Interest rate on LOC after residency

[Nikhila]

Hey everyone,

So I signed my life away yesterday (i.e. I signed my LOC agreement ;) ) with the Royal Bank and it was a 7 page agreement that I did read but I guess not carefully enough because I realized today that after residency, I am required to pay prime interest + 5%. I am quite pleased with the rest of my LOC agreement and the benefits that come along with it but I was just curious as to whether this is a similar interest rate charged by other banks to people after they have finished residency?

Thanks,
Nikhila

[Ollie]

I really hope that you meant prime + 0.5% and not 5%! I really think that you should demand that the rate stay at prime throughout. When I met with MD Management, the woman told me that a lot of banks raise the rate after residency, but MDM/National Bank maintains it at prime forever. I think that you have the option to cancel the LOC for a while after first signing up, so if they won't bend on this, maybe you should look elsewhere.

Hmm, I think I will double check my documents when I get home today!

[Nikhila]

Hey Ollie,

Sadly it wasn't a typo, it was prime + 5%... Thanks so much for your input though because I'm gonna have to do some thinking

[Ollie]

Holy cr@p! 5%! That's crazy! I will double check my LOC with MDM and let you know for sure their rate.

[Nikhila]

Hey again Ollie,

I just called my RBC representative and she said that the agreement that I signed is one for general students and that in fact the interest rate that I will pay after residency is prime.... Phew!! Now I have to get that in writing :\

Thanks for your help!
Nikhila

[Nikhila]

Hey everyone,

So I e-mailed my RBC representative about amending the LOC agreement to reflect that as a practicing physician my interest rate on the LOC will be prime and this was the response I got:

"Unfortunately we can't alter the agreement to something that may happen in the future. In the agreement however it doesn't state that we would charge you Prime + 5%, it says that at no time will the interest rate charged be greater than Prime + 5%.

Our packages for medical/dental students is currently priced at Royal Bank Prime. We can also offer practising doctors personal credit lines as low as prime however there is no guarantee that the program will be the same 6-8 years down the road.

I hope that helps clear things up for you. Give me a call if you have any questions."

Does MD Management give it in writing that the interest rate after we finish residency will be prime (or prime +1%, whatever the case may be)? If so, in your opinion should I rethink my decision to go with RBC?

Any suggestions/advice would be much appreciated.

Nikhila :)

[Mimicat65]

Just remember, once you are a practicing physician, most financial institutions will be clamouring to give you credit. You WILL be able to get a highly competitive rate just about anywhere, and will be able to pay off your medschool LOC if that institution is unwilling to keep a competitive rate. No worries ;)

[Ollie]

Hi Nikhila,

I have e-mailed the lady I'm dealing with at MDM about the post-residency interest rate. I had a look through my forms, and it didn't mention specifically about after residency. It just says that the interest rate is prime so I am assuming that this means forever. Hopefully MDM will clarify this for me. I will let you know!

Edit:

OK I just talked to my MDM rep. In her words she is "shocked" that RBC has this clause in their contract. She assured me that the MDM/National Bank LOC will never go above prime, and she had contacted NB about whether this is in writing somewhere, or if it can be put in writing. She said that often, when you complete residency, the banks will convert an LOC to a term loan (not sure of the lingo), and that allows them to raise the interest rate. Oh, the joys of the fine print.

Nikhila, I sent you a message to your inbox :)

[lex]

The National Bank won't negotiate payment rates until that time comes. It all depends on what field you go into after residency, what your family situation is like, where you're living, etc. On my forms, it was left blank. Basically, doctors are popular with the banks right now. They haven't always enjoyed that position though. It all depends on how "in style" doctors are with lending institutions at the time and what the person's individual situation is like. The MDM reps might not be up to date on this - it's best to call a specialist at the Nat'l Bank.

With the MDM/Natl Bank, the LOC can, upon approval, be extended after residency or it can be converted into a personal loan with an interest rate to be determined based upon the situation at the time. No different than RBC's. And remember, if anything changes, you can always switch.

[Ollie]

OK, now I'm even more confused :p I was specifically told by MDM that the LOC is not converted to a loan after residency. But you're right Lex, I should go straight to the source at NB. Time to go read some more fine print.


Edit:

OK I had a look at my MDM/Nat'l Bank documents. After residency, the LOC can either be converted to a personal loan, or maintained as an LOC. The interest rate can be "as low as" prime (but not necessarily prime), and the interest rate is determined by risk (ie if you have bad credit, you might not get prime). So it seems that this is pretty standard. I think the advantage with MDM/Nat'l Bank, is that you have your MDM rep as a go-between, between you and then bank. My MDM rep said she has found Nat'l Bank to be very accomadating and will to make special considerations for her clients.

[Ian Wong]

Floating back to the top.

Ian