Medical loans are a type of personal loan used to pay for medical expenses. You’ll likely find them through online lenders, although some banks and credit unions offer personal loans that can be used to cover medical costs.

Loans for medical bills can help you pay for both planned and unexpected health care expenses, such as a scheduled surgery, ER visit or an ongoing prescription cost. They may also be able to help you consolidate medical debt into a more affordable package or pay for charges your insurer doesn’t cover, such as dental or vision services.

Despite these advantages, medical loans can be one of the more expensive ways to pay for medical needs, especially if your credit isn’t good enough to qualify for some of the best loan terms available to you. Before taking out a loan, research all your options and compare costs using our guide below.

• What are medical loans?
• Is a medical loan necessary?
• 10 reasons a medical loan may be worthwhile
• Medical loans: pros and cons
• What should I consider when comparing medical loans?
• 6 medical loan lenders
• Can you find a medical loan if you have bad credit?
• 3 medical loan alternatives
• FAQ: medical loans

What are medical loans?

Medical loans come as unsecured personal loans. That means they don’t require any kind of collateral, such as a house or car, in case you default on paying the loan back.

Lenders have different requirements for medical loans. In most cases, though, you’ll be able to use a loan for standard medical services and equipment, such as surgery, emergency care visits, drugs, physical therapy and long-term rehabilitation. Your loan may also help you cover less common costs, such as those for orthodontics, cosmetic surgery, dialysis and fertility treatments. Often, you can get a medical loan quickly, sometimes the same day you apply.

When you take out a loan for medical expenses, you’re given a lump sum of money that’s then repaid in fixed monthly payments plus interest. To determine your interest rate, lenders usually look at factors such as your financial history, credit score, employment status and monthly expenses compared to income.

Is a medical loan necessary?

Taking care of medical debt is important: If not addressed quickly, it can deeply damage your credit profile.

Still, before taking out a medical loan, review your medical bill for possible errors. Also,

speak with your medical provider about payment options. Some providers, like hospitals, may be able to offer you a payment plan, direct financial assistance or a discount that can be more affordable than paying interest, possibly for years, on a health care loan.

If you don’t have health insurance, you might be able to qualify for government and community programs that can help cover the cost of a necessary medical procedure. On the other hand, if the procedure isn’t urgent, consider delaying it until you’ve saved enough money.

10 reasons a medical loan may be worthwhile

1. Emergency medical expenses
2. Medical debt consolidation
3. Dental work or orthodontics
4. IVF or fertility treatments
5. Cosmetic surgery
6. Weight loss surgery
7. LASIK surgery or other vision procedures
8. Hair loss or hair replacement
9. Chiropractic services
10. Prescription costs

What should I consider when comparing medical loans?

• APR (annual percentage rate): Usually the lower the APR, the more affordable the loan.
• Fixed vs. variable interest: A fixed rate will stay the same throughout the life of the loan, while a variable rate may change.
• Loan terms: Longer terms mean smaller monthly payments but perhaps more interest in the end.
• Eligibility: Your lender may not require a specific credit score but will still consider factors such as credit history, income and how well you pay back other types of debt, such as a credit card or mortgage.
• Origination fees: You may be charged a loan origination fee equal to 1% to 8% of your overall loan amount. The fee will be deducted from your balance upfront, making the loan more expensive.
• Loan amounts: Don’t borrow more than you need, but also make sure the lender will loan you enough money to cover your medical expense. Loan minimums may vary by state.
• Time to funding: Check to see how long it will take to receive your funds and whether the process can be completed online, especially if you need money quickly.

6 medical loan lenders

Can you find a medical loan if you have bad credit?

It’s possible to find a medical loan if your credit score is not ideal. In fact, you might be able to qualify with some of the lenders mentioned above.

Here’s why: Rather than focusing just on credit scores, some lenders look at a range of information, such as your income and overall borrowing behavior. For example, Upstart will consider applicants who have a FICO® or Vanguard score as low as 620; however, it will also check to see how much debt you carry relative to income and whether you have any accounts overdue.

In general, if your credit is less than ideal, expect higher interest rates and smaller loan amounts.

3 medical loan alternatives

Payment plan

Most medical providers will work with you to set up a payment plan if you can’t pay your bill upfront. Hospital payment plans are often interest-free, and those that do charge interest may still be more affordable than a medical loan. These plans may not even involve a credit check.

Often, hospitals also offer financial assistance programs that can be used together with a payment plan. These programs provide discounts on medically necessary services for low-income and uninsured patients, which, in turn, can make the payment plan more affordable. The discounts depend on both household size and family income and are based on federal poverty guidelines.

Still, hospital payment plans have one big drawback: Because they are either low-interest or interest-free, they require a faster payback time. Medical loans usually come with loan terms of anywhere from two to seven years, but many hospital payment plans need to be paid off in one to two years. Of course, this can be an advantage if you’re trying to pay off your debt quickly and avoid interest fees, but it means you’ll see higher monthly payments.

Medical credit card

A medical credit card is a credit card for paying medical bills, and you may find them offered by your medical care provider or an independent company. You may be able to use the card to pay off medical bills over a period of years at a more attractive and often fixed rate. In some cases, the card may also come with a 0% APR promotion that lasts longer than for a regular credit card, say 24 months versus the 6 to 18 months now common.

CareCredit is a widely accepted health care credit card. It currently has no annual fee and offers promotional financing to applicants who’ve been approved for credit. You can use the card to pay for medical expenses, say, an emergency hospital visit or monthly prescription charge, as they arise. You can also use it online to access tools for finding doctors and service providers, such as medical specialists, primary care physicians and pharmacies.

Still, accessing a medical credit card that’s both flexible and convenient might not be your most affordable option for tracking medical bills. The CareCredit Card, for example, has a standard cardholder APR of 26.99% variable. That’s high compared to rates charged by some of the medical loans mentioned above.

Introductory 0% APR credit cards

An introductory 0% interest credit card may also help you pay off medical bills interest-free and sometimes over a period of a year or more. With a card like this, you won’t incur any interest charges as long as you pay off your balance before the intro period ends.

Pay attention to the terms of the introductory offer if you’re using a credit card for medical expenses. You’ll want a card with a 0% intro APR on new purchases if you have an upcoming medical expense, while a credit card with a 0% intro APR on balance transfers can help you pay off existing debt. The longer the introductory period, the better.

You’ll need good credit to qualify for an intro 0% APR credit card, and even if you do qualify, you might not be offered a high enough credit limit to cover the cost of your medical expense. If you have good credit, though, it’s worth a try, as these offers can save you money in interest. Some also come with sign-up bonuses or credit rewards that might add up quickly with a large medical charge.

Personal loans are a versatile form of credit. You can use them to consolidate other high-interest debts, pay for home improvements and more. Because they usually come with fixed interest rates and repayment schedules, you know exactly how much you need to pay each month and when your debt will be paid in full.

Still, taking on any type of debt is a serious responsibility. This personal loan guide will help you learn more about how personal loans work, which pitfalls to avoid and some alternatives to consider.

Part I: Personal Loans 101

How do personal loans work?

When you apply for a personal loan, you borrow a specific amount of money — most often at a fixed interest rate — for a set amount of time. Then you pay off your balance monthly until it’s paid in full.

The terms of your personal loan will depend on your unique financial situation and your lender. The loans are typically offered in amounts ranging from $1,000 to $50,000, and potentially even higher, depending on the lender. As for the repayment period, the loans’ terms often range from one to five years, but can potentially go up to 15 years for purposes such as home improvement.

Personal loans are unsecured debt, meaning they’re not secured by an underlying investment like a home or a car. For that reason, they usually come with higher interest rates than you might get with a mortgage or auto loan.

To get a real sense of how much a personal loan will cost you, keep an eye on the annual percentage rate, or APR. It includes interest and other costs, which could include an origination fee. An origination fee is a loan processing fee that can typically be 1% to 8% of the loan amount; however, some lenders, such as Lightstream and Discover, don’t charge any origination fees at all.

Pros and cons of personal loans

Pros

• Interest rates can be lower than credit cards. While interest rates on personal loan offers have risen lately, they can still be a good option for consolidating high-interest credit card debt, especially if your credit is top-notch. The average APR on a personal loan offer from a lender is now 11.81% for borrowers with excellent credit, and 15.61% for those with very good credit, according to recent data from parent site LendingTree; in contrast, companion site CompareCards lists the average APR on all credit accounts is 15.09%.
• Quick access to funds. Depending on your lender, you may receive funding for a personal loan in just a day or two.
• Predictable payments and interest. Because personal loans generally come with fixed rates and payment terms, you may not have to worry about your interest rate or monthly payment going up. That makes it easier to budget.

Cons

• Could lead to overspending. Personal loans can be used for almost any purpose, which could lead you to borrow more than you can afford to repay each month.
• Higher interest rates than some loan products. For example, if you have equity in your home and good credit, you may be able to get a better rate with a home equity loan or line of credit.
• Damage to your credit if you don’t pay. Some lenders offer options for borrowers facing financial difficulties, and may work with you if you lose your job or face other financial troubles. However, your credit might be damaged if you ultimately can’t make your payments.

What you may need to qualify for a personal loan

• Good or excellent credit. If your credit score is 640 or lower, it will likely be more difficult to get approval for a personal loan (although some personal loan companies might still work with you). By contrast, having good credit (a FICO score of at least 670) will give you more borrowing options, and a score of 740 will let you qualify for loans with the best interest rates and terms.
• Low debt-to-income ratio. Lenders might be hesitant to lend money if your debt-to-income ratio is too high. This ratio is determined by taking your total monthly recurring debt and dividing it by your gross monthly income. For personal loans, lenders usually like to see a DTI ratio of 36% or less. Still, even with a high DTI, you may qualify for a personal loan if your credit score meets a lender’s criteria, and you have both a solid income and credit repayment history.
• Cosigner or collateral. If you have a bad credit score, you may need a cosigner with good credit or collateral to help you qualify for a personal loan.

How to pick the best personal loan

Here are tips that can help you identify a personal loan that’s right for you:

• Shop around with different lenders. Gather information on personal loans to compare interest rates and loan terms from various lenders.
• Read the fine print. Make sure you understand your contract, your monthly payment and all terms and potential fees.
• Read reviews. Reading reviews of top personal loan companies can help you gauge the quality of each lender and what your experience might be like.

Part II: Common Uses for a Personal Loan

You might be surprised to know just how many uses personal loans can have. According to an April 2020 report from LendingTree, some of the top reasons applicants seek personal loans include:

• Credit card refinance: 32.0%
• Debt consolidation: 31.0%
• Home improvement: 8.5%
• Major purchases: 5.0%
• Car financing: 4.3%
• Business: 1.8%

These numbers don’t mean personal loans are the right choice in every borrowing situation. Here’s some more information about potential uses, along with some pros and cons:

Part III: Personal Loan Traps and Scams to Avoid

Here are some personal loan traps you should consider:

Advance loan fees

Occasionally, a fraudulent loan company will offer outrageous loans and loan terms with a catch: You must pay upfront fees or “insurance” to qualify.

Look out for lenders who ask you to wire funds via Western Union or MoneyGram — reputable lenders won’t ask you to pay money upfront.

‘No credit check’ loans

According to the Federal Trade Commission (FTC), a lender who isn’t interested in checking your credit is a red flag.

Steer clear of ads and websites that promise “Bad credit? No problem” or “We don’t care about your past,” the FTC cautions. These slogans usually signal a scam.

Precomputed interest

Some personal loans might come with precomputed interest, which means they use the original payment schedule to calculate interest, even if you make payments early. This forces you to pay more interest over time, even if you make larger payments or try to pay off your loan early.

Prepayment penalties

Some personal loans tack on a prepayment penalty if you pay your loan off early. And while prepayment penalties aren’t that common, they are unnecessary. Be sure to read through your loan terms to check for a prepayment penalty before you sign the agreement. If you find one, consider opting for another lender.

Part IV: Alternatives to a Personal Loan

Personal loans vs. credit cards

Credit cards can be a great deal if you pay them off monthly, as you have the potential to earn rewards.

Personal loans vs. HELOCs

A home equity line of credit (HELOC) is a revolving line of credit secured by your home. HELOCs often have lower interest rates than personal loans, and you may be able to deduct the interest if you itemize your taxes. By contrast, interest paid on your personal loan is not tax-deductible.

Personal loans vs. cash-out refinance

A cash-out refinance lets you take out a new mortgage that’s more than what you now owe, and pocket a portion of the loan as cash. It usually comes with a lower interest rate than a personal loan, but with longer terms, so you could end up paying more overall. If you’re opting for a cash-out refinance, check this calculator to determine how much you might be able to borrow, and what your new monthly mortgage payment will be.

Unsecured personal loans vs. secured personal loans

A secured personal loan requires borrowers to use an asset, like a vehicle or certificate of deposit (CD), as collateral. A lender can repossess the asset if the borrower fails to make payments, so interest rates on secured personal loans tend to be lower than those on unsecured loans.