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Captain Courageous

PSLOC at less than Prime?

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Just to clarify a few things here, for any casual readers who don't understand how these lines of credit work: 

  1. Prime is a floating interest rate set by the bank, so your prime rate will vary as the banks vary their prime rates. The recent trend has been increasing prime rates, and we're currently at near-record low prime rates. Historically, prime has hovered in the mid-to-high single digits, although it peaked at 22.75% back in 1981. 
  2. Lines of credit don't have interest free grace periods like your government student loans do. You will pay interest every month for every dollar you use from the moment you use it.
  3. ZPP appears to be confused about the terms of the lines of credit. No bank is going to make you set aside funds to pay the interest on your line of credit. Some banks, such as Scotiabank, will automatically roll your monthly interest into your line of credit. Other banks may make you manually transfer money into your account to pay the interest – but this can be done by taking money out of your line of credit and putting it back in. The end result is the same – the interest is added to your line of credit – but there may be less administrative work on your end with some banks. Ask your bank – I know for a fact that not all the banks ZPP listed as forcing you to do this will actually make you do this. 
  4. Payment-free and interest-payment-only grace periods are nice, because they give you greater flexibility and can decrease stress if you take a lower paying articling job (either out of necessity or desire). But keep in mind that even during your two-year payment free grace period, your line of credit will be incurring interest. It's best to plan to pay off your line of credit as quickly as possible post-graduation. 
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3 hours ago, BlockedQuebecois said:

 

  1. Prime is a floating interest rate set by the bank, so your prime rate will vary as the banks vary their prime rates. The recent trend has been increasing prime rates, and we're currently at near-record low prime rates. Historically, prime has hovered in the mid-to-high single digits, although it peaked at 22.75% back in 1981. 

Very important. A lot of students are young enough that they take the post-‘08 low interest environment for granted. I found it useful to stress-test myself and always assumed an interest rate of 5-7% when planning my repayment strategy. 

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7 hours ago, pzabbythesecond said:

The deals have changed tremendously since I got mine. But I know for a fact that that's not necessarily true.

Whatever facts you're alluding to, I'm going by the facts of what I've surveyed in the last 4 weeks, including face to face meetings with some of the bank advisors at RBC and Scotia. After comparing all six, Scotia was the only one to offer no payment for up to 6 years at prime.

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18 hours ago, pzabbythesecond said:

TD, RBC, BMO, and CIBC will all make you pay the interest every month while you're in law school.

This is what I said. I stand by it @ZPP

Edited by pzabbythesecond

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6 hours ago, BlockedQuebecois said:

Just to clarify a few things here, for any casual readers who don't understand how these lines of credit work: 

  1. Prime is a floating interest rate set by the bank, so your prime rate will vary as the banks vary their prime rates. The recent trend has been increasing prime rates, and we're currently at near-record low prime rates. Historically, prime has hovered in the mid-to-high single digits, although it peaked at 22.75% back in 1981. 
  2. Lines of credit don't have interest free grace periods like your government student loans do. You will pay interest every month for every dollar you use from the moment you use it.
  3. ZPP appears to be confused about the terms of the lines of credit. No bank is going to make you set aside funds to pay the interest on your line of credit. Some banks, such as Scotiabank, will automatically roll your monthly interest into your line of credit. Other banks may make you manually transfer money into your account to pay the interest – but this can be done by taking money out of your line of credit and putting it back in. The end result is the same – the interest is added to your line of credit – but there may be less administrative work on your end with some banks. Ask your bank – I know for a fact that not all the banks ZPP listed as forcing you to do this will actually make you do this. 
  4. Payment-free and interest-payment-only grace periods are nice, because they give you greater flexibility and can decrease stress if you take a lower paying articling job (either out of necessity or desire). But keep in mind that even during your two-year payment free grace period, your line of credit will be incurring interest. It's best to plan to pay off your line of credit as quickly as possible post-graduation. 

The RBC advisor I met with last week said they will debit the bank account monthly for the interest charged. Yes, you could withdraw from the PSLOC enough money to cover the interest payments. Most of the banks treat the PSLOC as a regular loan application, which means you have to submit all kinds of income and related information. Scotia, however, has the policy of trying to approve you first on your credit score, and it's just a one pager.

Yes, the interest still accrues on your account for the amount you've withdrawn. To my mind, not having to worry about paying the interest for up to 6 years is a huge weight off.

Edited by ZPP
clarity

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20 minutes ago, ZPP said:

Yes, you could withdraw from the PSLOC enough money to cover the interest payments

@ZPP Seems like you don't since you just agreed with what I said.

Edited by pzabbythesecond

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So I was at RBC a couple days ago and the rep there told me that the prime only rate was only for a certain number of schools and that since I won't be going to one of the schools on the list that the best they could do was prime +.5%. Does anyone think I'll be able to swing a deal for the prime only or should I start shopping around? (I will be at Robson Hall UofM next year in case that helps). 

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2 hours ago, SAReimer said:

So I was at RBC a couple days ago and the rep there told me that the prime only rate was only for a certain number of schools and that since I won't be going to one of the schools on the list that the best they could do was prime +.5%. Does anyone think I'll be able to swing a deal for the prime only or should I start shopping around? (I will be at Robson Hall UofM next year in case that helps). 

I would shop around no matter what, it’s the only way you can get a sense of what’s being offered.  Treat banks like you would a car dealership, if you really like the Ford F-150 for example but are not happy with the person you were dealing with at one dealership try another one, in this case go to a different RBC branch, and come prepared with offers from other banks.  I will say however that the list the rep is referring to has been mentioned many times in the past, and if I’m not mistaken only 4 or 5 law schools are on the prime only list (UofA, UofT are two of them that I remember).  Go to Scotia and try to get their PSLOC at prime, and if you still really want to go to RBC then having a competing bank offer you prime could encourage them to bring you down to prime.  Also try TD, they may not offer the most total credit, but they may be able to offer you prime.  

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On 4/15/2019 at 9:01 PM, TheSaskConnection said:

I would shop around no matter what, it’s the only way you can get a sense of what’s being offered.  Treat banks like you would a car dealership, if you really like the Ford F-150 for example but are not happy with the person you were dealing with at one dealership try another one, in this case go to a different RBC branch, and come prepared with offers from other banks.  I will say however that the list the rep is referring to has been mentioned many times in the past, and if I’m not mistaken only 4 or 5 law schools are on the prime only list (UofA, UofT are two of them that I remember).  Go to Scotia and try to get their PSLOC at prime, and if you still really want to go to RBC then having a competing bank offer you prime could encourage them to bring you down to prime.  Also try TD, they may not offer the most total credit, but they may be able to offer you prime.  

Yeah that was sort of my thought. Is it common for people to be given their PSLOC at prime when not on that list?

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