you can help me with.

 

I'm someone who has funds available to pay off the monthly interest on my LOC and would actually prefer doing so.

 

When I went to Scotia, I asked if I could set up automatic monthly interest payments from my chequing account towards my LOC. The Scotia specialist said that this wasn't possible and that they charge the monthly interest  directly to the LOC (as in, I'd be paying interest on top of interest).

However, she said if I wanted to make monthly interest payments, since I get a monthly statement showing the interest and the due date, I could manually pay off the interest from my chequing account if I want to. This seems a little ridiculous.

 

RBC, on the other hand, said that their monthly interest payments are automatically charged from the chequing account (I will always have enough funds in it to cover interest). Does Scotia seriously have no way to automate this the way RBC does?

 

Thanks for your time!

The advisor in Toronto is correct in the fact that you cannot automatically pay the interest.  Our system is set up so that you can have minimum or full balance payments paid automatically.  Due to the fact that there is no payment due it is impossible to setup the interest to be paid automatically.  That being said you can set up a recurring transfer online which automatically transfers funds from your account onto the line of credit for a set dollar amount.

 

I agree with the posters that it is better to keep a minimal balance in your account however and pay down your line of credit.  This way in the long run you are paying lest interest.  Your account does not need to maintain a balance to have the fee waived so you shouldn't keep a large sum in the account.

 

If its a matter of your parents giving you funds on a monthly basis to cover the interest it is just a matter of transferring the funds onto the line of credit or depositing directly to the line of credit.

[FutureDDS2015]

Does anybody know of a good Scotiabank representative in Ottawa?

[ottawaliquid]

David Johnstone at the Terry Fox/Campeau Branch in Kanata knows a lot about dentists and the dental world.  He likely wouldn't do it himself as he is the branch manager but he would put you in touch with a good person for you.