Should I get a medical loan?

Doctor speaking with her patientImage: Doctor speaking with her patient

In a Nutshell

If you’re facing medical expenses you can’t pay with money in a savings account, you might be considering a medical loan. But before you decide to borrow, look into the pros and cons of a personal loan for medical expenses and think about your alternatives.

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Medical debt is a complicated issue — and an emotional one.

The medical billing system is complex. It’s not always easy to figure out how much you’ll need to pay to get the care you need. Whether you need treatment for a medical emergency or an elective surgery, paying for an expensive procedure can be tough.

Taking out a personal loan for medical expenses may seem like a tempting option, especially if you’re already struggling to pay your medical costs and don’t have the health insurance you need to cover them.

Before you decide how to pay for your medical care, examine all of your options to determine what’s best for your situation.

What is a medical loan?

A medical loan is a personal loan that’s used to pay for medical expenses.

Personal loans can be used for a wide range of medical treatments, including elective procedures, fertility treatments, prescriptions, surgeries and more. A number of lenders, including certain banks, credit unions and online lenders, offer personal loans that can be used for medical treatment.

Medical loans may be unsecured personal loans, meaning they don’t require any collateral. Since lenders are trying to judge your ability to repay the loan, applications for these types of personal loans will primarily focus on factors such as your credit history and income.

You can also apply for a secured personal loan to help pay for medical expenses. Secured personal loans require you to put up collateral to secure the loan, but you may be able to get more competitive rates.

The amount you’re approved to borrow and the terms of the loan will depend on a variety of factors, including your credit history.

Need a loan with bad credit? Some things to know.

Pros of medical loans

There are a few benefits of using a personal loan to pay for medical expenses. You may be able to get access to funds quickly — and if you’ve had a medical emergency, this may be the most important factor for you. If you apply and are approved, some lenders will give you the funds within a few business days.

Personal loans may also be cheaper than using a traditional credit card to pay for your medical debt. If you have excellent credit, it’s possible to find personal loans with APRs as low as 6% or less. Since the average APR on credit cards is in the double digits, you may end up paying less interest with a medical loan.

Cons of medical loans

Medical loans can be an expensive financing option. While some borrowers can qualify for low-interest personal loans, applicants with less-than-perfect credit histories will probably see much higher interest rates. Depending on the terms you qualify for, you could end up paying a lot in interest over a number of years.

A medical loan doesn’t decrease the total cost of what you’re paying. If you’re struggling to pay medical bills, explore options that could actually reduce the amount you’re required to pay.

Alternatives to medical loans

Taking out a personal loan to pay for your medical bills isn’t always the best option. Instead, examine medical financing alternatives before you borrow money.

Explore financial assistance

If you’re struggling to make ends meet, you may qualify for free or reduced-cost care.

Hospitals often have financial-assistance programs to help you pay for the care that you need. The criteria for financial assistance vary, but these programs might consider your income, assets and whether the care you receive is a medical necessity.

You may also be able to work out a payment plan with the hospital if you need extra time to pay the debt.

Look for information about your hospital’s financial-assistance program on its website or through its customer service department.

Ask for discounts

Some hospitals may provide discounts if you’re uninsured, even if you don’t qualify for free or reduced-cost care.

Every hospital has its own policy, but if you’re uninsured, don’t have coverage for the medical procedure you need, or need to pay out of pocket for another reason, ask about getting a discount.

If you ask, you may end up getting a substantial discount — some hospitals will cover up to 50% of your bill for medically necessary services if you’re paying for your own care.

Negotiate a lower payment

If you don’t qualify for financial assistance but still need to lower your bill, consider negotiating with your doctor or hospital. You may be able to negotiate an out-of-network bill down to a more-manageable cost.

Use a medical credit card

You may be able to get a medical credit card through your healthcare provider to pay for eligible medical bills. Unlike regular credit cards, a medical credit card can only be used to pay for healthcare — and only with providers that accept the credit card.

Some medical credit cards come with a period of deferred interest — if you’re able to pay off the balance before the deferment period is up and follow the terms of the offer, you won’t need to pay the interest. But if you can’t pay the balance off within the deferment period, you might have to pay the interest that’s been accruing since the date you first used the credit card.

Once you’ve used a medical credit card to pay for your care, you’ll make payments to the credit card company, not the doctor.

A word of caution on medical credit cards: Once you pay for your bill on a medical credit card — or any credit card — you may not be eligible for financial assistance.

Use a credit card

Instead of paying for your treatment with a medical credit card, you might also consider using a regular credit card.

If you’re able to qualify for a credit card with a low intro APR offer, and you can pay off the debt within the introductory time frame, this could be a smart financial move. Remember though, if you don’t pay your balance by the time the intro period ends, you’ll be stuck paying interest.

But if you’re not be able to pay off the debt before the intro rate ends or you can’t keep up with the monthly payments, using a credit card could end up costing you.

Dispute billing inaccuracies

Before you pay your medical bill, take some time to double check your invoice to make sure everything is correct.

If you find any incorrect information, call your healthcare provider or insurer to dispute the errors.

What’s next?

If you’re struggling to pay your medical bills, getting a medical loan — which is a personal loan — isn’t your only option. Research your choices — including applying for financial assistance or getting a medical credit card. If these alternatives don’t work for your situation, then consider applying for a personal loan.

Worried about medical debt because of COVID-19?

If you’re worried about missing a payment or paying off your medical debt because of the coronavirus, you’re not alone. Congress has passed some legislation that might help you with upfront medical costs.

Congress has also mandated that all coronavirus testing be covered in full by group health plans or health insurance issuers.

The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, also provides some money to healthcare providers to treat uninsured patients for coronavirus.

You can find more information on government resources here.

About the author: Erica Gellerman is a personal finance writer with an MBA in marketing and strategy from Duke University. She’s also the founder of The Worth Project: a weekly money newsletter you actual… Read more.