What is the HCF High Yield CD Account?
The Health Care Finance (HCF) Savings CD Account is a short term savings option for clients looking for a stable, guaranteed and predictable interest income, comparable to a traditional bank savings account or CD. It is a product of the experience and team of Loan Doctor in partnership with Apis Capital Management, an NFA member and CFTC regulated financial firm.
What is Apis Capital Management?
Apis is an investment management firm, specializing in unique and innovative investment products, whose founders have over 50 years of financial services experience. It has been recognized for its success, innovation and commitment to its clients by Forbes and Preqin.
What is Loan Doctor?
Loan Doctor is financial services company that works with clients in the healthcare industry to service their needs for financing, ranging from practice acquisition and expansion, to personal needs such as mortgages and student loan refinance. The Loan Doctor team has helped over 3500 doctors nationwide, originating over $500MM in loans.
What are the terms of the HCF High Yield CD Account?
The CD has a yield of 6% APY (5.841% annual interest compounded monthly) and an open, 1 month renewable term. The interest is accrued and paid monthly. It renews automatically every month, similar to a traditional 1 month CD at a retail bank.
What is an open term?
The open term of the HCF High Yield CD means that clients can make deposits at any time, and don’t have to wait until the CD matures. When deposits are made, they begin accruing interest immediately. Open term also applies to withdrawals, as it allows partial withdrawals to be made, so clients have an easier time planning for future expenses. In essence, an open term CD combines the advantages of a savings account with the higher yield of a traditional CD. Please note that withdrawals are still subject to the 1 month notice period, which requires you to initiate a withdrawal 1 month prior to your next maturity date.
What do banks or financial institutions like Loan Doctor do with funds deposited in a CD account?
While most people think that funds in a CD account at a bank just sit there, the reality is more complex. Banks use the funds on deposit in a CD to originate loans such as mortgages, auto loans, business loans etc, in a system called Fractional Reserve Banking. Financial Institutions like Loan Doctor typically also lend out the funds, however unlike a bank, they can be very selective in the type of loans they originate, as well as what they do with the loan over time.
Similar to a bank, the funds deposited in the account allow Loan Doctor to fund healthcare lending needs during very short time periods, before the originated loans are securitized and sold to large institutional investors. During the time that the funds are idle, they are invested in FDIC insured cash and cash equivalents with our banking partners, where they also earn interest.
Can the interest rate change?
Yes, just like any bank savings or CD account, the HCF High Yield CD account interest rate could rise or fall, depending on market conditions, such as the federal rate or the healthcare lending environment. If the interest rate changes, you will always be notified 1 month prior to the change, so you have time to decide.
Is the 6% an introductory rate or promotional rate? Will it go down soon?
No, the 6% APY is the current rate for all Loan Doctor customers, both current and new. The HCF High Yield CD has kept the 6% APY throughout 2019, and rates are not expected to change up or down for the next 6 months.
Why is the rate of the HCF High Yield CD Account higher than traditional banks?
When loans are originated, Loan Doctor always has a securitization buyer/investor available. In the current market, which is known as “end of credit cycle” there is a tremendous appetite for highly performing loans such as those made to healthcare professionals, as those are known to be unlikely to default in the impending economic downturn. As a result, institutional investors are aggressively buying up such debt and paying a premium. Loan Doctor therefore has only short term financing needs to help generate new lending activity to its high credit grade healthcare clients, as it is guaranteed to resell the debt within the 1 month term of the CD. Loan Doctor maintains a cash reserve equivalent to the amount on deposit, therefore each account is 100% fully collateralized with cash/cash alternatives. Loan Doctor thus earns both interest on the cash reserves, as well as profit on the origination and resale activity, Unlike a bank which must account for defaults on the loans it issues, Loan Doctor’s ability to immediately resell the loans ensures that it is not exposed to defaults.
In addition, Loan Doctor uses the latest in financial technology focusing on efficiency, and does not have the same high expenses as a traditional bank. The interest a bank earns on the loans is used to pay their branches, tellers, marketing etc, and a small amount is left over to pay back to the depositor in the CD as interest. Because a traditional bank’s expenses are very high, this leftover amount it pays as CD interest is typically very small. You won’t see a Loan Doctor branch near you, but we are active nationwide. As a result, a much higher portion of the revenue earned goes back as interest to the depositor.
The funds in the CD account are deposited at either US banks where they are covered by FDIC insurance, or in the case of cash alternatives, by Lloyd’s of London up to $100MM.
Who can open the HCF High Yield Account?
The account is available to all US persons, and can be opened by an individual, corporate entity or 401k/IRA retirement plan. Foreign account holders are also accepted, however please note that account funding must be made in US dollars and redemption of principal and interest will be paid in US dollars as well. All account holders are subject to KYC/AML verification and certain persons or persons from certain countries may be prohibited from opening an account.
Is the HCF High Yield CD Account a Security?
No, the HCF High Yield CD Accounts are not a security due to their 1 month term, according to (Securities Act 2(1), 3(a)(3); Exchange Act 3(a)(10)). As such, unlike stock or bonds, they do not need to be acquired through a broker, which avoids commissions and transaction costs. Each account is opened directly by the client with Loan Doctor and we do not charge any commission, subscription or redemption fees.
Is early withdrawal permitted and are there fees/penalties?
The HCF High Yield CD is a short term CD with a duration of only 1 month. As a result, early withdrawals are not normally permitted. In the event that an early withdrawal is allowed as an exception, there are no fees, however any partial interest earned for that month is forfeited.
How do I know how much interest I’ve earned?
You will see your interest earned daily, and credit monthly, through the Loan Doctor Financial Online Account. US account holders will also receive a 1099-INT on a yearly basis and foreign account holders will receive a Year-End statement.
How is the interest from the HCF High Yield CD Account taxed?
For US citizens or residents, interest is taxed similar to a savings account or CD and all US account holders will receive a 1099-INT. Foreign account holders will receive a year end statement showing interest earned and will need to follow the tax procedures in their home jurisdiction
What are the fees of the HCF High Yield CD Account?
These are the fees for the account:
Account Opening: $0
Monthly Maintenance Fee: $0
Account Funding via Check, US Wire Transfer or Bank Transfer: $0
Account Funding via International Wire Transfer: $50
Withdrawal via Check or Bank Transfer: $0
Withdrawal via Wire Transfer (US or International): $50
Early Withdrawal Fee/Penalty; $0
Account Closing: $0
Legal Fees: $100 / instance (Legal Fees are only incurred when Loan Doctor receives a valid court order regarding a depositor, such as a wage garnishment or judgement)
How does Loan Doctor benefit from the HCF High Yield CD Accounts?
The IRR (internal rate of return) from origination to re-sale of each healthcare financing loan that Loan Doctor originates is slightly higher than 6% annualized. A portion of this is typically the normal high yield savings rate of 2.5%-3% that is available to Loan Doctor through its FDIC insured accounts and the rest is generated from multiple cycles of loan origination and resale throughout the year. Therefore, for each account, Loan Doctor generates revenue from the difference between its IRR and the 6% that it pays holders of the Account, similar to how a bank generates revenue from the difference between the revenue it earns by using the funds in CD deposits for lending and the interest it pays on to the CD holders.
How do I open a HCF High Yield Account?
How do I deposit funds into my account?
You can make deposits at any time through the Loan Doctor Financial Online Account via Check, Wire, ACH debit from your bank account, or a bank to bank ACH transfer. Deposited funds, once cleared, begin earning interest immediately. Additional deposits do not extend your maturity date.
How do I withdraw from the HCF High Yield Account?
You can make withdrawals from your account at any time, through the Loan Doctor Financial Online Account portal. Withdrawals are subject to a 1 month notice period. You may withdraw the entire balance of your balance or make a partial withdrawal. To maintain the account, you must keep the minimum $1000 balance.
For example, if you open and fund an account on 1/5/2020, it will automatically renew on 2/5/2020 and so on monthly. If you would like to make a withdrawal from it on 6/5/2020 in this case, you must let us know no later than 5/5/2020 (1 month prior to desired redemption date)
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