Dealing with a health issue can be very stressful. That pressure can intensify if you're suddenly faced with the prospect of paying thousands of dollars out of pocket, whether for the full cost of care or for what your insurance doesn't cover.
Ideally, healthcare expenses are manageable through insurance coverage or savings in health savings accounts and flexible savings accounts. But when unexpected costs arise, it's worth looking into options like medical loans.
Understanding how to get a medical loan or exploring medical financing solutions can help reduce financial stress and ensure you get the care you need without delay.
Healthcare financing options
Common medical financing methods include personal loans, payment plans through healthcare providers, credit cards, and crowdfunding. Each option comes with its own set of pros, cons, and eligibility requirements.
Health insurance coverage
The standard advice for picking a health-insurance plan goes something like this: choose one with a monthly cost (known as a premium) that you can afford and that covers the drugs and doctors you need.
If you're relatively healthy and don't expect to go to the doctor much, pick a plan with higher out-of-pocket costs and lower monthly premiums. If you need to see a doctor more or take prescriptions regularly, you might want a more expensive insurance plan that costs more each month.
Medical payment plans
Some medical care providers offer financing options like payment plans that allow you to pay in installments. Some such plans may be interest-free and others are promoted as a way to make payments in installments with deferred interest.
However, that could end up being pretty costly if you haven't paid your bills in full.
Health savings accounts (HSAs) and flexible spending accounts (FSAs)
Health savings accounts (HSAs) and flexible spending accounts (FSAs) allow you to set aside pre-tax dollars for eligible out-of-pocket healthcare expenses. While you can use these two accounts for the same types of expenses, the rules surrounding them are very different.
The biggest difference is that FSA money has to be used by the end of the year, while HSA money rolls over from year to year.
Personal loans for medical expenses
When to consider
A medical loan is a type of personal loan that can be used to pay for a wide range of expenses, including surgery, hospital stays, dental needs, and fertility treatments. Medical loans can also help pay for services not covered by health insurance. They are available through banks and online lenders, as well as credit unions. The loans are unsecured, so you won't have to put up your house as collateral.
Medical loan advantages include flexible repayment options, longer repayment terms, and higher loan amounts than some of the best personal loans. They also typically offer lower interest rates, longer repayment terms, and higher loan amounts.
As with any loan, be sure to review all the terms and conditions of a medical loan before committing. This includes checking for origination fees, late payment penalties, and the medical loan's annual percentage rate (APR).
Shopping for the best rates
Like most personal loans, loans for medical expenses typically come with fixed interest rates and a fixed repayment period. That compares to credit cards, which charge variable rates and offer fluctuating payments.
The best medical loans are usually unsecured loans, meaning you don't have to put up high-worth assets as collateral. Medical loans can be used to cover co-pays and deductibles, cosmetic surgery, and hospital stays.
Secured medical loans are also available, especially for borrowers with poor credit. Like the best bad credit loans, secured loans require collateral but may offer lower interest rates and higher approval odds. Secured loans can be a good option if you're struggling to qualify for unsecured financing, but keep in mind that you risk losing your asset if you default.
Another way to improve your chances of approval or secure better terms is by applying with a co-borrower or cosigner, particularly one with a strong credit profile.
A medical loan works in the same way as other personal loans in that you pay it off in equal monthly installments over a set period of time. You can also usually pay off the loans early without penalty. In most cases, the lender will ascertain the end use of funds.
How to get a loan for medical expenses
Applying for a medical loan is a straightforward process. Here are the steps the apply:
- Determine how much you need and make sure it's enough to meet your medical expenses.
- Create a budget to determine how much you can repay monthly.
- Check your credit scores. This determines the interest rate you'll get on your medical loans. Like with most loans, the higher the credit score, the more attractive the interest rates. Checking your credit score enables you to know where you stand.
- Research different loan service providers and get a loan pre-qualification : Read everything you can across the internet to learn more about medical loan service providers, specific terms and conditions, maximum permissible finance limits, interest rates, repayment terms, etc.
- Select the lender and complete the formalities. Once you decide on a lender, apply for your medical loan. Should you be approved, it won't take long to get the funds.
Medical credit cards
Credit cards can also help cover medical expenses. The best 0% APR credit cards offer a credit line for large costs without accruing interest for a limited time. There's almost always a selection of big bonuses that can offset your purchase, and your sizable purchase will go a long way toward meeting the minimum spending requirement.
You can also get a healthcare-specific credit card, such as CareCredit. Special financing options may be available, as well as shorter financing terms. The downside is the same as with regular credit cards. If you make late payments or have an unpaid balance once this promotional period ends, you may end up with significant interest and fees on top of your medical bills, hurting your credit score.
However, if you consistently make timely credit card payments, this can improve your credit score and show credit bureaus you are trustworthy lender.
Crowdfunding for medical bills
A creative way of getting money for healthcare is to crowdfund. In fact, there's at least one provider 100% dedicated to healthcare crowdfunding, CoFund Health. The downside there is that you might not raise enough to cover your costs.
Financing medical expenses FAQs
What should I do if my health insurance doesn't cover a necessary procedure?
If your insurance doesn't cover a necessary procedure, you can appeal the decision, look into payment plans from your healthcare provider, consider a personal loan, or explore programs offered by non-profit organizations.
Can you take out a loan for medical expenses?
Yes, you can take out personal loans for any medical expense. They offer flexibility to cover various costs, including procedures not covered by insurance, medication, and aftercare. However, be sure to compare interest rates and terms before committing.
How does crowdfunding for medical bills work?
Crowdfunding for medical bills involves raising funds on platforms like GoFundMe. It requires setting up a campaign detailing your situation and financial needs, and sharing it on social media and other networks to solicit donations.
Are there specific credit cards for medical expenses?
Yes, there are specific credit cards designed for medical expenses, such as CareCredit. These cards tend to offer promotional periods with no interest, but it's crucial to pay off the balance before the promotional period ends.
How can I dispute a medical bill I believe is incorrect?
To dispute an incorrect medical bill, request an itemized statement, review it for any errors, and compare it against your insurance coverage. If you find any discrepancies, contact the healthcare provider's billing department and your insurance company to challenge the charges.
