What is the HCF High Yield CD Account?
The Health Care Finance (HCF) High Yield CD Account is a short term savings option for clients looking for a stable and predictable interest income, similar 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. The HCF High Yield CD account is not a bank deposit.
What is Apis Capital Management?
Apis is an investment management firm, specializing in unique and innovative investment products, whose team has 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 a 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. Loan Doctor is not a bank, and is not a deposit broker.
Is Loan Doctor Accredited?
Yes, Loan Doctor is a BBB Accredited business and is rated A-. You can see details at the BBB official page.
What are the terms of the HCF High Yield CD Account?
The CD has a yield of 5.25% APY (annual percentage yield), 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 investments at any time, and don’t have to wait until the CD matures. When investments 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.
How does a bank and Loan Doctor differ in its lending?
A bank will loan out more than it has in cash on deposit. For example, if a customer deposits $1000 in a bank, the bank then is allowed to loan out $10,000 to others. That means that if only 10% of those loans default, or just 10% of depositors want to withdraw funds, the bank would fail. Banks by nature are “leveraged”, meaning they take on more risk than they can pay off. This is the reason that banks must have FDIC insurance.
On the other hand, Loan Doctor is never leveraged. We can only originate loans up to the amount of cash and cash equivalents we hold, which is itself equal to the amount of CD Deposits. In the similar example, if a customer deposits $1000 into a High Yield CD, Loan Doctor can only lend $1000, and not any more. In addition, because we do not hold the loans, unlike a bank, if 100% of the depositors want to make a withdrawal, those withdrawals can be met immediately. This ensures that the principal of CD deposits is protected at all times and is one of the ways that Loan Doctor limits is risk beyond traditional banking requirements.
Similar to a bank, the funds deposited in the account will 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 insured cash and cash equivalents with our banking partners, or deposited with other regulated financial institutions such as broker dealers, where they also earn interest.
Can the interest rate change?
Yes, just like a traditional 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, the healthcare lending environment, or other factors. If the interest rate changes, you will always be notified at least 1 month prior to the change, so you have time to decide.
Is the 5.25% an introductory rate or promotional rate? Will it go down soon?
No, the 5.25% APY is the current rate for all new Loan Doctor customers. Previously, the rate was at 6%, and existing clients still benefit from the previous rate. Rates for existing clients 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 healthcare loans are originated, Loan Doctor will 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 very interested in 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 liquid asset reserve equivalent to the amount on deposit, therefore each account is 100% fully collateralized with cash, cash alternatives or other highly liquid assets. Loan Doctor thus earns both interest on the 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.
How does Loan Doctor benefit from the HCF High Yield CD Accounts?
Loan Doctor aims to generate revenue from the CD investments, similar to a bank. It intends to derive revenue from interest on cash and cash equivalents, and from the origination to re-sale of each healthcare financing loan. In the interim, Loan Doctor earns interest from cash, cash equivalents and other liquid assets.
The funds in the CD account are deposited at either US banks where they are covered by FDIC insurance, at US credit unions, where they are covered by NCUA insurance, or at regulated broker dealers where they are covered by SIPC insurance. When a loan is made by Loan Doctor, the funds are not insured but are instead backed by liquid collateral or a purchase commitment from a buyer of the loan, thus limiting Loan Doctor’s risk.
Loan Doctor is not a bank, and therefore each account is not individually insured by FDIC directly
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.
How do I invest in the HCF High Yield CD with IRA or 401k funds?
You can open a CD account, titled in the name of your IRA or 401k, and fund it with IRA or 401k funds. However, Loan Doctor Financial is not an administrator of retirements account. Therefore, you would not be doing a rollover or transfer, and you would keep your current administrator.
Some IRA or 401k providers restrict your investments to only those that they offer/sell (for example, stock or mutual funds at a brokerage, or checking or savings account at a bank). In this case, you would need to switch to a new IRA/401k administrator that does allow you to invest in outside products, such as the HCF High Yield CD.
The most common type of administrator that allows this is called a Self Directed IRA (SDIRA) or Self Directed/Checkbook 401k administrator. You can learn more about a Self Directed IRA here: What is a Self Directed IRA?
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 penalty 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. Account holders who are US citizens or residents 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/ACH 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
Returned/NSF Deposit: $35 (This fee is only charged if a deposit you make by ACH or check is rejected/dishonored by your bank)
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 do I open a HCF High Yield Account?
How do I invest into my account?
You can make a deposit to invest in the CD 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 investments 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 at least 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 request the withdrawal no later than 5/5/2020 (1 month prior to desired redemption date)
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