Investing LOC

[tim23]

Do any of the banks offer you a LOC without yearly maximums? if not do you think that it would be possible to negotiate for this?

I'd be interested in investing a portion of the LOC and make some money off interest while in med school, with the low interests rates it could really contribute to my fees.

Tim

[coastalslacker]

I'm with RBC and they give you access to 150k right off the bat. We had presentations from all the banks last year and MD Management (through National Bank) and RBC were far and away the best. I've thought of investing some of the money from my LOC, but I'm not convinced it would be worth it-you'd have to have a solid margin between what you pay in interest (prime) and what you're making off of your investments. I'm looking into buying a house right now and, if I do, I will be transfering a solid chunk of the mortgage onto my LOC, just because the interest rate will be better (prime).

[tim23]

If I go to U of M (cheap tuition) I'm looking to buy a car, keep some saved for tuition, use provincial student loan 1st year (apply before I buy car :) - or put it in my mom's name - is that legal?- so I am elgible ) use LOC to pay second year, get Manitoba bursary option 3rd and 4th years. I figure leaving enough to compound the interest payments, I should be able to borrow and invest $70K, I think this is called leveraging right? If I can get a medium risk investment returning about 10% thats a net gain of say 5% a year, giving me a profit of of about $15K through med school- not bad for doing nothing :)

any thoughts??

there must be someone out there who's done something along those lines, so far RBC is the only one i found to give it all up front, anyone know of any other bank that offer this?

[noncestvrai]

Well you would need to be sure (impossible) that your investments actually gives 10%/y, and that interest rates stay low...for the whole 4 years, which are not really long term, thus the possility of a high variance outcome.

But if you raise a good point (that I though about) but needing this money to travel and pay stuff deterred me from doing so. I'm still "young" and money now needs to be used, I will change my approach when I come to residency, when I will have no life...

noncestvrai

[medeng]

If I can get a medium risk investment returning about 10%

Thats a pretty big IF, at least with current market conditions... I'm no financial planner, so don't quote me on this, but here is my take on this idea: most mutual funds aren't performing 10% currently; GICs, Tbills etc definitely aren't; and most stocks that would currently get you 10% wouldn't qualify as "medium risk", (of course risk is a subjective, personal term, you might call them med risk!); coastalslacker's idea of a mortgage might actually be the best investment of your LOC. Obviously the interest is lower than a mortgage, it reduces one of your expenses (housing), and it is generally a good investment, with decent ROI, and fairly low risk (and esp. right now, although there is always the risk of a late 80s style housing crash, most analysts still seem to be fairly bullish on real estate)
I have definitely thought about doing this (assuming I get in...) one thing to keep in mind, you can't use a LOC for an "uninsured" downpayment. If you want an uninsured mortgage (= lower rates), you need to have cash (I believe you have to have 25% to be completely uninsured by CMHC, but there are other points where you have more/less insurance costs) that is free and clear of debts for the downpayment. That doesn't stop you from using your LOC to make a big payment on the mortgage, and reduce your borrowing costs, but it won't be counted as a downpayment per se.

[UWOMED2005]

Yeah, ANY investment has risk. And the last thing you'd want to do is lose money on such a proposition.

[tim23]

if I go to U of M I'll be living at home, with no real desire to move out. So morgage is kinda out of the question unless I wanna do some real estate and rent out a cheap place or something but that seems like too much work...

t-bills and GIC's are definetley out as far as I know. I have a friend who reccomended a few income trusts, they have fewer fees then mutural funds but are probably closer to high risk then medium risk.

I'm meeting with MD Managment this week, anyone give me a general idea of what you can ask for? it says up to $200,000 I'm assuming at prime, I have decent credit. Will they give it to me all at once like RBC or is there a maximum yearly allowance??

Thanks for the feedback guys,

Tim

[UWOMED2005]

Usually with MD Management it is year to year, and the $200,000 is only in exceptional circumstances. $30,000/yr X 4 yrs is more realistic, and they WON'T count gov student loans against you (like RBC would.)

I'd doubt wanting to invest the money would qualify as an "exceptional circumstance."

[tim23]

UWOMED2005: I'm scheduled to meet with someone from MDM and RBC this week, sounds like you have some experience with them. I've never really delt with banks in person, how much flexibility to negotiate with them do I have? I don't want to be rude but I want a good deal.

if I go to MDM/BMO etc... and say "RBC will give me this same deal, but there offering $150K upfront, can you match this?" is this rude? will i get anywhere?

lol i really want MDM cuz there credit card looks so cool :)

PS I don't have any gov student loans

[wattyjl]

UWOMED (or anyone else), can you clarify what you meant by RBC counting govermment loans against you? i had sort of assumed i would get an RBC LOC, and also apply for the integrated ontario/federal student loan (don't have any current student loan debts). if RBC finds out about the government loans will they change aspects of the LOC (amount, etc.)?

thanks for any info you can provide.

james.

[tim23]

....I was also planning on doing this for my first year atleast

[thatuvicguy]

With regards to RBC counting government loans against you, I signed with RBC and have been taking full student loans for several years. They definitely looked at my debt burden but this was almost a formality because even though I had a significant government loan debt it wasn't enough to effect my LOC approval. The only consequence was that they decided to give me $75,000 right away rather than $150,000. My rep said that this is mainly because I had a few credit blips (from my less financially responsible days) but won't effect my access to the full $150,000. She said I could just submit a form for an increase to the full $150,000 sometime next year.

Hope that helps,
thatuvicguy

[btrots]

hey guys.

I know absolutely nothing about the world of money (which you could say put me in this mess to begin with..hehe) so hopefully someone else will have some idea.

I currently have credit card debt, and while I believe I will have the majority of it paid off by the time med school comes along, it may still be up in the 2G range. Also, I have student loans on the order of around 8G. Is this going to screw me in any way when LOC time comes in August? (specifically the credit card debt). Obviously I was hoping that my first order of business could be paying off the remainder of my credit card debt with the LOC, and be finished with it. Also, for the first year at least, I`ll likely be living at home, so I won`t need huge amounts of cash outside of school costs.

Any suggestions/knowledge you guys have on this would be greatly appreciated.

cheers
b

[nby]

are you already accepted to med?

if so, get the LOC now and pay off the credit card completely, then slowly pay off the LOC the same way you would the credit card. This will significantly lower the interest you are paying. as far as your student loans are concerned, you should be alright, bankers seemed pretty willing to bend over backwards to accomidate me (finally was in the drivers seat in a professional relationship, it was weird).

Unless you never make payments, don't worry about your current credit.

[wattyjl]

theoretically, this should make them happy (current debt) - because it means you're instantly withdrawing 10K against your LOC, and instantly paying interest to them (not the CC company) for it. i am in a similar situation to you, and i'm also hoping it won't be an issue when i go to apply...

[btrots]

thanx guys, appreciate your thoughts.

yup, accepted at UofC

i`ve had late payments in the past, but I generally keep on top of them.

being in the driver`s seat financially...freaky...hehe...be a first for me too

b

[UWOMED2005]

With regards to RBC counting government loans against you, I signed with RBC and have been taking full student loans for several years. They definitely looked at my debt burden but this was almost a formality because even though I had a significant government loan debt it wasn't enough to effect my LOC approval. The only consequence was that they decided to give me $75,000 right away rather than $150,000. My rep said that this is mainly because I had a few credit blips (from my less financially responsible days) but won't effect my access to the full $150,000. She said I could just submit a form for an increase to the full $150,000 sometime next year.

That's true. But the last time I was with RBC (in 2002) they counted my $30,000 in OSAP against my eligible LOC. That's why I switched to MD Management. . . I got to 3rd year and realized I was going to spend out by RBC line of credit before I was even done!!

It sounds great to have the money up front, but realize eventually the bank will cut you off. You get great deals as a med student, but the banks aren't stupid!

A couple of other thoughts:

- Tim23: definitely you can play one deal off another. Don't expect TOO much movement though. . . many med students have done this in the past and things are the way they are partly for a reason. But I would highly recommend politely mentioning the fact you are shopping around and that some deals might be better elsewhere.

- btrots: DEFINITELY pay that credit card off ASAP. The LOC interest rate is SOOO much less than a credit card would be. Worse comes to worse, you borrow the money at the end of the year when your LOC runs out. . . you're saving probably 10 months of credit card interest rates.

Just remember, lines of credit are great tools. . . but you do have to pay them back!!

[wattyjl]

blank post, made a new thread as it was a different topic.

[Ian Wong]

Floating back to the top.

Ian