Medical professionals seek to get the biggest bang for their buck with all purchases, including their financing. They find themselves asking, “Do I seek a shorter-term with a higher monthly payment, and possibly pay less interest overall, or go with a longer-term for a smaller monthly payment?”
Many accountants prefer a 5-year note over a shorter term because it typically parallels most depreciation schedules for medical equipment. However, even though this makes sense from an accounting standpoint, certain medical professionals still wish to pay these loans off early and not pay the remaining interest. This is because the equipment is often a revenue-generating asset. The average ROI on medical equipment is 8 to 24 months. The standard interest rates on most 1–2-year notes are somewhere between 7-13%. These rates are much higher than established medical professionals are used to, so it is common to see 5-year terms because comparative interest rates are at their lowest and the payments are typically more affordable.
So, what is a business owner to do? Commit to those higher monthly payments for a shorter period, or have a lower monthly payment but be tethered to these payments for 2-3 additional years?
The trick is asking the right question with accurate verbiage. The term “no prepayment penalty” is thrown around loosely and is candidly a euphemism. No prepayment penalty simply means that you will not incur any additional fees over and above your remaining principal and interest payments if you would like to pay the loan off early. Conveniently, many lenders do not disclose the fact that you are still responsible for all remaining interest. The term principal buyout is the correct vocabulary to use when speaking with a financing company when what you want to know is, “If I pay off the loan early, am I responsible for the remaining interest?”
Fortunately for medical professionals, Funding Well Capital has the no interest payoff solution that will help them achieve the lower monthly payment with a 5-year term, and the flexibility to not be tied to all the remaining interest.
At FWC, medical professionals can receive a great interest rate with a true principal buyout option. That creates flexibility for business owners and allows them to conserve cash flow and pay off the loan when they are ready to. For more information on early loan payoff and no interest payoff, please contact us at firstname.lastname@example.org.