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Mistakes Doctors make when Borrowing Money

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Doctors are usually busy with their practice – both personal and professional commitments leaving very little time to efficiently manage their finances. However, a little prudence with funds while availing a medical business loan (be it for renovating the clinic, purchasing the latest medical equipment or integrating technology into their practice) can prove crucial in influencing working capital stability and determining success of their practices.

For practitioners, whether experienced or otherwise, there is always a checklist of the most common mistakes doctors should avoid while availing a loan for doctors.

Some of the general mistakes doctors can avoid are:

-Approaching the wrong financial institution/lender

Availing a professional loan from a lender that may have approved a similar borrowing in the past (or due to it being in the vicinity) may not be a good idea all the time. Complacency could prove counter-productive in such a scenario, making the approval and disbursal process more cumbersome and complex. It is advisable to shop around before finally zeroing-in on a lender that has had prior experience serving medical practitioners and a suite of customised loans for doctors.

-Not selecting the appropriate financial instrument

A host of financial tools is available in the market today, with almost all of them promising to service the typical needs of doctors. However, knowing the drawbacks and balancing the pros and cons of each instrument is key to selecting the right mode of finance. For instance, while a credit card does provide instant access to funds, it often attaches a higher rate of interest.

It is good to opt for medical business loans rather than a credit card should the objective be to remodel the work space, expand practice or buy the latest medical equipment, scanners and monitors.

Opting for a generalized mortgage

Lenders acknowledge doctors’ unique personal and professional objectives and have come up with tailor-made loans that are packed with purpose-specific features and benefits. Therefore, availing a suite of loan for doctors comprising of personal and medical business loans up to Rs.30 lakhs; home loans and loan against property up to Rs.2 crore is always preferable over any other generalized mortgage.

-Ignoring the loan tenor

The tenor is one of the more crucial aspects of a professional loan, and paying due attention to it can help manage finances effectively while ensuring stable cash flow. Short-term goals such as funding a wedding in the family or going on a vacation should warrant a shorter tenor (12-96 months) while a longer tenor (up to 18 years) would fit better should the objective be to buy a new home or expand the premises of the clinic. Ideally, the tenor should be influenced by factors such as purpose of availing the professional loan for doctors and individual repayment abilities.

-Settling for far less than the best

Being in the medical profession, doctors often qualify for exclusive additional benefits while availing a loan. These include easy approval and money-in-bank guarantee within 24 hours, coupled with the Flexi Loan facility that allows easy borrowing from within the sanctioned limit and part pre-payment without incurring any extra charges. The interest is levied only on the withdrawn amount and not the entire loan limit. This further makes sure doctors can keep a tighter check on their finances while enjoying a principal holiday on EMIs for the initial part of the tenor.

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