What you need to know about medical loans

One in four Americans say they – or someone in their household – have had trouble paying for health care in the past 12 months, according to a KFF survey.

Preventive care and emergency treatment are essential for your health. If you can’t cover these costs upfront, medical loans can help. An advantage of this financing option is that you can receive money quickly, sometimes the next business day. But before you take one out, it’s a good idea to be aware of the potential downsides.

What is a medical loan?

A medical loan is a personal loan taken out for the specific purpose of financing medical treatment. Medical loans can pay for a variety of medical costs, such as elective surgeries, IVF treatments and emergency procedures.

Most medical loans are unsecured, so you don’t have to put your home – or any other asset – up as collateral in the name of your health. However, to get the lowest rates, you need good credit.

If your credit score needs adjustment – ​​especially if you’ve had trouble paying medical bills in the past – you can also apply for a secured medical loan. The trade-off is that you have to provide some form of collateral, which you lose if you default on the loan. But you get a much lower interest rate and will have to pay less in the future.

How do medical loans work?

You can get a medical loan by applying online or at a brick-and-mortar financial institution. Many lenders allow you to pre-qualify, a process that shows you realistic offers without hurting your credit. To officially apply for the loan, a credit check, salary verification, and other information are required.

The timeline for receiving the money after approval varies from lender to lender, but can take up to a week in some cases. Once you receive the money, you make fixed monthly payments until the loan is fully repaid, with interest being added to each payment.

Where can you get a medical loan?

Medical loans are offered through banks, online lenders, some credit unions and health care providers. When comparing medical financing options, don’t just look at the APRs. Eligibility requirements, loan terms and fees also affect how much you pay.

Loans to cover medical expenses are available from online lenders, banks and some credit unions. Healthcare providers can also offer medical loans.

Advantages and disadvantages of medical loans

Medical loans can be a good alternative to depleting emergency savings or increasing credit card debt. However, they are not the right choice for everyone.

Plus points

• Predictable payments. Personal loans have fixed interest rates and repayment terms, so your bill won’t fluctuate.
• Fast financing. Most personal loans are disbursed within days, giving you the money you need without delay.
• Less expensive than credit cards. Credit cards have an average interest rate of more than 20%. Personal loans can offer interest rates of less than 10%.
• Flexible. The proceeds from personal loans can be used for any treatment or procedure.

Cons

• Interest. Some credit cards offer an introductory period of 0%, but with a loan you always pay interest.
• Costly for borrowers with bad credit. If you have imperfect credit, you could get an APR as high as 36%, plus fees.
• Limited amounts. Personal loans typically range from $1,000 to $50,000. If your procedure falls above or below that threshold, you may need alternative financing.

Who are medical loans best for?

Medical loans can be a good idea for people with a solid credit score (700 and above) who can qualify for the most favorable interest rates and terms. A loan can also be a good option for someone who wants to use the money for a variety of expenses, including travel or other costs related to treatment and recovery.

Additionally, those who need immediate treatment and do not have adequate insurance or sufficient cash to pay for medical costs out of pocket may want to consider a loan. “If you are dealing with a potentially life-threatening condition, it is certainly better to close the loan than to reschedule for a different time,” said Michael Sullivan, director of education at Take Charge America.

How to Apply for a Medical Loan

Once you’ve determined that a medical loan is right for your situation, take these steps:

1. Determine how much you want to borrow. The first step in any loan application process is figuring out how much money you need and can reasonably borrow and repay. Crunch the numbers to see how much you need without selling yourself short.
2. Check your credit. Because loan terms and interest rates have a lot to do with your credit history and score, it’s a good idea to review your credit report and correct any errors. This information will help you narrow down your options, as some lenders, for example, specialize in loans for people with bad credit.
3. Prequalify. Receive quotes from multiple lenders and identify the most competitive rates and favorable loan terms.
4. Select a lender and complete the application as required. In addition to your personal information, most lenders require documents to verify your employment and income information.

Once you have fully completed the application process, you may be able to receive the funds in as little as one business day.

Medical Loan Alternatives

For some, medical loans are not the right choice due to time constraints or credit requirements. Fortunately, there are alternatives.

Payment plans

Many medical offices offer payment plans, some even without interest. Before filling out a loan or credit card application, talk to your doctor about your concerns about paying for the procedure. You may be surprised to learn that working out a payment plan directly with your healthcare provider can be the most affordable financing option for medical loans.

The hospital provided financial support

Depending on your financial situation, some hospitals may offer you financial assistance through a discounted or free service. Ask your provider if a financial assistance program is available.

Crowdfunding

Consider using a crowdfunding platform to solicit donations from others for your medical bills. Some options include CoFund Health, GoFund Me and Plumfund. Most sites charge a small processing fee, and you can stop accepting donations at any time.

Credit cards

Credit cards are a viable option for financing lower-cost procedures, especially if you take advantage of an introductory no-interest offer. Several lenders even offer medical credit cards, which are an instant solution to paying for medical expenses.

However, interest rates on medical credit cards can be higher than other credit cards; some lenders even take advantage of unwary patients by advertising heavily in doctor’s offices and not being honest about the terms. For example, medical credit cards with an introductory APR offer of 0 percent for the first year may retroactively charge interest if the entire balance is not paid off before the twelve months are up. If you are considering a medical credit card as an alternative medical loan, read the terms carefully first.

it comes down to

Medical bills are among the highest expenses Americans will pay in their lifetime. Although the costs of elective and preventive procedures may seem prohibitive, keep in mind that taking good care of your health can help prevent a serious illness later that could rack up tens or hundreds of thousands of dollars in medical bills.

While many Americans decide to put off medical treatment because of the cost, medical loans exist for a reason: They can help you afford the care you need. But remember that taking out a personal loan is not the right choice for everyone. Consider the pros and cons outlined before disabling one. If you decide a medical loan is right for you, compare the rates, terms and fees of a number of lenders to get the best deal.