Medical Loans

Specialized medical financing companies make it easier for patients to obtain a wide range of medical, surgical, cosmetic, bariatric, dental, and therapeutic procedures and treatments. Many of these procedures cost thousands of dollars and are not covered by conventional medical or health insurance plans. It is often the case that patients forego needed treatments because they can’t afford them. In general, you need good credit to obtain a medical loan. But, financing options are available for people with less-than-perfect credit.

Financing for a medical procedure could be the single most important type of loan you ever apply for. Whether it’s In Vitro Fertilization (IVF), elective or cosmetic surgery, or dental rehabilitation, major medical therapies can change your life and the lives of those around you. It is very important to consider every option to prior to taking on a medical loan because:

  • Some or all of the surgery may actually be covered by your health insurance
  • You might be able to take out a conventional loan from a bank, credit union, or online lender
  • You may be able to use alternative financing source such as an online lender or in-office financing
  • A combination of all of these options could be available to you

All financing options have their advantages and disadvantages. In most cases, medical financing is available as an unsecured personal loan. However, appropriately evaluating where you stand with each option is key to developing a custom-tailored borrowing strategy that will improve your health while not overburdening you with debt.

Obviously, having some or all of your medical, surgical, or dental treatment, procedure, or therapy is the most desirable option. Health and dental insurance can be confusing. Terms such as “in network”, “out of network”, and “co-pays”, need to be entirely defined and understood when it comes to how they apply in your specific case. If you are insured, most insurance company have 24-hour a day, 7 days a week benefits hotlines. Get on the phone with one of their insurance specialists and have them walk you through every aspect of your plan and how it relates to your upcoming treatment. You don’t want to show up for your procedure, provide them with your insurance details, and then be told after the fact that you’re not covered for the medical or dental care you received. Believe it or not, this happens all too often and you’ll be held accountable for the outstanding hospital bill.

Taking out an unsecured personal or signature loan may be an option to fund your medical treatment. Though most banks or credit unions don’t advertise a “medical loan”, they are compassionate when it comes to funding important health needs. If you have good credit, a strong credit history, a low debt to income ratio, and stable employment and income, obtaining an unsecured loan is relatively simple. Banks and credit unions generally have a low Annual Percentage Rate (APR) and you can borrow between $5,000 and $35,000. Depending on your personal situation, they may even lend you more. You should shop around for a loan that is right for you and fits with your repayment abilities. There is no harm in competing multiple lenders against each other to ensure you get the amount you want as well as the most competitive terms and rates. In many cases, these loans can be funded within a day or so, allowing you to immediately proceed with your treatment plan.

There are also alternative lenders such as online and Peer to Peer (P2P) lenders that specialize in providing medical loans. These lenders have approval processes that are less strict than banks and credit unions, allowing them to lend money to riskier borrowers. Of course, that comes with a downside, namely higher loan fees and APR. It is important to understand all aspects of the loan that you’re applying for. The fine print of your loan may contain language that sees a higher APR triggered in the event of late payments or non-payment. You need to ensure you read every word of your financing agreement to ensure a once manageable loan doesn’t become a high interest and unmanageable debt. Online and P2P generally issue loans up to $35,000. However, it may be possible to borrow a higher amount if you have exceptional credit and strong income. But, it should be noted that if you have average or a lower credit score, these lenders may be your only option given the risk you present as a borrower.

Do not use your credit or charge cards to cover medical bills. These cards carry the highest interest rates and you could be saddled with the debt for a lot longer than if you took out a loan specifically for your procedure. Depending on the credit card, you could be paying an APR of up to 30%. If you have a medical bill for $10,000 on your credit card, this translates in up to $3000 per year in interest, not considering any additional cardholder fees you may have to pay. It is very often the case that people immediately swipe their credit or charge card to pay a medical bill. You should carefully consider the financial ramifications to you before doing so. Especially in the case of cosmetic surgery, many people “impulse buy” these services. The need to look better or even just feel better about themselves through veneers or breast augmentation surgery or implants outweighs any financial aspect of the purchase of services. You should always take your time in making these decisions for both your overall personal and financial health.

If the surgery is cosmetic or elective and you can delay undergoing the procedure, saving up some money, using your health insurance for partial coverage, and offsetting the balance with a signature loan is also a great option. This approach shows maturity in your personal financial management. You’re sharing the responsibility of your health among various cash and non-cash options. If you have decent credit and this is your plan, nearly all banks would issue you a loan given that you were showing them you were working upfront to lessen their risk and your overall debt. But, it is known that even if you’re responsible with your finances and have savings, unforeseen emergencies can come up that you’re just not equipped to address alone. So, understanding your financial options even as a contingency plan is a smart thing to do. 

Tip 1: Creating a “slush fund” that you allocate a portion of your monthly earnings to is a sound personal financial plan. The “slush fund" can be used for any purpose, including medical, dental, surgical, or therapeutic treatment. If IVF is a requirement for you and your family, setting up an separate fund for this purpose will save you from having to take out a larger loan to cover the cost of the service (which can run up to $100,000). Having cash on-hand is always the best way forward in any medical-related situation. But, given that emergencies do come up, saved cash coupled with responsible borrowing will help you lessen a sudden debt as a result of a health issue or other expense. Be sure to plan accordingly so you don’t find yourself in an unmanageable financial situation.