Author Topic: What's the best way to borrow $100k?  (Read 19221 times)

MustSam

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What's the best way to borrow $100k?
« on: August 02, 2013, 02:55:06 PM »
Hi gang,
Before I start getting face-punched left and right, let me explain why I would ruin my perfectly debt-free life with a 100k loan. Short answer: wife!

Long answer:
The best way to describe it is to get out of a scholarship obligation. If I don't want to pay up, I could go back to the company that paid for part of my education and make about $120K a year. I would be obligated to work there 3 years and its in a part of the world that my wife is very reluctant to go to. Or I could "buy myself out" with a $100k due up front. If we stay here after I finish school next June, I'd probably make a minimum of $160k with a range up to $185K starting. So I imagine it would be pretty easy to pay back the loan within a 2-3 years. We've gotten used to living on 70K (includes housing, which in CA is about $30K). Not mustachian by any stretch of the imagination but we're trying... Hopefully our expenses won't skyrocket when my salary goes up.

So - how to get the best loan possible? By best I mean easy, low cost, low interest. Credit score is upwards of 750. No other debt.

BTW, the total scholarship buy-out is $120k -  100K figure is the balance after I exhaust my medium term savings of about $20K.

Thanks friends,
Samuel

dragoncar

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Re: What's the best way to borrow $100k?
« Reply #1 on: August 02, 2013, 03:29:01 PM »
More info needed -- assets?  Company?  Degree?

rocketman48097

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Re: What's the best way to borrow $100k?
« Reply #2 on: August 02, 2013, 03:33:59 PM »
More info needed -- assets?  Company?  Degree?

=  Not to borrow it, ever, in the first place (face punch).  Sorry, not my style to be web-violent, but in this case you deserved it. 

arebelspy

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Re: What's the best way to borrow $100k?
« Reply #3 on: August 02, 2013, 03:51:19 PM »
Some other threads that may help:
http://www.mrmoneymustache.com/forum/ask-a-mustachian/which-option-for-short-term-credit/
http://www.mrmoneymustache.com/forum/ask-a-mustachian/cheapest-way-to-borrow-replace-student-loans/

HELOC is one option.  If you don't have assets, have no income, and you're just borrowing based on future earning power.. you're probably out of luck, aside from a personal loan (friends and family).

You may just have to suck it up and do the job to which you committed.
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AJ

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Re: What's the best way to borrow $100k?
« Reply #4 on: August 02, 2013, 04:00:57 PM »
You could just not work there AND not pay it. I imagine it would take a couple years for them to take you to court and garnish your wages - and by that time you might have been able to save up enough to pay it off (plus interest and court fees...) Or maybe with the possibility of having to take you to court on the table, your previous employer might arrange a payment plan for you? When my employer accidentally reimbursed too much of my education expenses they gave me a year to pay it back (though, in that case it was their mistake and not mine).

I think your best bet would be to complete the contract as agreed.

MustSam

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Re: What's the best way to borrow $100k?
« Reply #5 on: August 02, 2013, 04:11:16 PM »
thanks for the face-punches and for the links to other threads.
I'm a physician coming out of residency training. 
My income now is around 75K and next year will be 160K, hopefully more. Hopefully we'll be in a lower cost-of-living area.
No assets although my wife has a house in another state which is underwater so we probably won't sell it although generating about $200 / month after expenses.
Savings - retirement: 30K. investments  30K.

MustSam

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Re: What's the best way to borrow $100k?
« Reply #6 on: August 02, 2013, 04:25:48 PM »
More info needed -- assets?  Company?  Degree?

=  Not to borrow it, ever, in the first place (face punch).  Sorry, not my style to be web-violent, but in this case you deserved it.

Well, I haven't borrowed anything yet. Scholarship terms are either work for 3 years or pay back $120K (no interest).
Guess I could have declined the scholarship in which case I'd be looking at paying back $120K student loans WITH interest.
*ducks to avoid face punch from web-violent commenter*

Another Reader

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Re: What's the best way to borrow $100k?
« Reply #7 on: August 02, 2013, 05:44:00 PM »
If I understand correctly, you signed a contract with a hospital or some other organization in which they provided you $120k in scholarship money and in return you committed to work for them for three years after you finished your residency.  They have the expectation of you carrying out your commitment, although they have given you the out of paying off the scholarship amount.

From what you have said, in your shoes I would suck it up and honor the commitment.  The hospital or organization apparently needs your services so desperately, they were willing to make this deal to get you.  You and your wife agreed to this when you took the scholarship. If your wife does not like it in the VHCOLA California location, that's too bad.  If I were hiring doctors for my agency somewhere else and I found out about your failure to follow through, I would cross you off the list of candidates as unreliable and dishonorable.  I would not want you on my staff.

aj_yooper

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Re: What's the best way to borrow $100k?
« Reply #8 on: August 02, 2013, 05:55:11 PM »
You and your wife are each tethered by obligations.  I would sell her out of state underwater house before it turns into a cash flow loss too.  You don't need the financial and tort liabilities of being a landlord.  Then, negotiate with your scholarship grantor for a higher salary; with a $40k debt forgiveness each year, and a bump in the salary, you have a clean debt sweep in 3 years, and you'll be on your way.  For me, obligations matter.

footenote

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Re: What's the best way to borrow $100k?
« Reply #9 on: August 02, 2013, 06:09:40 PM »
You and your wife are each tethered by obligations.  I would sell her out of state underwater house before it turns into a cash flow loss too.  You don't need the financial and tort liabilities of being a landlord.  Then, negotiate with your scholarship grantor for a higher salary; with a $40k debt forgiveness each year, and a bump in the salary, you have a clean debt sweep in 3 years, and you'll be on your way.  For me, obligations matter.
+1

dragoncar

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Re: What's the best way to borrow $100k?
« Reply #10 on: August 02, 2013, 06:27:48 PM »
I don't think the job is in a high col area-- they wouldn't need to entice people there.  I agree you probably should suck it up.  Or ask you wife to supply the 40k/year to cover her geographic preference

MrsPete

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Re: What's the best way to borrow $100k?
« Reply #11 on: August 02, 2013, 07:17:51 PM »
Three years isn't a lifetime.  Honor your commitment, then you can walk away with your head held high. 

Furthermore, I know nothing about the medical field, but both my husband and I work in fields in which, if we were to walk away, that would hurt us in future job endeavors.  People talk, word gets around, and walking away from a commitment for no good reason would be held against us. 

Abe

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Re: What's the best way to borrow $100k?
« Reply #12 on: August 02, 2013, 07:42:12 PM »
Hi, fellow resident here! One of my friends received a full scholarship for med school and is obligated to work in our home state (we are in a different state for residency right now) for four years.  He was thinking about a similar course of action, but decided it would take something that is an honor into a blemish on his CV afterwards. I agree with the others, it may look bad when applying for a job if you renege on the service obligation.  The three years may not be fun, but it will be risking too much for the rest of your career to do this. If it was something related to a family member being ill or other mitigating factor then it would be fine. However, personal preference probably won't be sufficient excuse.

Also, there's the logistics of getting a $100k loan when you are have a house underwater.


olivia

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Re: What's the best way to borrow $100k?
« Reply #13 on: August 02, 2013, 07:47:42 PM »
If I understand correctly, you signed a contract with a hospital or some other organization in which they provided you $120k in scholarship money and in return you committed to work for them for three years after you finished your residency.  They have the expectation of you carrying out your commitment, although they have given you the out of paying off the scholarship amount.

From what you have said, in your shoes I would suck it up and honor the commitment.  The hospital or organization apparently needs your services so desperately, they were willing to make this deal to get you.  You and your wife agreed to this when you took the scholarship. If your wife does not like it in the VHCOLA California location, that's too bad.  If I were hiring doctors for my agency somewhere else and I found out about your failure to follow through, I would cross you off the list of candidates as unreliable and dishonorable.  I would not want you on my staff.

I have to agree with this.  You signed up for the program and took the money, so go do your part to pay it back.  I honestly don't see how you'll get a $100k loan anyway with no assets. 

If it's absolute torture after you start, then maybe consider buying your way out.  But I agree with some other posters that it may be a blemish on your employment history if you walk away before your commitment has been completed.

SwordGuy

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Re: What's the best way to borrow $100k?
« Reply #14 on: August 02, 2013, 07:57:30 PM »
If I understand correctly, you signed a contract with a hospital or some other organization in which they provided you $120k in scholarship money and in return you committed to work for them for three years after you finished your residency.  They have the expectation of you carrying out your commitment, although they have given you the out of paying off the scholarship amount.

From what you have said, in your shoes I would suck it up and honor the commitment.  The hospital or organization apparently needs your services so desperately, they were willing to make this deal to get you.  You and your wife agreed to this when you took the scholarship. If your wife does not like it in the VHCOLA California location, that's too bad.  If I were hiring doctors for my agency somewhere else and I found out about your failure to follow through, I would cross you off the list of candidates as unreliable and dishonorable.  I would not want you on my staff.

+1

Wanting to reach financial independence early is not a license to be a dick.

MustSam

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Re: What's the best way to borrow $100k?
« Reply #15 on: August 02, 2013, 09:06:28 PM »
If I understand correctly, you signed a contract with a hospital or some other organization in which they provided you $120k in scholarship money and in return you committed to work for them for three years after you finished your residency.  They have the expectation of you carrying out your commitment, although they have given you the out of paying off the scholarship amount.

From what you have said, in your shoes I would suck it up and honor the commitment.  The hospital or organization apparently needs your services so desperately, they were willing to make this deal to get you.  You and your wife agreed to this when you took the scholarship. If your wife does not like it in the VHCOLA California location, that's too bad.  If I were hiring doctors for my agency somewhere else and I found out about your failure to follow through, I would cross you off the list of candidates as unreliable and dishonorable.  I would not want you on my staff.

+1

Wanting to reach financial independence early is not a license to be a dick.


Thanks for the responses guys but this is getting off-tangent. Apologies for not describing my situation accurately. I think my use of the 'word' scholarship is misleading.

Let me clarify: an organization gave me a $120k loan with the option to pay it off in cash or by 3 years of service. It is not a scholarship. It was not a competitive process. I did not deny anyone an opportunity by accepting this loan. There is no 'obligation,' just that most people would rather work it off than find a way to pay the loan back all at once. By offering the money up front, they're hoping you'll work for them, but they are not offended or even that concerned if you wish to repay the money instead. They do not 'blacklist' you or report you to the medical board or other repercussions (unless you actually don't pay them at all) In fact, when I discussed paying off the loan, the medical director was very supportive and said he'd probably do the same in my shoes. He actually said it would be good for them to have connections in US institutions for collaborations in terms of research.

This contract was long before I met my wife (who is not from my home country) and we started our family so certainly things have changed. A couple of private hospitals I have interviewed at, who are familiar with the situation, have offered pretty generous start-up bonuses to cover part of this amount (up to $25K) but I'm actually sticking to more of a research job, which is generally at universities so much less pay overall and none of the bonuses.

Hope that helps. Trust me, if this was all about becoming FI, and not honoring the obligations over the last 15 years, I would not be looking for a research job paying half the market rate. Heck, I would not have spent the last several years doing extra residency and research training when I could have finished my 3 years (which actually pays more) and moved on to a private practice job.

MustSam

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Re: What's the best way to borrow $100k?
« Reply #16 on: August 02, 2013, 09:51:13 PM »
Also, I am not doing something unusual in terms of paying off this contract. Amongst people who are on a similar contract as me with this organization, the breakdown of paying off contract vs working it off is 30/70. How do the 30% afford it, you may ask. They get hired into private practice groups (in my home country) who pay part of the amount up front and offer a low interest loan for the remainder.

arebelspy

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Re: What's the best way to borrow $100k?
« Reply #17 on: August 02, 2013, 10:41:49 PM »
While I still think you should honor the commitment, since enough people have mentioned that and you seem to disagree, moving on to the practical: you won't be able to get an unsecured personal loan for six-figures with that income and no assets.

You already know the answer, because others have done it: sign up for a private practice group that pays part of the amount up front and offers a low-interest loan for the rest.

If you are unwilling to do that because you want to do the research thing, and don't care so much about the obligations, go ahead and default on it, switch to your new job, and start saving like mad.  Pay it off afterwards.

I'm not a fan of that strategy, but it's one of the few options you have if you don't want to work 3 years for them, nor do you want to go into a private practice that will help you pay it off.
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BigHammah

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Re: What's the best way to borrow $100k?
« Reply #18 on: August 02, 2013, 10:45:43 PM »
New to this forum, but maybe I can help - so let's get to the nut of your problem.

As I understand, you can go work for your lender to the tune of 160k per year per three years. You said 120k, but we need to add in the 40k per year loan forgiveness for those first three years to the value of your compensation.

You can also go work somewhere else for 160k a year (yes I know you said that's the starting range, but there ain't no guarantees in life & who knows what your negotiation skills are, so let's stick with the base figure).

So where we're at is that your job will start at a market rate of 160k regardless of where you go, which should make your decision easier.

Let's address the other facts first, since no item stands alone - everything must weave into a tight badass web if you're truly on the path to FI.

Start with the savings (20k). Under no circumstances do you start paying down this debt with the small amount of change that you clearly need, as it's less than four months of your current living expenses and you apparently have no other (non-usury) means of financing.

Second - the wife. She needs to be on the same page with you RE:FI. If she's not, then fuggetaboudit. Where are her earnings? What does she do? What's yours is hers & vice-versa, so it's hard to give advice without the involvement of the other half.

Third. The underwater house. Do the math. How long do you want to keep it? Is there any emotional attachment on the part of the wife? Hint - there can't be. It's now an investment. Will it make you money? ROI? Need more input on this too....moving on.

Fourth. Your current situation. Seriously 70k to live in Cali? Fix that asap. Since you're renting, shouldn't be hard to find cheaper housing. I've lived in two of the world's most expensive cities and never made more than 50k a year. Don't say it can't be done. Those people that cut your lawns, serve you food, clean your house, & do all those other service jobs? They live somewhere near by, not all of them commute one hour and not all of them live in the ghetto. Find out where they live and emulate their lifestyles. I lived in some seriously dodgy neighborhoods & never had a problem. No one thinks twice about someone that looks and acts like they belong in the neighborhood. I drive the same pos vehicles, wear the same second-hand clothes & drink the same cheap beer. No one knows what I have in my bank account. Hell, read the Millionaire Next Door. Some of my much older more frugal neighbors (plumbers, electricians, roofers) probably have a lot more of a stash than I do (I've looked up their homes, no mortgages). Okay, I'm rambling...point is, TRY HARDER to cut the living expenses to below 30-40k.

Back to the loan situation. I think logically, so let's assume first that you cannot find a way to come up with the loan money. This one's easy - you work off your debt. So you're at 160k and you have to move (since you stated the place where you have to work off your loan is somewhere else). Not so much of a bad thing, since you get a chance to reset (and we don't know the cost of living of your new area, so that should be a factor too). Wife not liking it? Not so much a factor unless she is a major earner herself, otherwise, for better or worse, richer or poorer, etc....she needs to deal with the new location as it seems the default most-likely option. One of my best buds spent three years of his life in Iraq & Afghanistan. Did he want to go to those places? Of course not. Sometimes we make choices that have consequences, and as they go yours aren't so bad.

Option two, you find the money & go where you want. At 160k a year it's a wash. You still need to set up shop & get those expenses below 40k a year. Let's assume you do - and also that 60k of your income goes to taxes. You're still stashin' 60k & 60% of your income. Not bad for a starting point. Then you work, your salary goes up, expenses go down and you're up into the 70's and and you're golden in less than 10 years.

Where to get the money - you're looking for an unsecured loan...well it's secured by your future earnings. You could get a life-insurance policy and try to convince a bank or investor to give you a loan. If I had the cash you needed I probably would in exchange for a good interest rate (think 25%+) and being named as the beneficiary on your life insurance. I also know people that could do the same thing, but trust me you don't want to default on their loans. In any case, such a loan is high-risk. Other things could happen to you hypothetically that result in you not earning but remaining alive...don't want to go down that path, because it's dark. I don't know any legitimate places that are going to give loans of that size without collateral. The only thing in the US similar is student loans, but that's a different animal altogether because of their non-dischargeability in bankruptcy (as in never being able to shake them as long as you live).

Seems like your only options are getting someone to put up some serious collateral or stick with the debt-workoff job. Then picking where you want to live, and paying down that loan yesterday while working hard to put some serious MMM principles in action.

Thoughts?


« Last Edit: August 02, 2013, 10:53:32 PM by BigHammah »

MustSam

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Re: What's the best way to borrow $100k?
« Reply #19 on: August 02, 2013, 11:10:33 PM »
@arebelspy - you've hit the nail on the head in terms of options. The type of employers who can afford to fund me out of this are not the ones I particularly want to work for. That's why I'm basically asking about the feasibility of loans. 

@BigHamma- thanks for the detailed analysis!! Let me answer your questions first re: wife. She's on board. She could make 80k working full-time but she is at home watching the 2 year old and pregnant with another. We are both hoping to sell the house as soon as it covers the outstanding loan mortgage. We did manage to refi it last year, so at least its cash flow positive now but not by much.
Living in the Bay Area is expensive - can't wait to move out actually. 30K annual rent. Still, I'm sure there are people living on below 50K. Could find a new place and get out, but I can't even find one bedrooms in east palo alto (the most affordable suburb within 30 minutes of work) for less than $1700. We could move and save $8K over the next 10 months I guess. 
Never thought about naming someone else has a beneficiary on a life insurance policy as collateral - that sounds like you're asking for an early death!

BigHammah

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Re: What's the best way to borrow $100k?
« Reply #20 on: August 02, 2013, 11:31:52 PM »
Don't know much about the Bay Area & rentals, but know people are on here from there and find a way to make do. Knowing you have a family of four obviously makes it harder but at those rental rates you have to start thinking about doing crazy things like renting an apartment an hour away and bicycling/busing in. In most major metros an hour away really means 20miles because we americans measure time in how long it takes to sit in a car in traffic on the way there.

Like I said, there are people in every major metro making peanuts, many with families & more kids making do on $10-15/hr jobs and feeding the whole family. It can be done, you'll just have to change your perspective. Not saying move to the most dangerous neighborhood you can find, but meet me halfway and find out where the service people live. How long do you have to stay where you are before it's time to start a job?

I came up dirt poor so I don't have a problem thinking about where to start. You're saying that the cheapest housing you can find is $20k a year and I'm telling you that there have to be options out there that are more workable than that. There are people out there in your boat making $30k a year and finding a way to pay rent, feed the fam & clothe the kids. You are going to have to lower your standards in one way or another. If it means moving into a 600 sq ft apartment an hours travel away you need to find that way.

If you're moving then start researching now and find that place you're going to live in. Housing is expense number one so if you screw that one up it's gonna be hard to make it up elsewhere.


« Last Edit: August 02, 2013, 11:33:31 PM by BigHammah »