As a Medical Doctor or Dentist, you have seen your debt bills rising year after year. At times it may seem that there is always a need to finance new equipment or make changes within your office that requires additional funding. With multiple loans for your practice you can get lost in repayment, often paying more than you need to. Debt Consolidation for Doctors and Dentists may be the best option for your practice, allowing you to lower your interest rate and reduce your monthly payment, leaving more money within your practice to allow growth and success.
Whether your practice is on the verge of bankruptcy due to excessive debts, or you are simply looking for a better way to manage your finances, you can get the help you need through debt consolidation. Just like any other business, you must first weigh the pro’s and con’s to debt consolidation to help determine if this is the right option for your practice.
What is Debt Consolidation?
Debt consolidation is the process of obtaining one loan which will pay off all of your smaller loans, leaving you with one monthly payment rather than several. The goal of debt consolidation is to get a lower interest rate and reduced monthly payment, as well as to help you manage your practices finances better and allow you to pay off your debts faster.
Secured or Unsecured Loans?
If debt consolidation is the best option for your practice you now need to determine if you should take out a secured or unsecured loan.
With a secured loan you use business or personal property to secure the loan through the bank. If you fall behind on repayment of the loan the lender can take the property you have used to secure the loan.
An unsecured loan is simply based on your promise to repay the loan. There is no property used to secure the loan that could be repossessed or foreclosed if you fail to repay the loan as promised. While an unsecured loan does not put your personal or business property at risk, it does often have a higher interest rate than a secured loan.
Debt Consolidation with a Secured Loan
When using a secured loan for debt consolidation you are faced with many different options. You can refinance your business real estate, taking out a second mortgage or take out an equity line of credit. You can also use other business or personal assets to secure a loan.
Pros of Consolidating With a Secured Loan
Secured loans typically have lower interest rates in comparison to unsecured loans, helping to save your practice money on interest payments. Along with the lower interest rate you will see your monthly payment will be lower and even more affordable. The interest you pay on this loan may even be tax deductible when secured with real estate. With a lower interest rate, and lower monthly payment you will be faced with less of a financial burden when paying back your practices debt.
Cons of Consolidating With a Secured Loan
The biggest risk with debt consolidation using a secured loan is that your business or personal property is at risk. If you can not repay the loan, you could lose your home, car, business and what ever asset you used to secure the loan.
The term of a secured loan is often longer than the current debt obligations you are choosing to consolidate. In the long run the total interest that you pay over the life time of the debt consolidation loan would be greater than the current interest on the individual debts, even if the monthly payment is lower.
Debt Consolidation Through Unsecured Loans
An unsecured loan for debt consolidation is commonly used, however they are much harder for any practice to obtain. Typically you will have to have a good credit rating.
Pros of Consolidating With an Unsecured Loan
The biggest pro to an unsecured debt consolidation loan is that your personal and business property is not at risk. Even though the interest rate may be higher than a secured loan, it may be less than is charged on your existing practice debts, lowering your interest burden and your payment.
Cons of Consolidating With an Unsecured Loan
An unsecured debt consolidation loan can be difficult to obtain if your credit is not the best. Many people who apply for unsecured debt consolidation are not approved. Interest rates to unsecured loans are often much higher than those for secured loans. This could make no difference in your practices monthly payment, offering no financial relief.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.