Students who graduate from medical school are often left in a precarious situation. As college tuition has continued to skyrocket over the past few decades, the requirements for becoming a doctor have remained the same. As a result, most medical students are graduating from school with an average debt of $190,000. One-Fourth of medical school graduates owe over $200,000. With this sort of debt, it is impossible for these graduates to qualify for any standard loan. Physician loans were created by banks under special circumstances to meet the unique needs of these new doctors.

The high risk of loaning to debtors. 
To receive conventional loans, borrowers need to have an excellent track record of repaying their debt. This history is compiled by many different agencies into an individual's credit score. For the average student who graduates with significant debt, this score won't look very promising. Banks wanted to devise a way to loan to these medical professionals without using their conventional products. This thought gave birth to the physician loan. These loans can be acquired by individuals with no work history and significant student debt. These particular products have been designed to be lower-risk for banks than traditional loans.

Why do banks offer loans for medical professionals? 
Although it seems kind for banks to curate a particular loan for recent graduates from medical school, many people still wonder why corporations would make such a move. Banks recognized a potential opportunity in the medical field because of the industry's high-paying positions. They figured that the initial investment would be worth the future return when medical students were earning full-time salaries. Here are a few reasons why banks offer these medical loans.

Future Business - Medical professionals would be more willing to do business with a bank that had offered them a loan at the beginning of their career. This increases a bank's opportunity to have "high-earning" customers.

Referred Clients - Bank's often receive referred clients from current users. This is a great way to develop a rapport amongst the medical community.

Lower Default Rates – These default rates for a doctors loan are significantly lower default than other packages.

What are the criteria for these loans? 
Because these loans have been designed for a specific group of people, their requirements will be slightly different than other products.

1. These loans will only be made to the target group of doctors, dentists, veterinarians, and other qualifying medical professionals.
2. Those who qualify for these loans only must make a small down payment of 0.5% on average.
3. Banks don't typically require proof of private mortgage insurance (PMI) from borrowers.
4. When running a check on a borrower's debt-to-income ratio, student loans aren't considered.
5. Banks will accept contracts instead of W2 forms or paystubs as proof of income.

Banks are willing to take a risk with these loans because of the future payoff. They expect a doctor who received one of these loans to returning with future business and possible referrals as well. Major institutions see these loans as an investment.