Unexpected and costly situations can pop up at any time, for anyone. Such situations are stressful emotionally, physically, and especially financially. We are always told to save up for a rainy day, but this is not always feasible: most medical students live on loans and have not had the opportunity to put back thousands of dollars in savings.
When approaching unexpected expenses, you must first ask if the cost is necessary. Do I need a car to get to where I regularly go? Is there another alternative to my dog’s surgery? Can I check out a computer from my school? Can I carpool with someone to my rotation? With a little bit of thought and creativity, the high-expense situations can oftentimes be minimized or completely avoided.
There are situations, unfortunately, when a high expense is what it is—there is no way out. In this case, there is one option: borrow the money. This can generally occur in one of five ways: getting a credit card, taking out more loans, borrowing from a family member, getting money from a school emergency fund, or financing directly with the seller. All of these options have pros and cons. Each person and each situation is different, so there is no single best solution.
Getting a credit card:
This option is best for someone who has a good credit score as determined by the creditor (required to get a high enough limit), needs money quickly (many applications are quick and approved within minutes), and will be able to pay off the balance within the next year (think fourth-year medical students or residents). Keep in mind that you will not always be approved for the amount that you need. For this reason, you should only apply to credit cards that do a soft credit pull initially and show you what you qualify for. This will allow you to see what your credit limit will be without hurting your credit score. You should apply for credit cards with a 0% introductory interest rate. This means that, for a pre-determined time (typically 12 months), no interest will accumulate on the charge. It is important to realize that the entire amount must be paid off before this intro period ends; otherwise, incredibly high interest rates (as high as 30% or more) will make it very difficult to get out of debt.
Taking out more loans:
This option is best for someone who will not be able to pay back the amount borrowed anytime soon or who cannot qualify for a large enough credit limit to cover the purchase on a credit card. Loans tend to have lower interest rates than credit cards and can be better for people who cannot pay off a credit card within the introductory period. Typically, the federal loans available to medical students have more borrower benefits (grace periods, income-driven repayment plans, and flexible pay-back options with the possibility of loan forgiveness) and should be considered before other loans. Not everyone will qualify for additional federal loan money, so it is important to talk with your financial aid staff. If you end up applying for private loans, be sure to take the time to read through the contract and understand the pay-back requirements.
Borrowing from family:
This is a tricky one. If you have family that you are close to and trust, borrowing money from them can be the cheapest and easiest option for you. However, not all students have families who can afford to or are willing to lend them money. You must also consider that money is serious business and can place immense strain on relationships. If money is a sore subject in your family, as it is with many, you may be better off avoiding this option.
Applying to your school’s emergency fund:
This is a very hit-or-miss option as not all schools have emergency funds for students. If your school has this, consider applying for it! Some schools will require that this money be paid back; however, that is not always the case. Find out how the process works at your school. Keep in mind that these funds are often limited, and the amount given may not be enough to cover your expense. Most schools have limits on how many times a student can apply for these funds.
Financing at the point of purchase:
Extreme caution must be taken with this method. Financing at the point of purchase is when you arrange with the seller to pay them directly over a certain amount of time. This direct approach can avoid the hassle of applying for a credit card or loan, however it must be approached with attention to detail as each arrangement is decided by the seller, thus the terms can be all over the place. Some places might offer 0% interest for a few months while others have a very high interest rate starting immediately. Some may require a minimum monthly payment that, if not paid, will result in the full balance being due immediately. With this option, pay very close attention to what you are agreeing to. Don’t let fine print kick you in the butt.
Unexpected expenses are scary. We are told to prepare for them by saving up, but that is not always realistic for many medical students. The most important thing to keep in mind when a big expense pops up is to keep a level head. Do not rush into a decision without spending a little bit of time thinking about other options. Don’t get soaked by a rainy day.
Author Bio: Jayden Williams is a second-year medical student at UT Health Science Center in San Antonio. He earned his Masters of Healthcare Administration at Louisiana State University in Shreveport before starting medical school.