Once you become an established physician, you’re likely bringing in a decent salary. The healthcare profession is one of the top-paying industries in the world — but that high paycheck doesn’t mean you won’t need a loan to reach your next goals.
As a doctor, you’ll find plenty of lenders happy to sign you up for their loan programs. The key is to understand what the terms include and stay away from those less-than-reputable contracts.
The best type of loan program depends on the reason you need to borrow money. Are you branching out and opening an office? Expanding your current clinic? Buying a home?
Whatever your financial goals are, here’s a breakdown of the different loan programs that you may qualify for.
1. Home Mortgages
The average doctor graduates medical school with substantial student loan debt. This can make it challenging to qualify for a traditional home mortgage. However, there are lenders available that specifically cater to physician home purchases.
These types of mortgage loans are typically obtained through private lenders who offer more flexible terms and less rigid qualification requirements than traditional lenders. Private mortgage lenders recognize that physicians have stable jobs with higher, consistent salaries but heftier debts along with their income. They also haven’t had as much time in the workforce to save up for a down payment.
To offset these concerns, physician home mortgages focus more on the income of the borrower than credit and savings. These lenders often offer up to 100% of the loan, which can be up to $1 million (or more if the borrower has a 10% down payment).
Unlike other loans that finance high mortgages, physician lenders aren’t out to “get you” with the fine print. They know that your career as a doctor makes you one of the most reliable, steady borrowers they can have, and they’re willing to give you lower financing rates and more generous terms to get your business.
Don’t be surprised if they require mortgage insurance and/or disability coverage, though. No matter how stable you are, accidents happen. If you can’t pay your loan, your insurance kicks in to protect the lender’s investment. Mortgage insurance is straightforward, but this guide by Physicians Thrive can help you navigate the types of disability insurance that will cover your bills if you can’t.
2. Equipment Financing
Medical equipment is often expensive, sometimes costing hundreds of thousands of dollars. But you may no sooner invest in one machine than another one hits the scene that’s essential to your practice.
Updating your equipment takes a lot of working capital. When that’s not possible, medical equipment financing can help. These loans are designed solely for healthcare professionals who need new machinery. Like a traditional loan, you receive the money for your equipment and then pay it back with interest.
Equipment financing is available through various programs that you may qualify for depending on your time in business and credit score. These include:
- Government funding through a Small Business Administration (SBA) medical equipment loan
- Unsecured lending through private lenders
- Equipment financing through private lenders (secured with the equipment you purchase)
Alternatively, you can use a business line of credit, which we’ll discuss next as a solution for building and expanding your office.
3. Lines of Credit for Private Practices
Whether you build your new clinic from the ground up or revamp an existing structure, starting a private practice takes funds. If you don’t have a hefty savings account to dig into, you may need to invest in a business line of credit.
These types of loans work like credit cards. You apply and get approved for a certain amount, and you access the funds any time you need them. The capital is available to use for anything that relates to your business.
Unlike a set loan, where you receive the full amount in one lump sum, lines of credit are helpful because you only pay interest on the funds you borrow.
Say you need $300,000 to get your business off the ground, but you don’t need the whole amount at once. With a loan, whatever you don’t use stays in your checking account, but you’re paying interest on all of it. With a line of credit, you have access to the full $300,000, but you only pay interest as you use the money.
This is a wise way to portion your money and avoid large monthly recurrent payments while you’re still growing your practice. If you use your funds sparingly, you won’t need to pay back the loan until you have a regular income coming in.
Conclusion
Loans get a bad rap, but they can be an essential part of the economy. As a physician, you may be offered many different loan programs, depending on what you’re trying to do with your money. These three are the most commonly seen in healthcare and should help you reach most of your financial goals.