Medical expenses, whether planned or unplanned, can put a significant strain on your finances. While costs vary, some procedures can set you back tens of thousands of dollars, not to mention the cost of staying in the hospital and taking time off work.
Considering that MediSave has withdrawal limits, and your insurance policies may not cover certain pre-existing conditions, taking up a personal loan can help you cover bills from doctors, hospitals, or anything medical-related. These loans vary, so it’s important to compare your options to find the right loan for you.
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What is a medical loan?
Covering medical costs can be expensive, and even with private health insurance you may have to pay an excess, or worse, your procedure might not be covered at all. If you don’t have the ready money you can take out personal loans to cover your medical costs.
A medical loan can help cover the amount not paid by your insurance. You may also 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 your healthcare provider.
What types of personal loans can cover medical expenses?
You can consider a few different types of financing if you require medical treatment:
Unsecured personal loan. You can use unsecured personal loans for any purposes, including medical expenses. You can usually borrow between 2 to 4 times of your monthly salary, depending on your annual income. Interest rates vary between 8-20% p.a. (EIR).
Short term loan. If you only require a small amount, you can consider a short term loan. You can apply for a loan as low as S$100 and have it repaid within the month. Keep in mind interest rates and fees will be much higher with short term loans.
Credit card. If you have a credit card or are eligible to apply for one, this is another financing option to consider. A credit card can be good if you don’t know how much money you’ll need to borrow or if you want to take advantage of interest-free periods. Make sure you check if your surgery will be eligible as an interest-free purchase and that you have the means to repay the credit you use.
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 quickly get expensive if you don’t pay your balance off right away.
Aside from piling on interest, putting too much on your card can also hurt your credit utilisation ratio. Your credit utilisation 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 utilisation 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.
How can I find competitive financing?
When you’re facing a 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 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. Most of the lenders provide online application process.
Once you’ve found a few 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 pre-approval 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 processing fee or a monthly fee. These can greatly impact your EIR, 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.
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 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 name brand 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.
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.
Frequently asked questions
Interest rates vary depending on the lender and your credit profile. You can explore the starting rates of the lenders in our comparison table above. After applying for the loan, you’ll receive a more accurate estimate of the interest rate the lender will charge, which usually ranges from 8% to 30%.
Most likely, yes. Lenders don’t usually exclude certain procedures as long as the procedure was performed by a reputable medical professional. You can check the lender’s website before applying or call their customer service line to be sure.
Medical loans are usually meant to pay the facility or medical profession that’s owed. If your bill has been sent to collections, a debt consolidation loan may be more appropriate. However, if you’re applying for a personal loan to use for medical expenses, its specific purpose likely won’t matter.
Yes. If you don’t pay your medical bill in full or don’t set up a payment plan with your physician, your bill may go into default and sent to collections.
Yes. Your medical bill can be sent to a collections agency which can then report the unpaid balance to the credit bureau. This can impact your credit score, making future borrowing quite difficult and much more expensive.
Matt Corke is the head of publishing emerging markets for Finder. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time he has survived the dot-com crash and countless Google algorithm updates.
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