5 Must Ask Questions Before Choosing Doctor Loan

With the popularity of medical tourism, affordable medical treatments, and the advent of new medical technology in India, most doctors are keen to spruce up their facilities and employ the best technology and staff in order to be competitive. When it comes to financing medical facilities, most doctors can easily qualify in order to avail a doctor loan but the best type of doctor loan you may get would depend on the kind of services and offers you would like to avail while borrowing the loan. It is recommended that you shop for the best terms and conditions applicable as each borrowing product comes with its set of positives and drawbacks.

There are 10 Lakh registered doctors in India. There are over 2 Lakh established hospitals and clinics in India as of 2015. However, the demands of technology and trained staff are always on the rise. Many established doctors are inclined towards expanding their scale of operation. Whether you are looking to spruce up your nursing home, avail ancillary equipment finance, or expand your eye centre or look to secure re-finance on existing or used equipment – the reasons for securing funds could be a myriad set of circumstances you may find yourself in as a doctor. Professional loans available to doctors help in hospital infrastructure finance, operating lease of medical equipment finance, expanding your medium or large private clinic, expansion of a pathology laboratory perhaps, or even balance transfer for existing term loans.

Let us bank on the future here for a minute. As a medical practitioner, most banks would like to gain your business by providing you with a loan amount or a line of credit that shall meet your needs. Therefore as a doctor, you must consider your borrowing needs carefully. Where exactly will the funds be utilized? What exactly is the loan for? How much funds do you really need? Majorly, there are 5 things that any doctor should focus on. These include Loan to value ratio, how much cash you need, interest rate, your credit score and monthly instalments, i.e., EMI that you will have to pay every month.  Let’s take a detailed look here:

5 Major things to consider before availing a doctor loan:

To kick-start the process, you will need to answer some questions that will help you select the right lending partner. For example, you can borrow a doctor loan from any bank or Non-Banking Financial Company (NBFC) but if you are looking for flexible terms and conditions, then you must go to a high-rated NBFC for availing your loan. Thus it’s worth your time to address and consider the below-mentioned points. Ultimately, selecting the best doctor loan and the lending institution is the goal.

doctor loan

#1. Loan to Value Ratio

A loan to value ratio defines the amount that you require for the purchase of the machinery or equipment vs. how much you will actually get from the financial institution. Loan to value ratio is crucial in any type of loan, especially doctor loans. Each lender has different criteria with regards to providing loans, and every borrower may have a varied limit for the down payment. Many doctors do not prefer paying a huge down payment as they want to keep maximum cash available to incorporate changes to the facilities, or use the cash as working capital and perhaps purchase new products. So, a loan to value ratio gives you the total percentage of funds you will get when you apply for a loan.

Some important questions that you need to answer here are:

  • What is the maximum cap?
  • Is it necessary to make down payment?
  • If yes, then how much should I pay?
  • Will furnish a down payment provide considerable benefits?
  • If so, then how much down payment will affect my doctor loan?

#2. Cash Required

When it comes to determining the right amount for closing a doctor loan, you have to consider all the costs associated with the doctor loan. Right from out-of-the-pocket expenses to working capital, it is essential that you take everything into consideration. Most of the practitioners while availing a doctor loan prefer to keep additional amount saved for the EMIs so they do not miss out on deadlines. To doctors looking for pre-closure, it is important that they verify the prepayment charges and look into any catch that may involve shelling out unnecessary funds.

Some important questions that you need to answer here are:

  • Charges such as origination fees, settlement fees, and so on
  • Do I have enough liquid assets if needed?
  • Do I have a plan to prepay before the tenor?

#3. Interest rates

In order to get the best doctor loan deal, it is important that you study the interest rates prevailing in the market. There are various financial institutions offering professional loans for doctors with different interest rates. The interest rate differs from lender to lender. When taking a loan, make sure to choose the lowest rate as it helps in repayment by bringing down the interest component in the EMI.

Some important questions that you need to answer here are:

  • What are the different interest rates available in the market?
  • Is the chosen interest rate type feasible?
  • If there is an increase in the interest rate, can it be afforded?

#4. Credit Score

Credit Score and Collateral Free loans go hand in hand since lenders need the guarantee from the borrowers for the repayment of the loans which is why they refer to the credit score of the applicant. Majority of the lenders approve loans of those applicants that have a credit score over 750 points. Borrowers that have a credit score below 750 points can apply for a Doctor loan with the help of the NBFCs as they offer loans to borrowers with a credit score up to 650 points.

Some important questions that you need to answer here are:

  • What is my credit score?
  • Does my credit score meet the lender’s requirement?
  • If yes, are the other terms suitable?

#5. Monthly Instalments

Once the loan is approved and sanctioned, it has to be repaid in the form of Equated Monthly Instalment (EMI). Your EMIs are calculated by analysing your monthly income and making the necessary deductions that you might need for your monthly expenditure. You can even lower you EMI amount by increasing the loan tenor.

Some important questions that you need to answer here are:

  • Is the EMI affordable?
  • What if I default on the EMI’s is there a way out?
  • If yes, then how can I come back on paying regular EMI’s?

After answering the above questions, you can get clearer view on the various loan possibilities you have in front of you. It would be wise to choose a lender that offers you a loan at comfortable terms and conditions.

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