From an emergency to expensive treatments — find out how a medical loan could help you manage payments.
Medical expenses can put a significant strain on your finances. According to the Bureau of Labor Statistics, Americans spent over $100 billion in 2016 on medical expenses alone. And according to the Kaiser Foundation, almost 30% of people report that they have trouble paying medical bills.
Costs vary, but some procedures can put you back hundreds or even thousands of dollars, and that doesn’t include the money you’re losing taking time off work to visit doctors or stay in the hospital. A medical loan can help you cover bills from doctors, hospitals, or anything medical-related. Our guide will walk you through how medical loans work, what they can be used for and ways you can reduce the costs of borrowing.
What’s in this guide?
What is a medical loan?
Medical loans are personal loans used to finance medical costs.
Hospital stays, surgeries, ER visits and expensive treatments can all add up, and many Americans find themselves unable to pay their bill when it comes due. Medical loans are there to cover the amount not paid by your insurance. You may be able to consolidate all of your medical debt and secure a low interest rate, which is generally cheaper than opting for in-house financing from the healthcare provider.
Top 5 providers for medical loans
The providers listed in the table below are our top picks when you need to borrow money for medical bills.
|Provider||Loan amounts||Min. credit score||Why it’s good for medical financing||Our review|
|Prosper||$2,000 to $40,000||640||Prosper is a peer-to-peer lender that offers a specific personal loan for medical expenses related to bariatric surgery, cosmetic surgery and dentistry and fertility treatments.||Go to site|
|SoFi||$5,000 to $100,000||680||SoFi has relatively low interest rates for a personal loan, and its large maximum amount mean you can borrow enough to pay for any medical expesne that crops up.||Go to site|
|Laurel Road||$1,000 to $45,000||680||With lower interest rates than many other personal lenders, Laurel Road can help you consolidate previous medical loan debt or finance your next procedure.||Go to site|
|Even Financial||$1,000 to $100,000||580||Good for people with fair credit, you can borrow a large amount with Even Financial to cover any number of medical procedures.||Go to site|
|LendingClub||$1,000 to $40,000||660||In addition to its peer-to-peer loans, LendingClub offers specialized medical loans through its Patient Solutions service.||Go to site|
Compare more loans to cover medical expenses
8 types of financing to cover your medical expenses
You aren’t limited to just personal loans when it comes to financing your medical expenses. These are a few of the many options you can explore so you can pay your bill and start recovering.
- Unsecured personal loan. You can use an unsecured personal loans for any purpose, including medical expenses. There are plenty of lenders out there to cover any income or credit score, and you may be able to borrow between $3,000 to $50,000. Interest rates vary between 8%-20% and loan terms last between 24 to 60 months.
- Personal line of credit. A revolving line of credit can cover a series of procedures and any potential unexpected costs that may crop up. You only pay interest on what you borrow, and once you repay, you can borrow again for as long as your line of credit is active.
- In-house healthcare financing. Certain healthcare providers offer loans specifically for medical procedures performed at their offices. This may limit what you’re able to do with your loan funds, but it may allow you to access better terms and lower interest rates than a standard personal loan.
- 401(k) loan. Not all 401(k) plans allow you to take out a loan against the retirement account balance. If you’re able to, use this money wisely; you repay through payroll deduction, and some plans won’t allow you to contribute to your balance while you’re paying off a loan.
- Home equity loan or HELOC. Your home will likely have equity you can draw on if you need to pay down a medical bill. These are secure loans and lines of credit that use your home as collateral. They have lower interest rates than unsecured loans, but you do risk foreclosure if you’re unable to repay.
- HSA or FSA. Although not technically a loan, you can use funds from your health savings account or flexible savings arrangement to pay for medical bills. If you’ve contributed to your HSA or FSA account through your employment, you can draw from these to cover a portion of your medical expenses. However, because of the contribution cap, you may not be able to fully cover surgeries or other expensive procedures.
- Bad credit personal loans. If you’re confident you can repay your loan quickly and only need a small amount, a cash loan of up to $5,000 might suit your needs.
- Medical credit card. Like a medical loan, a medical credit card is meant to pay for your doctor bills. They can be costly, though, and many will have deferred interest rather than a 0% introductory rate. CareCredit is a popular brand for medical credit cards.
Think before you swipe that credit card
If you’re looking to finance an expensive procedure that you know you won’t be able to pay back quickly, think twice before slapping it on plastic. Credit cards typically come with higher interest rates than personal loans (though not as high as short-term loans) and can get expensive quickly if you don’t pay it off right away.
Aside from piling on interest, putting too much on your card can also hurt your credit utilization ratio. Your credit card utilization ratio is the amount of credit you use versus the amount of credit you qualify for (in this case, your spending limit). Having a credit utilization ratio of 35% or over is bad news for your credit score and can cause it to take a dip, and that’s not something you want to worry about when you’re recovering.
What can I use a medical loan for?
Medical loans are meant to cover the expenses your insurance doesn’t — either because your copay is too large or the service isn’t included in your package. The most common uses of a medical loan are usually procedures that aren’t considered crucial by insurance providers. They include:
- Orthodontics, veneers and other dental services
- Weight loss surgeries
- Fertility treatments and adoption loans
- Cosmetic and reconstructive surgery
Of course, this isn’t the definitive list. Whenever you need to finance a medical procedure, a loan can be useful to cover the amount due to your provider and extend the payment plan to match your budget.
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How can I find competitive financing?
When you’re facing an large bill from past surgeries or multiple upcoming doctor visits, good interest rates and loan terms may be the last thing on your mind. However, understanding your loan is the first step to managing your finances and keeping your head above water.
Start by checking out the personal loan options available from your local bank or credit union. These usually have the lowest interest rates and accept people with a variety of credit scores. After you’ve exhausted this avenue, compare your rates for online lenders. The application process can be done online, and you may not need to fax any information.
Once you’ve found a couple loan options that suit you, you can compare them by analyzing these aspects:
- Application process. You don’t want to waste time filling out a bunch of paperwork just to be rejected. Many lenders will have quick online forms that allow you to submit for preapproval before your credit is run.
- Credit score requirements. Lenders should list the minimum score for approval. Don’t apply for a loan you can’t afford — you’ll likely land in the rejection pile and you may harm your credit score.
- Interest rate. Lenders calculate your interest based on your credit score, income and debt-to-income ratio. If you have bad or fair credit, finding the lowest rate should be at the top of your priority list. You don’t want to spend hundreds or thousands more than you have to because of interest.
- Fees. Depending on the lender you choose, you may have to a pay loan origination fee or a monthly fee. These can greatly impact your APR, and you should also know what types of late fees or penalties are charged if you’re late for a payment.
- Loan term. How long you have to repay the loan will impact your monthly payments and the total amount you’ll pay in interest. A longer term means lower payments but more spent on interest. Choose a loan term that doesn’t break your budget but won’t cost you too much in interest.
What information will I need to provide my lender?
Medical loans work like other personal loans. Lenders will request that you supply both information about yourself and your income in order to determine if you meet eligiblity criteria.
- Personal information. Your name, date of birth, address, contact information and Social Security number.
- Employment information. Your employer, how long you’ve been employed and your income.
- Bank account information. Your bank’s routing number and your account number. This is only required for loans that will be deposited directly into your checking account.
If you plan on using your loan to consolidate your debt, you may need to provide information about these accounts so the lender can send funds to pay off your accounts for you.
Is a medical loan the right choice?
Medical loans are good solutions for many situations, but that doesn’t mean they’re always the right choice. When browsing your financing options, keep in mind that medical loans are meant to be used to pay for upcoming or past medical procedures and surgeries.
If you find yourself with quite a bit of medical debt already accrued, a medical loan won’t be your best choice. Rather, you may want to seek out debt consolidation services to combine multiple monthly payments into one.
If you have more than just a medical expense you need to pay for, then a generic personal loan or line of credit might suit your needs better. Many of these also allow for cosigners, which could potentially help you qualify for more money or a lower rate than you would if you applied as an individual.
No matter your decision, proceed with caution. Every loan, whether it’s medical or not, comes with fees and interest. Be sure to create a solid budget for payments when determining if medical loans are the best choice for you.
What if I don’t want to take out a loan?
Not everyone has the extra income to spend on making loan payments, and people without good credit will likely find the interest they’re being charged too much to handle. Instead, use these three methods to handle your medical expenses without a loan.
- Negotiate medical bills. Providers have discounts you may not know about unless you ask, and there’s nothing shameful about haggling prices when it comes to your bill. The trick to negotiating is staying firm and knowing what you’re after — having a good idea of how much other providers charge for your procedure is a good place to start.
- Request a payment plan. As long as you paying on a medical bill, it won’t go into collections. Requesting a payment plan with your provider can help you make a difference in what you owe. Since many billing departments are willing to start a payment plan without interest, you may be able to save more money than you expected.
- Check for clerical errors. It’s important to go over your bill carefully and make sure everything has been coded correctly. A generic medication may have been listed under a namebrand or a procedure may have been incorrectly labelled. These mistakes mean your insurance can’t process the bill properly and may charge you for something you didn’t receive.
Options for low-cost or free medical care
These won’t cover the medical bills that have already come due, but they can help make a dent in future expenses. Many are free of charge, available to people without insurance or both.
- Community health centers. No matter your insurance coverage and income, you won’t be turned away from a community health center. These operate on a sliding pay scale so you won’t be charged more than you can reasonably afford.
- Nurse practitioners. Seeing a nurse practitioner can cut the cost of a doctor visit and are often qualified to perform many of the services done by your general practioner so you won’t miss out on the care you need.
- Medical bill advocates. Negotiating with your provider and insurance company is hard enough when you’re well, but if you suffer from chronic illness or don’t want to jump through hoops, hiring a medical bill advocate may increase your chances of lowering your payment or convincing your insurance company to shell out for a procedure.
- Health fairs. Many counties and cities run health fairs semiregularly to treat people who may not have access to medical care. Often, you can receive an overall wellness checkup, and during flu season, you may be able to snag a cheap shot.
- National Association of Free & Charitable Clinics (NAFC). Formed to help the working poor, underinsured and uninsured find low-cost alternatives to health care, the NAFC has clinics all over the US.
- Medicaid and other county healthcare services. If you’re struggling to pay for your healthcare or don’t receive insurance through an employer, Medicaid and other equivalent county services are a good option. Your copays will be reasonable, and you won’t have to worry about huge costs when you stay in-network.
- Crowdfunding websites. Using crowdfunding to finance a medical procedure is becoming more common. If you know you’ll be struggling to pay for an important health issue, looking to your peers is a good place to ease the financial burden.
- Partnership for Prescription Assistance (PPA). Not every struggle is with a procedure. If you have an ongoing condition that needs medication, the PPA can help you find programs to assist you.
Common terms you may come across when financing medical costs
Medical loans can be a life-saver, but they don’t come cheap. By comparing your options and using multiple sources of funding, you can lower your expenses and pay for whatever procedure you need done. Since many medical loans are personal loans, you should browse the available lenders and find the terms that work for you and your financial situation.