Updated November 03, 2017
With medical debt plaguing 26% of adults, it’s no wonder people are looking for an easier way to pay it back. According to a study by The Henry J. Kaiser Family Foundation, this problem isn’t exclusive to the uninsured, either. Those who have health insurance are struggling to afford crippling bills as well.
While there isn’t always an “easy” or quick solution, refinancing your medical debt with a personal loan that has lower interest rates and more favorable terms may help. However, before you consider refinancing, you should exhaust your options with your hospital first.
If you’re looking for help with affording medical debt, we’re covering how you can try to lower the amount of medical debt you owe, and which personal loan lenders are the best for refinancing medical debt.
Negotiating Medical Debt With a Hospital
Are you struggling to pay back any medical debt you owe? Your first stop should be the hospital at which you received treatment. You may be able to negotiate with the billing department or settle on a lower amount owed. The worst thing you can do is ignore your medical bills only to have them sent to collections. You want to do everything in your power to avoid that.
Plus, some hospitals, particularly non-profits, offer something called charity care for low-income families or those who are uninsured. You never know what financial aid programs your hospital has unless you ask.
Have you tried negotiating with the hospital to no avail? Then you might want to consider trying a professional service, such as copatient.com. Besides negotiating your medical bills on your behalf, Copatient also reviews your bills for any errors.
Hospitals aren’t exempt from making billing errors, and it’s important to ensure you’re on the hook for the correct services received, especially if you have insurance coverage. In fact, on its website, Copatient states that 80% of the billing statements it reviews contain errors. Unfortunately, medical bills can be hard to understand, which is why having a second pair of trained eyes to review it may help.
As Copatient doesn’t require you to pay for its services unless it’s successful at negotiating your bill, it could be worth a try. It charges you 35% of what it saves you, so if you were able to save $8,000, the fee would be $2,800.
Maybe you’ve tried negotiating your medical debt and either weren’t successful, or still can’t afford to pay. In that case, refinancing your medical debt is a solution you should look into, especially if your interest rates are high. Here are our top six choices for personal loan lenders for those with excellent and good credit.
We recommend refinancing with SoFi for a variety of reasons, and medical debt is no exception. While it doesn’t have a specific program for medical debt, most personal loan lenders will allow you to use a personal loan for just about anything, medical expenses typically included.
SoFi has some of the lowest APRs of any lender, with fixed rates ranging from 5.49% to 14.24%, and variable rates ranging from 5.21% to 11.67%. You can refinance $5,000 up to $100,000 on 3, 4, 5, 6 or 7 year terms as well.
There’s no minimum FICO score you need to qualify, though higher is better, as is not having any negative marks. Having a stable employment and education history will help you qualify for a better rate, too. You must be employed to be approved for a loan, and SoFi’s personal loan isn’t available to residents of Mississippi or Nevada.
SoFi uses a soft credit pull to provide you with estimated rates, and if you want to move forward with the loan, then it will use a hard credit pull. That means you can see if the loan is workable for you before committing and before having the inquiry impact your credit.
There are also no hidden fees with SoFi, so what you see is what you get in terms of the loan amount as there is no origination fee and no pre-payment penalty.
Earnest is similar to SoFi in terms of its low APRs. Fixed APRs range from 5.25% to 14.24%, but terms are 1, 2, and 3 years. This makes Earnest a good option for those with less debt, though you can refinance $2,000 up to $50,000.
The only downside to Earnest is that it isn’t available in many states. You must be a resident of the following states to be approved: AK, AR, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, MA, MD, ME, MI, MN, MO, NC, NE, NH, NJ, NM, NY, OH, OK, OR, PA, SC, TN, TX, UT, VA, WA, Washington DC, WI, WV, and WY.
If you don’t reside in a state on this list, check back often as Earnest has been adding several states to its roster over the last year.
You should have a minimum credit score of 720 to be approved for a loan with Earnest, though it also takes into account your savings, employment history, education history, and income. You can apply for a loan using your LinkedIn account (which pre-fills some fields for you), but it isn’t necessary.
Earnest doesn’t have origination fees or pre-payment penalty fees, though it does use a hard credit inquiry when you complete the application. According to its FAQ, it is working on building a tool that will give you preliminary rates and terms on a personal loan without a hard pull.
LightStream is an online division of SunTrust and offers great deals on personal loans. You can refinance $5,000 up to $100,000 on terms ranging from 2 to 7 years. Fixed APRs range from 5.99% to 16.44%, and there are no origination fees. Rates do vary based on the term you select, so be sure to look at all your options here.
LightStream has one of the faster application processes - if you get all the necessary documents in by 2:30pm ET, you may be eligible for same-day funding. Additionally, if you’re unhappy with the services provided by LightStream, its customer service is backed by a $100 guarantee.
LightStream requires a hard credit inquiry, which makes it a slightly less attractive option. You might want to check with the personal loan lenders that use a soft credit pull first.
Upstart and the following two lenders are better options for those with less-than-ideal credit, or those that haven’t been getting approvals elsewhere.
You can refinance $1,000 up to $50,000 with Upstart (be aware it says $35,000 on its FAQ page and $50,000 when you check your estimated rates). Fixed APRs range from 9.56% to 29.99% on its 3 and 5 year terms.
You need a minimum FICO score of 640 to qualify for a loan with Upstart, but that’s just one part of the equation. You should still have a clean credit report - no delinquencies, no collections, less than six inquiries on your credit report within the last six months, and you’ll also be required to verify your income.
Upstart has origination fees ranging from 3.655% to 8% of the loan amount, so take this into consideration when applying.
The good news is that Upstart uses a soft credit pull to give you estimated rates. A hard credit inquiry will happen should you choose to move forward with the loan.
Prosper, like LendingClub below, is a peer-to-peer marketplace. That means investors (individual and corporate) can fund your loan request, giving you a slightly better chance of approval.
You can refinance between $2,000 and $35,000 on terms of 3 and 5 years, and fixed APRs range from 5.99% to 35.99%. That’s a high cap, and as with any loan, you should run the numbers to make sure consolidating your medical debt this way will save you money.
Prosper isn’t available to residents of Maine, North Dakota, or Iowa. You need a minimum FICO score of 640 to qualify, and Experian is used to run credit. A soft pull is used at first, and a hard pull will not be used unless your loan gets funded.
There are no fees at all to post a listing to the marketplace, but if you want to fund your loan through Prosper, you will face “closing fees” ranging from 0.50% to 4.95%, depending on the “Prosper Rating” your loan is given. This rating is Prosper’s proprietary grading system, mostly for the benefit of investors, so they can evaluate how risky your loan is.
LendingClub is another peer-to-peer marketplace and its loan offerings are similar to those of Prosper. You can refinance $1,000 up to $40,000 on terms of up to 5 years. Fixed APRs range from 5.99% to 35.89%, and there are origination fees ranging from 1% to 6% of the loan amount.
LendingClub will loan to those with lower credit scores - as low as 600 - depending on the situation. You should still have a good track record with limited missed payments in the mast. LendingClub does not make loans in Iowa or West Virginia.
Shop Around for the Best Rates and Negotiate
If you’re one of the many people in the United States struggling to afford medical bills, then start working on a solution to overcome it. Try negotiating with your hospital’s billing department, review your statements for any errors, call your insurance company to see if anything can be done, and check to see if a personal loan will make things easier on you.
Depending on the interest rate your medical debt is at, a personal loan may or may not be the right fit for you. It’s important to get all the details so you can run the numbers to see if you’ll come out ahead with savings. That’s why it’s a good idea to shop different lenders, especially with the ones that don’t use a hard credit inquiry right off the bat. This allows you to get a preview of the types of rates and terms that are available to you.
Whichever route you decide to take, make sure you stay on top of your financial obligations. Don’t ruin your credit and your financial situation because you can’t afford to pay; this will only make things harder for you in the future. Take all the actions listed here instead of ignoring your bills, and you’ll come out ahead.