Medical Loans: Everything You Need to Know

Kylie Ora Lobell
Jan 14, 2022

Healthcare is notoriously expensive in the United States. According to the Peter G. Peterson Foundation, healthcare costs are expected to rise an average of 5.5% per year throughout the next decade.

On the other hand, a Debt.com medical debt survey revealed that 50% of Americans are now in debt due to medical costs, with most respondents saying that they have between $1,000 and $5,000 worth of debt. 

To cover the costs of both necessary and elective medical treatment, you might be considering taking out a medical loan. Perhaps you need to pay for a catastrophic emergency surgery that you didn’t anticipate, you are interested in scheduling cosmetic surgery, or you need help affording medical equipment. 

No matter the reason, for the sake of your personal finances, you should research what you’re potentially getting yourself into. Here’s some more information on medical procedure loans to help you make your decision. 

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First: Determine the Actual Cost

Hospital billing can be confusing, even if you’re familiar with how to read a medical bill.

There are more than 150,000 different medical codes in use today, and there’s no way the average person could figure out how to decipher everything

Even if your healthcare provider quotes you a certain number for the cost of a procedure, it could end up costing thousands more if there are complications. Before you go into your procedure, you should get a ballpark number for different outcomes from the hospital for your medical costs.

It’s also crucial to contact the various providers involved, as sometimes the only costs the hospital records are for facility use, and not for the surgeon, anesthesiologist, or surgery nurses. You’ll need to keep in mind that the quote may be under or significantly over the actual cost. 

Browse around to see if your health insurance provider has a calculator on their website so you can estimate what your costs are going to be. For example, Kaiser Permanente has a handy tool for members where you can figure out what you’ll pay for common procedures, exams and tests. 

How Do Medical Loans Work?

A medical loan is an unsecured personal loan that you can take out to pay for your medical expenses. There are medical loans for good credit, as well as medical loans for bad credit–if your credit score is less than stellar. 

Loan companies that provide personal loans also tend to offer medical loans. For example, some of the prominent medical loan online lenders include LightStream, SoFi, and Upstart.

Along with paying for procedures and services, you could use a medical loan to consolidate any medical debt that you have with your healthcare provider or credit card company. 

Lenders may be a bit more open to loaning money for your medical expenses than for any type of cost. However, the interest rate tends to be higher for these types of loans.

The annual percentage rate can range from 4.99% to 35.99%, depending on the lender. Typically, if you have good or excellent credit, you'll be offered a loan with a lower interest rate.

Your interest will be fixed or variable. Fixed is superior because it’ll stay the same for the entire loan period and help you plan out your finances better.  

Remember that other fees could include an origination fee, where the lender will charge you to process your loan. This could be hundreds of dollars or less; it depends on the value of your loan. 

The best medical loan for your situation will offer you a competitive and low-interest rate and the full amount you need to cover your healthcare expenses. Additionally, you won’t be charged prepayment penalties to pay back your loan early or hidden fees that are added to your bill.

Sometimes, you can also get a better interest rate for putting your loan on autopay. Some lenders will also offer a grace period where you don’t have to pay interest, which could be a great help. 

Of course, you should look for a loan offer that gives you enough time to pay back your loan and make your monthly payments on time.

Remember to read the fine print on your loan application, and when you pre-qualify, so you know exactly what kind of loan terms–including repayment terms–you’re entering into.

Different Kinds of Medical Loans

Medical loans can cover a variety of healthcare costs, from procedures to equipment.

  • Surgery Loans: These are fairly self-explanatory. You need a surgery, but your insurance either won't cover it in full, or you have a hefty deductible to cover before your costs are met. These loans may offer an easier way to cover the expense without having to negotiate with the hospital later.
  • Cosmetic Surgery Loans: As cosmetic surgery is usually elective, many insurance companies either don't cover procedures, or only cover a percentage of the total cost. These loans cover the rest, and can allow people that want a cosmetic procedure to get it now and pay later.
  • Medical Equipment Loans: If leasing isn't an option, and you need something like a wheelchair or other equipment on a permanent basis, medical equipment financing could help. Some companies will let you pay over time directly, while there are lenders that specialize in personal loans that can pay for medical equipment.
  • Fertility Treatment Loans: IVF and other fertility treatments can be expensive, and many times insurance will only cover one round of treatment. If you end up having difficulty conceiving, paying out of pocket for another round could be prohibitive. A medical loan in this case could help.
  • Orthodontic Loans: While dental health may not seem like a medical issue, it does fall under healthcare. Paying for braces, implants or other orthodontia can be cost prohibitive, putting you in a tough situation. An orthodontic loan could help get you or your child a new smile and allow you to pay the cost back over time.

Are There Medical Loans for Bad Credit?

Yes, there are medical loans for bad credit. However, you should note that the interest rate is going to be higher than it would be if you had “Fair”, “Good” or “Excellent” credit.

The problem with taking out a medical loan with a high APR when your credit has already taken a hit is that you risk not being able to repay the money. You could end up getting into even more debt if you don’t pay off your medical loan in a timely manner.

If you do prequalify for a bad credit medical loan, be sure that the payments are manageable, and that you have a Plan B for paying it off if you have any complications from your procedure and can't work for longer than anticipated.

Not sure if a bad credit medical loan is for you? There are alternatives you can take advantage of.

Medical Loan Alternatives

There are several options you have, aside from taking out medical loans when it comes to paying for your healthcare.

They include:

  • Working out a payment arrangement with your healthcare provider to pay down your debt.
  • Using a medical credit card, like CareCredit, which may offer you 0% financing options for a certain period of time.
  • Hiring a medical billing advocate to negotiate with your healthcare provider.
  • Increasing your healthcare coverage and premium so that your costs will be covered. (Make sure you research this option. Some plans won't cover a procedure that was already scheduled before the upgrade.)
  • Creating a GoFundMe* for your medical bills and raising money from friends and family.

*There are 250,000+ medical fundraisers per year on the site.

There are also nonprofits that could assist you with your bills if you qualify.

For instance, The HealthWell Foundation can help you pay for your health insurance premium, prescription drugs, and deductibles.

Additionally, NeedyMeds is an organization that will give you money for medical costs like prescription drugs. You can also reach out to your state’s health insurance marketplace and see if you qualify for Medicaid or Medicare, instead of paying full price for health insurance through a private provider. 

Furthermore, hospitals anticipate that some people won’t be able to pay their bills, and they’d rather you pay back some of your costs instead of not paying altogether. You could apply for financial aid, for instance, if you’re low-income.

You can also negotiate with your healthcare provider to discharge your medical debt and ask your doctors for discounts because you’re in a tough financial situation. They just may be willing to work with you. 

The Bottom Line

Medical debt can happen to anyone. Even the best-planned procedures could have hidden costs or include undisclosed provider fees. Insurance won’t always cover your necessary procedures, and what they deem elective is sometimes necessary. 

There are many ways you can pay down your medical debt; a medical loan is just one tool you have available to you.

Make sure you go over all your options upfront before making a decision to take out a medical loan.

Then, you’ll know that you’re making the best possible move for your financial future. 

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer with over 10 years of experience working with publications like MoneyGeek, Slickdeals, LegalZoom, OppLoans, SoFi and TaxAct. She has also been published in New York Magazine and the Los Angeles Times.

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