What they are and how to get one – Forbes Advisor
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Paying for health care in the United States is no small feat. Even with Medicare, which should make it cheaper – average annual medical expenses ranged from $ 360 to $ 1,500 per household depending on the state, according to a 2019 report by The Commonwealth Fund.
For those who don’t have good health insurance, the price can be much higher. For example, treating some types of cancer for just one year can cost more than $ 100,000, according to the National Cancer Institute.
The good news is that there are often ways to pay these bills. Medical loans are just one of your options, and they can have a big impact on your finances and the health care you can afford. Here’s what to consider before signing on the dotted line.
What are medical loans?
A medical loan is a type of personal loan which is used only to pay for medical care. Usually available from traditional banks and online lenders, medical loans are usually unsecured loans, which means that they are not bound by any guarantees. This makes them safer if you end up defaulting, as lenders can’t take any property from you, like repossessing your car.
On the other hand, it also means that you will generally need better credit to qualify. And even with good credit, unsecured loans can be more expensive than those that are secured. You may also have to pay higher origination fees if your credit score is not the best.
Benefits of medical loans
Medical loans can be particularly useful if you have to pay for large health expenses. And there is certainly do not miss those right now in the American healthcare world. This type of loan can allow you to perform a procedure to improve your quality of life now, rather than potentially waiting years to save money.
For example, LASIK procedures are frequently funded. Most LASIK surgeries cost several thousand dollars, and if your vision is poor, your only other real option is to wear glasses or contact lenses for the rest of your life.
Funding the surgery now and paying it off over time can allow you to have the surgery done sooner. This is an important consideration since, as with many types of medical procedures, the earlier the surgery, the better.
Where to find medical loans
You can find medical loans in many of the same places as regular personal loans. There are many lenders online that offer medical loans, and some banks and credit unions offer them as well.
Many health care providers also offer medical loans. You may be more likely to find them in a doctor’s office that offers expensive elective procedures, such as cosmetic dentistry or plastic surgery. The doctors in these cases know that patients are more likely to pay these bills out of pocket, so they often have more funding options available than your average family doctor.
Medical loans for bad credit
One of the downsides of unsecured medical loans is that you usually need good or great credit to qualify. This means that you will likely need a score between 670 and 739 or higher to qualify. But this is not always the case, there are lenders who offer medical loans for bad credit.
Make sure to be very careful with your homework in these cases, however. As we’ll see in the last section, getting a medical loan to pay for your health care is convenient, but it’s far from your only option. Medical loans for bad credit (or any other bad credit loan, for that matter) come with much higher interest rates, to the point that you might not be able to afford the monthly payments.
What to consider when choosing a medical loan
Here are some questions to ask yourself before taking out a medical loan:
- What is the interest rate? Interest rates for medical loans generally range from 4.99% to 35.99%. For comparison, the average two-year personal loan rate in August 2020 was 9.34% APR, according to the Federal Reserve.
- What are my other options? Getting a medical loan may seem like your only option, but it probably isn’t. Make sure you see what is available for you.
- Who is the money paid to? Will the money be sent to you directly or to the doctor?
- What is the amount of monthly drafts? Is this something you can afford within your budget? If not, is there room to make adjustments to your current spending?
- How much will I pay in total interest? Ask the lender or use a personal loan calculator to see how much interest you will pay over the life of the loan. Are you comfortable with this number?
Advantages and disadvantages of medical loans
Here are some highlights to help you determine if a medical loan might be right for you:
- No collateral required
- Can often get the funds you need quickly
- Wide range of uses, including for elective and cosmetic procedures
- Can be very expensive compared to alternatives
- May require good to excellent credit
Alternatives to medical loans
Paying for health care often seems like a headache, and medical loans are just one piece. Here are some other things to consider before switching to the more expensive option:
Hire a medical billing consultant
You practically have to be an expert to understand the medical billing and payment system in the United States today. If you’re not an expert in this area — and most of us, in fact, aren’t — you might consider hire a medical billing lawyer.
The services offered by these companies may vary, but in general, it’s like hiring a personal assistant for your medical bills. They can scan your invoices line by line for billing errors (spoiler alert: they are surprisingly common and can be horribly expensive), negotiate payment plans or reduced fees, among other services.
Best of all, many medical billing advocates only charge you a percentage of the savings they can achieve for you. Still others charge on an hourly basis, but in any case, it may be worth hiring someone to help you.
Set up a payment plan with the doctor or hospital
When you receive a doctor’s bill, it often says “in full” on it. But here’s the kicker: It’s not always the case. But to know the real due date, you will need to contact the billing department. Most healthcare providers are actually more than willing to work with you to set up a payment plan, especially for healthcare that is not optional.
This is usually a much better way to go than just taking out a medical loan up front, as healthcare providers often offer these payment plans at a low interest rate, or even no interest. Unlike the auto industry, for example, they typically provide health care and that’s what they want to be paid for, not expensive finance plans.
Get a medical credit card
If your doctor’s office isn’t willing to work with you on a payment plan and you really need to fund your health care, another option is a medical credit card. These are special credit cards that can only be used with certain healthcare providers, so make sure your doctor’s office accepts them before signing up. Care Credit is a popular option, for example.
Medical credit cards are convenient because you can use them for everyday expenses like therapy or frequent treatments like allergy shots. But again, they tend to have APRs between 4.99% and 35.99% which makes them more expensive than many loans.
This means that if you do not fully pay the invoice by the end of the promotional period, you will have to pay all interest that you thought you were avoiding, so in reality you are not getting any savings at all. This is a sneaky tactic, so be sure to be on the lookout and not incur more debt than you can afford at the end of the deferred interest period.
Seek financial help through the hospital or charity
Finally, there are many places that offer assistance in paying your medical bills. Many large healthcare providers, such as hospitals and medical networks, have funds that are essentially scholarships to pay for healthcare for those in need. Check with your doctor’s office to see if they have any such financial aid programs.
There are also many national, state, and local charities that can help you pay your medical bills if you need to. For example, the HealthWell Foundation and the Patient access network are two nationwide charities that help with a range of bills. Many charities offer help with all medical expenses if you qualify. Others are specific to certain diseases like cancer or autoimmune diseases, or focus on children or people in certain professions.
Do not count this resource. It may take a little time and some Google searches on your part to find these charities, but if you qualify, these are often your best option as it’s free money. Money is there to help you after all, so be sure to take advantage of it.