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With medical debt plaguing many in the U.S., it’s no wonder people are looking for ways to pay these bills.
While there isn’t always an easy or quick solution, consolidating your medical debt using a personal loan that has a lower interest rate than a credit card is one option you might consider.
What to know before you take out a personal loan to pay medical debt
It’s important to note that, before you consider taking out a personal loan to pay off medical debt, you should exhaust your other options first. Medical debt, after all, generally comes with low or no interest rates, while personal loans will charge interest rates that can be quite high if your credit isn’t excellent. There are also laws that protect consumers with medical debt that can make it far easier to manage and pay off than other forms of debt. For instance, the Medical Debt Relief Act dictates that credit bureaus will not report a medical collection on your credit report for six months after an account is sent to collections, and any medical collection account must be removed from your report within 45 days of the debt being paid in full. In general, noted the National Consumer Law Center, medical debt is considered a low-priority debt that you should not pay by incurring other debt.
Personal loans for your medical debt
Nevertheless, if you do find yourself in a real pinch, and you want to avoid having your medical debt sent to a collections agency, securing a personal loan is an option. Just be sure to do your due diligence and research the loans that will be best for you and your credit profile. Here are six loans that may work for your medical debt needs.
We recommend working with SoFi for a variety of reasons. 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 5.99% to 18.82%. You can borrow $5,000 to $100,000 on 24 to 84 month terms.
The minimum FICO Score is 680. Having a stable employment and education history can 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.
SoFi uses a soft 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 affect your credit.
There are also no hidden fees, origination fees or prepayment penalties when you work with SoFi.
Minimum Credit Score
24 to 84
No origination fee
SoFi offers some of the best rates and terms on the market. ... Read More
Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
Earnest is similar to SoFi in terms of its low APRs. Fixed APRs range from 5.99%to 17.24%, with terms that go from 36 to 60 months. With Earnest, you can borrow from $5,000 up to $75,000.
You can check this list to see if Earnest is able to lend in your state. If you don’t reside in a state on the list, check back often, as states are regularly added.
You should have a minimum credit score of 680 to be approved for a loan with Earnest, but 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 prepayment penalty fees. It also features a tool that will give you preliminary rates and terms on a personal loan without doing a hard pull.
LightStream is an online division of SunTrust Bank and offers great deals on personal loans. LightStream offers loans from $5,000 up to $100,000 on terms ranging from 24 to 144 months. Fixed APRs range from 4.99% to 16.79%, and there is no origination fee. Rates do vary based on the term you select, so be sure to look at all your options.
LightStream has one of the faster application processes — if you get all the necessary documents in by 2:30 p.m. ET on a banking business day, 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.
24 to 144*
No origination fee
LightStream is the online lending division of SunTrust Bank.... Read More
*Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.
Upstart is a better option for people with less-than-ideal credit or those who haven’t been getting approvals elsewhere.
You can borrow from $1,000 up to $50,000 with Upstart. Fixed APRs range from 6.53% to 35.99% on its 36 & 60 month terms.
You need a minimum FICO Score of 620 to qualify for a loan with Upstart, but that’s just one part of the equation. You should have a clean credit report, which means no delinquencies, no collections and fewer than six inquiries on your credit report within the past six months. You’ll also be required to verify your income.
Upstart has origination fees that can go Up to 8.00% of the loan amount, so take this into consideration when applying.
The good news is that Upstart uses a soft pull to give you estimated rates. A hard credit inquiry will happen should you choose to move forward with the loan.
Minimum Credit Score
36 & 60
Up to 8.00%
Upstart is an online lender created by ex-Googlers.... Read More
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. Prosper features a health care marketplace specifically for borrowers who are looking for help with medical bills, for which you can finance up to $35,000.
Fixed APRs range from 6.95% 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 Iowa or West Virginia. You need a minimum FICO Score of 640 to qualify. A soft pull is used at first, and a hard pull will not be used unless your loan gets funded.
Prosper charges an origination fee of 2.41% - 5.00%, depending on your creditworthiness.
Minimum Credit Score
36 or 60
2.41% - 5.00%
Prosper is a peer-to-peer lending platform that offers a quick and convenient way to get personal loans with fixed and low interest rates. ... Read More
For example, a three-year $10,000 loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR. You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. APRs through Prosper range from 6.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All loans made by WebBank, member FDIC.
LendingClub is another peer-to-peer marketplace, and its loan offerings are similar to those of Prosper. You can borrow $1,000 to $40,000 for terms of 36 or 60 months. Fixed APRs range from 6.95% 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. LendingClub does not offer loans to residents of Iowa.
36 or 60
1.00% - 6.00%
LendingClub is a great tool for borrowers that can offer competitive interest rates.... Read More
Alternatives to paying your medical debt with a personal loan
As previously noted, taking out a personal loan to pay medical debt should be a last-resort option. Here are some other strategies you can consider first to help manage your medical bills.
Negotiate with the hospital. If you’re struggling to pay your medical debt, you may be able to negotiate with the billing department at your hospital, or settle on a lower amount owed. Plus, some hospitals, particularly nonprofits, offer a service called charity care for low-income families or those who are uninsured. You can also ask to be put on a payment plan, or you can simply pay what you can afford each month to slowly bring down your balances. Before talking to the billing department, make sure you have a good idea of what kind of payment you can afford, so you aren’t walking into the conversation completely unprepared. That should help make negotiations less stressful overall.
Seek help from the pros. Have you tried negotiating with the hospital to no avail? Then you might want to consider trying a professional service, such as CoPatient, The Karis Group or Patient PAL. A professional service may be able to negotiate on your behalf and check your bills for 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, according to Medical Billing Advocates of America, studies have found 49% to 80% of bills include at least one mistake. Unfortunately, medical bills can be hard to understand, which is why having a pair of trained eyes to review them may help. Keep in mind that you will have to pay a fee for professional for-profit services, but many, including patient, won’t charge anything unless they can successfully negotiate for you and help you save on your bill.
If you are experiencing serious financial struggles, you may be able to look into a charity care program.
Consider a 0% interest credit card. Maybe you’ve tried options such as negotiating your medical debt and you either weren’t successful or you still can’t afford to pay. In that case, you may be able to secure a credit card that offers a 0% APR for a specific time period that can range from around 12 to 24 months. If you think you can pay off your debt before the promotional period ends, this may be a good option for your needs. However, keep in mind that once the promotional period ends, interest rates usually jump considerably. And if you are having trouble paying your debt now, the goal of paying off the credit card in the time allotted may be unrealistic.
There are also credit cards designed specifically for medical debt, including CareCredit. CareCredit offers a 0% rate as long as you can pay off the entire balance between six and 24 months, depending on your situation. However, once that promotional period ends, interest will be charged to your account from the date of purchase instead of simply on the balance you have left on your card, and the rates are high. So choose this option with real caution.
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 by neglecting to think through all of your options. Instead of ignoring your debts, find a solution that is right for your circumstances, and you may find the stress of medical debt can be significantly alleviated. You may also be able to avoid getting into major medical debt in the first place by establishing an emergency fund or looking into a health savings account if you currently have a high-deductible plan, or a flexible spending account if you have an employer-sponsored plan.