Loans for Doctors – NeeBo Capital Blogs

It’s So Easy to Get Loans for Doctors

Doctors, by all accounts, have to pass through a huge number of tests and certifications before they can actually be licensed to practice. They have to spend 4 years in a good college, and then pass a test to go continue their studies. Then they have to spend another 4 years of medical school, after which they need to pass the medical board. Then they specialize.

But at least this profession has its rewards, and we’re not just talking about the satisfaction of helping people get better. We’re talking about ample compensation, and easy ways of borrowing money for whatever reason.

Benefits of Special Loans for Doctors

Here are some of the advantages doctors get when they’re trying to get a personal home mortgage loan:

The process is expedited. This is quite an improvement over the usual glacial loan process with banks.
Approval is almost automatic. Even recent medical graduates can get these special loans for doctors, despite the high level of student-loan debt.
Loans with no down payments are common. This is very hard to find these days, but it’s not a problem with doctors. For new doctors, loans for up to $500,000 may have no down payment requirements. A $1 million loan may require only 5% in down payment.

With just a year of post-residency, there may be no down payment for a loan of up to $650,000 and only a 15% down payment on $1.5 million.

There’s no private mortgage insurance. This is the insurance that a borrower pays to protect the lender in case of default. But doctors don’t need to get mortgage insurance, which lowers the cost of the loan considerably.

Why It’s Easy to Get Loans for Doctors

Haven’t you heard that rich people who don’t really need money are the people that banks love to lend money to? In the case of doctors, that’s absolutely true. Banks lend money to people who are able to pay their debts, and doctors fit that description well.

According to the Bureau of Labor Statistics, in 2012 primary care physicians get a median annual compensation of $220,942. Those who practice medical specialties receive a median annual compensation of $396,233. Those who specialize in anesthesiology received a median annual compensation of $431,977.

Now when you consider that physicians and surgeons as a group has one of the lowest unemployment rate among all jobs at only 0.8%, you begin to understand why banks feel safe lending to doctors.

There’s another bonus for banks too. They can require doctors to open other accounts with the bank as well. So when the doctor borrows money for their medical practice and for their home mortgage, they put their medical practice’s money in the bank, and they put their own personal finances there too. And when a new doctor is looking for a bank recommendation, the doctor who got the loan from the bank can recommend that bank to him.

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Loans for Doctors: Choosing the Right Lender

When it comes to borrowing money, doctors have it easy. This is true when they’re trying to get a home mortgage loan, or if they use the money for their medical practice.

But the problem is that doctors aren’t really business-minded for the most part. That means they don’t often know how to choose the best banks that offer the right finance tools with the most suitable terms. This is understandable, but that doesn’t make it right.

So if you’re a doctor, here are a couple of basic rules to remember:

Shop Around

If there’s one rule that doctors need to know about, it’s this: don’t just go to your personal bank or the nearest bank and apply for a loan. You have to talk to more banks. You have to shop around and interview banks. This may be a strange idea for you, but you have to accept the necessity of it.

It’s a bit like interviewing a partner for your medical practice, and in a sense this is actually an accurate description. The bank will really want to be your partner. They want you to borrow from them for your medical practice, they want you to use their bank to finance your company and for your personal needs, and they want you to get a mortgage from them. And when other doctors ask you for bank recommendations, they of course want you to mention their company.

So how do you choose a bank? First, of course you should try to see which ones offer the best terms. But you should also make sure that they have ample experience in lending money to doctors so that they’re already familiar with your industry.

And if you want to take out a loan that’s SBA-guaranteed, the bank should also be familiar in dealing with the complications brought by SBA lending.

Choose the Right Type of Loans for Doctors

Too many doctors seem to think that a line of credit—or a credit card—is the right type of finance tool for just about anything. But that’s not exactly true.

For example, a line of credit may not be the best tool when you’re paying for medical equipment. Perhaps you can pay for the equipment through an installment agreement. You may even ask if it’s possible to just lease the equipment.

The rule of thumb for medical practices is that a short term loan should be used for a short term need. Conversely, a long term loan that lasts for more than a year is better for your long term needs.

If you use a line of credit or a credit card for your business, you need to pay it off right away or else you will be slapped with finance charges and high interest rates. It’s a better idea to get a term loan that extends past the expected useful life of the equipment you want to get.

Borrowing money for your medical practice can really help you out. But if you don’t even try to educate yourself financially, then you may not get the maximum benefits from your loan. The loan may even hurt your medical practice.