What Are Medical Loans and Where Can You Find Them?

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Updated on Tuesday, May 26, 2020

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?

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
Medical loans: pros and cons

Pros:

Cons:

  • Access procedures you can’t pay for upfront
  • Consolidate medical debt to make your payments more manageable
  • Refinance medical debt to a lower interest rate
  • Build credit with on-time payments
  • Costly interest and fees
  • Good credit may be needed to qualify
  • Potential to end up in too much debt

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

LenderAPR rangeLoan amount
EarnestAs low as 4.99%$1,000 to $100,000
LightStream5.95% to 20.49%$5,000 to $100,000
OneMain Financial18.00% to 35.99%$1,500 to $20,000
Rocket Loans7.16% to 29.99%$2,000 to $45,000
SoFi5.99% to 18.28%$5,000 to $100,000
Upstart8.69% - 35.99%$1,000 to $50,000

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 600; 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® credit card, for example, has a standard cardholder APR of 26.99%. 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.

FAQ: medical loans

You’ll have the best chance of qualifying for a medical loan if you have good or excellent credit, which is a FICO score of 670 or above. However, many online lenders accept personal loan applicants with credit scores in the low 600s, and a few even accept applicants with scores in the 500s.

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