A doctor loan is a financial product tailored to help medical doctors manage the financial aspects of their careers and personal lives, such as consolidating their practice, paying off medical school debt, or buying a home.
These loans acknowledge each doctor’s needs and come with benefits not typically found in traditional loans.
What makes them special is that physician loan lenders are happy to offer higher borrowing limits, competitive interest rates, flexible repayment options, and many different loan types due to physicians’ prospects for financial success.
We will explain how physician loans work, their types, and eligibility requirements to help you kickstart your medical career.
Key Takeaways
- Various loan options are available for doctors, each with specific eligibility requirements.
- Medical school loans include federal and private loans with different terms and benefits.
- Business and practice loans help finance, start, or expand medical practices.
- Personal and home loans provide financial support for doctors’ personal needs and home purchases.
Table of Contents
Types of Loans Available to Doctors
Depending on their needs, doctors have a wide range of financing options available. These options’ eligibility requirements vary depending on their type.
1. Medical School Loans
Your medical education debt is likely the biggest obstacle you will face as a future doctor. If you plan on paying your medical school debt, your two options are federal and private loans.
Federal Loans
Federal loans encompass direct unsubsidized loans and direct PLUS loans. The former have lower interest rates, origination fees, and a set per-year borrowing limit.
The latter have higher rates and fees but allow you to borrow up to the cost of attendance as determined by the school.
Both come with benefits, such as an income-driven repayment plan and the potential for loan forgiveness.
Eligibility Requirements
For direct unsubsidized loans:
- Be enrolled at least half-time at an eligible school.
- Complete the Free Application for Federal Student Aid (FAFSA).
For PLUS loans:
- Be enrolled at least half-time in a graduate or professional program.
- Complete the FAFSA.
- Do not have an adverse credit history.
Private Loans
Private loans are less strict with their requirements. They are offered by banks, credit unions, and online lenders.
However, pay attention to their credit score requirements and repayment options.
Some might come with higher interest and origination rates than you would expect, which can be especially risky if you are managing student loan repayments.
Eligibility Requirements
- Have an excellent credit score.
- Provide proof of enrollment in an eligible medical school.
2. Refinancing Loans
With refinancing loans, you are taking out a new loan to pay off an existing one or more loans to either get a lower interest rate or consolidate multiple loans into one.
Note that you may forfeit your federal loan benefits if you consolidate your private and federal loans into a new loan.
Eligibility Requirements
- Have a good to excellent credit score.
- Have a stable income, which will be verified through your employment data and statement history.
- Have a degree from an accredited medical school.
- Be a U.S. citizen or permanent resident.
3. Business Loans
Business loans target doctors who own a practice or wish to invest in one. They can be used by the physicians as they see fit, such as for hiring staff and buying equipment.
These loans come in three primary types: small business administration (SBA) loans, business lines of credit, and working capital loans.
SBA 7(a) Loans
These loans are ideal for fulfilling long-term funding requirements; they are co-guaranteed by up to 85% by the SBA, and you can obtain them through an SBA-approved lender.
The partial government guarantee ensures that you receive the most favorable interest rates and conditions available, with loan durations extending up to 25 years.
Eligibility Requirements
- A medical degree and valid medical license.
- A detailed business plan.
- Good credit score.
- Proof of your ability to repay the loan.
- U.S. citizenship or permanent residence status.
Business Lines of Credit
These loans work similarly to a credit card. They give your business access to a specific amount of funds you can use as needed, and you only pay interest on the money you withdraw.
Once repaid, that credit becomes available again.
They are ideal if you want to take advantage of emerging opportunities or cover unexpected costs without applying for a new loan each time.
Eligibility Requirements
- A good credit score.
- Proof of stable income and business revenue.
- Business financial statements.
Working Capital Loans
Working capital loans are short-term and designed to finance the everyday operations of your business.
They can ensure that your practice continues to operate smoothly despite fluctuating revenue and expenses by covering payroll, inventory, and such.
Since they are short-term, their repayment deadline can be no longer than a month. They also have higher interest rates compared to alternatives.
Eligibility Requirements
- A good credit score.
- Proof of stable income and business revenue.
- Business financial statements.
4. Practice Loans
You will need to consider the financial implications of opening your private practice.
Practice acquisition and startup loans, as well as equipment loans, are types of business loans designed to offer you the relief you need to get started.
Practice Acquisition Loans
These loans are for financing the purchase of an existing medical practice.
Loan amounts, interest rates, and repayment terms vary from one lender to another, but these loans typically allow you to apply for up to $5,000,000 and repay them through the course of about 15 years.
Eligibility Requirements
- Have a medical degree and valid medical license.
- Have a good credit score.
- Have a detailed business plan for the practice.
- Have experience in the field, where the exact requirement varies from one lender to another, but is typically 1–2 years.
Startup Loans
Startup loans scaffold you toward starting your new private practice. They will fund your lease, equipment, hiring staff, operating expenses, and so forth.
However, their maximum amounts are less impressive compared to acquisition loans, and they have higher interest rates due to the risk associated with new businesses.
Eligibility Requirements
- Have a medical degree and a valid medical license.
- Have a good credit score.
- Have a comprehensive business plan that details your new practice’s operations, market analysis, and financial projections.
- Provide proof of income or ability to repay the loan.
Equipment Loans
If you would like to purchase the latest equipment for your practice—office technology, diagnostic machines, and such—lenders will require you to prove why it is necessary, show your practice’s financial statements, and have a good credit score.
Loan amounts depend on the cost of the equipment, and the repayment terms are usually aligned with its useful life.
Since the equipment itself can be considered collateral, interest rates are fixed and are often lower than for other types of loans.
Eligibility Requirements
- Have a good credit score.
- Have a medical degree and a valid medical license.
- Provide proof of the equipment’s necessity for your practice’s particular operations.
- Provide proof of your ability to repay the loan.
5. Personal Loans
As the name implies, personal loans are taken for personal use.
They require you to have a good-to-excellent credit score and provide proof of stable income and U.S. citizenship or permanent residency.
There are two types of personal loans: secured and unsecured.
Both types vary greatly in terms of loan amounts, interest rates, and repayment terms, depending on your lender. So, shopping around and comparing options is a must.
Unsecured Loans
Unsecured loans are not backed by collateral, an asset such as your house or vehicle that lenders can seize if you fail to repay the loan.
Consequently, they are riskier to lenders and, in turn, less favorable to borrowers.
Secured Loans
If you pledge collateral, it becomes less risky for lenders to lend you money. As such, you get to enjoy lower interest rates and higher borrowing limits.
However, only secure a loan with a personal asset if you are certain you will be able to repay it. Otherwise, you will lose it!
For more information regarding this type of loan, check out our article on personal loans for doctors!
6. Home Loans
Physician mortgage loans vastly differ from conventional home loans. The benefits they provide doctors with include:
- No Down Payments: Physicians can typically secure a home loan without the need for a down payment.
- No Private Mortgage Insurance (PMI): Unlike conventional mortgages, physician mortgages do not require PMI, even with minimal down payments.
- Flexible Credit Score and Debt-to-Income (DTI) Qualifications: These loans are tailored to meet physicians’ unique financial situations.
- Lower Initial Interest Rates: Your physician mortgage lender will happily negotiate lower interest rates due to your potential to become a high-net-worth individual.
Click here if you plan on applying for a physician mortgage loan; our comprehensive guide will break down their ins and outs for you!
Plan Your Finances With PhysiciansThrive
As a medical professional, you have a bright future ahead of you. Loans can serve as vital scaffolding to achieve your goals.
However, they are a long-term commitment that requires thoughtful planning.
At PhysiciansThrive, we stand ready to offer the financial guidance you need to plan for the long term.
Contact us today to begin shaping your financial success!
