Dec 20, 2019
By Mariclare Cranston, Content Specialist

Using a Personal Loan for Medical Expenses

Medical expenses can use up your Savings faster than you may think. If you are faced with major medical expenses, you have options. While reaching for your credit card may be your first instinct, keep in mind that doing so will often add a hefty interest rate to those expenses. A Personal Loan, on the other hand, will likely carry a lower interest rate as well as a fixed term, giving you the comfort of knowing exactly when your loan will be paid off.

What can I use a medical expense loan for?

Funds from a medical expense loan can be used for any number of medical costs. From paying for deductibles to procedures not covered by insurance, you can use a medical expense loan for:

  • Emergency medical procedures. When your health is on the line, you don’t have time to wait for your insurance to process claims and pre-approvals. A medical expense personal loan may be able to provide you with the money required to seek the treatment you need.

  • Planned medical procedures. Most major health plans carry large deductibles. If you are scheduled for a medical procedure and are facing a deductible, a medical expense personal loan can help ease some of that burden.

  • Medical devices and supplies. Equipment such as walkers, wheelchairs, breathing equipment and ramps may not be covered by your insurance. Before using your credit card to purchase medical devices, consider applying for a personal loan. You may be able to purchase the equipment you need at a lower interest rate.

  • Elective medical procedures. Procedures like botox or cosmetic plastic surgery may not be covered by your insurance at all, leaving you to finance the entire expense yourself. A Personal Loan can help you to avoid using a higher interest rate credit card for your procedure.

Estimate your monthly payment using our Personal Loan calculator.

Is a Personal Loan better for medical expenses than a Credit Card?

Personal Loans can be more attractive than Credit Cards for medical expenses. Putting a large charge on your credit card will add up over time thanks to higher interest rates. The example* below shows that using a Credit Card means you could end up paying almost double the amount of interest.

Total interest paid for Medical Expenses on a Personal Loan compared to a Credit Card

Furthermore, many Credit Cards carry a variable interest rate. On the other hand, personal loans have fixed interest rates. This ensures that your monthly payment will be the same each month, provided you don’t accrue any late fees. Knowing exactly how much your monthly payment will be allows you to adjust your budget and determine the affordability of your Personal Loan. Personal Loans also carry flexible terms, allowing you to select a term that best works with your financial picture. The available terms will depend on your financial institution. At MHV, Personal Loans carry terms up to 60 months, giving you the freedom to find a payment that will work with your budget.

Do I qualify for a medical expense loan?

Lenders will often look, at the very least, at your credit score and your debt-to-income ratio (DTI) before deciding to lend to you. Your credit score is a mathematical analysis of how likely you are to repay your loan on time. Your score factors in things like how many loans or credit cards you have, how well you pay your bills on time, how much of your available credit you’ve used and how old your oldest credit or loan account is. All of these factors are weighted and combined to assign you a score. It is very important to have a good understanding of what your credit score is before you begin the process of applying for a Personal Loan. If your score isn’t high enough, there are steps you can take to work on improving it.

DTI measures how much debt you currently have relative to your income. A DTI that is too high suggests you may be spread too financially thin to be able to make the payments on your Personal Loan. Even if you have a good credit score, a high DTI can cause some lenders to deny your application. Using a monthly budget tool is a great way to manage your finances and keep your debt at a manageable level.

For more information on understanding your credit, watch our brief explainer video here. 

Is a medical expense loan right for me?

If you are facing medical expenses, try talking to your medical provider first. Often, they are willing to work with you to establish payment plans. In addition, there are specialty medical credit cards that could be a viable option, if you can pay off the balance within the introductory term. View the terms of these specialty cards carefully, though, for the interest rate after the introductory period can be over 20%. Once you have talked to your medical provider and looked at other viable payment options, consider a Personal Loan to avoid using higher rate credit cards.

Can I reduce my medical expenses?

Unpaid medical debt can impact your credit score, but there are options available to help you avoid that. Here are some tips to help you potentially lower your medical expenses.

  1. If your procedure is planned and not an emergency, ask about any available discounts. Be sure to find out well ahead of the procedure whether your insurance company will cover any or all of it. If not, talk to your provider so that they are aware of your financial situation.

  2. If you can, pay in cash. If you are paying for your procedure with cash, this saves the medical office on credit card processing fees, and ensures that they are getting payment immediately. Some providers will offer a discount for this.

  3. If you will require medical equipment, research community programs that may offer trial equipment so that you can determine which brand and style will work for you, without having to purchase it first.

  4. Be sure to check the billing and insurance statements thoroughly. Any small error in codes can impact how much you are being billed for the procedure.

  5. Be assertive, but not aggressive. Approaching your medical provider and insurance company in a calm but confident manner will go further than waiting until the stress of the situation overwhelms you. Medical offices and insurance companies know how costly medical expenses can be and are often willing to work with patients.

Dealing with medical bills can feel overwhelming. Reaching out for help and doing some research into your options can help ease that burden.

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