physician loan or doctor loan

Students who graduate from medical school are often left in a precarious situation. As college tuition has skyrocketed over the past few decades, the requirements for becoming a doctor have remained the same. As a result, most medical students graduate from school with an average debt of $190,000. One-fourth of medical school graduates owe over $200,000. These graduates can't qualify for any standard loan with this debt. Banks created physician loans under exceptional circumstances to meet the unique needs of these new doctors.

The high risk of loaning to debtors.

To receive conventional loans, borrowers must have an excellent track record of repaying their debt. This history is compiled by many different agencies into an individual's credit score. This score could be better for the average student who graduates with significant debt. Banks wanted to devise a way to loan 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 products have been designed to lower banks' risk 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 - Banks 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 doctor's loan are significantly lower 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. Only those who qualify for these loans must make a small down payment of 0.5% on average.
3. Banks don't typically require borrowers' proof of private mortgage insurance (PMI).
4. Student loans aren't considered When checking a borrower's debt-to-income ratio.
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 return with future business and possible referrals. Major institutions see these loans as an investment.