What are Medical Loans and Should You Apply for One?
June 4, 2021 by Daniel Azzoli
If you ran into an unexpected medical expense without the money to handle it, you wouldn’t be alone. Research shows that in 2019, 137 million Americans experienced some level of financial problems because of medical expenses.
With the steep cost of healthcare and the lack of insurance coverage some people may experience, where should you turn to in order to get the money you need to help you handle your emergency medical expense? Well, if you’re dealing with an unexpected (and pricey) medical situation, you’ll likely want to deal with the bill promptly to avoid dealing with a collections agency and subsequently hurting your credit score.
One potential option may be to look for medical loans that suit your financial situation. But before you take on debt, you’ll want to make sure you understand what medical loans are and whether or not they’re right for you. Today, we’re going to help clear some of the air by defining loans for medical bills, looking at some potential alternatives, and going over things you can do that may help you limit your medical debt.
What are Medical Loans?
In simple terms, medical loans are personal loans that you would apply for to help you deal with an unexpected medical expense. These will typically come in the form of unsecured personal loans and your credit score may play a role in determining whether or not you get approved.
Having said that, there may be medical loans for bad credit wherein the financial institution issuing the loan focuses less on your credit score, and more on things like your employment status and income to determine your creditworthiness. Keep in mind that these personal loans will typically come with high interest rates, so they should only serve as a last resort in emergency situations.
Why Apply for a Medical Loan?
The main reason to consider a loan for medical expenses is to pay for an emergency medical expense when you don’t have the savings to handle it right away, and to avoid having an unpaid bill go to collections. Depending on the type of personal loan you apply for, you could spread out the cost of your expense to manage the payments over a longer period of time.
Some of the potential benefits of personal loans for medical procedures include:
- If you apply for an unsecured personal loan, you won’t need to put up collateral to get approved.
- If all your savings are tied up in paying for your medical expense and you run into a separate emergency expense – like an unexpected car or home repair – you can apply for a personal loan to help you deal with the additional expense.
- If you like the idea of having your payments spread out over a longer term, you can apply for a personal installment loan which does just that.
While there are definitely benefits to loans for medical bills, there are also some things you should keep in mind, like:
- You may have a hard time paying them off if you’re already struggling to keep up with your regular expenses. Always make sure you can afford a loan before you apply for it, and if you need to make a little extra room in your budget, look for ways to reduce spending and cut costs.
- Ultimately, taking out a loan will only increase the amount you owe in the end, so you should only apply for these personal loans as a last resort.
3 Potential Alternatives to Medical Loans
Before you take on debt to help you deal with a medical expense, you may want to explore some other avenues first. Here are three things to consider before applying for a loan for medical expenses.
1. Speak to your Health Care Provider
If you end up in a situation where you’re facing a medical expense without the means to pay for it, your health care provider might be able to give you a hand. First off, check with the hospital to see if they have any financial aid programs. They may have programs specifically to help people from low-income households pay for essential medical procedures. While you may not be eligible to get your entire expense covered, they may still take care of a portion of the cost. They might even reduce your bill if you don’t have insurance.
Another potential outcome for those who don’t have insurance is that the hospital may agree to some type of payment plan. If they do, this would likely be a cheaper option than applying for a medical loan as they likely won’t charge interest.
2. Double Check Your Claims with Your Insurance Company
If your insurance company is covering part of the cost of your expense, take a look at your bill and make sure everything is accurate. There may have been some errors made during the claims process, and it’s possible that some part of your expense wasn’t covered when it should have been. If this is the case, get in touch with your provider and bring the potential error to their attention.
3. Use Your Credit Card
If you know you’ll be able to pay off the cost of your medical bill before the next due date on your credit card, it might make sense to use it to take care of your expense. This way, you can avoid the interest and fees that come with medical loans. Just make sure that you’ll be able to pay it off in time, as the interest rates of credit cards are generally fairly high.
3 Ways to Limit Your Medical Debt
If you want to avoid the debt that can come from medical expenses, you’ll want to prepare for unexpected expenses in advance, and take the necessary preventative measures. Here are some tips to help you do that.
1. Put Together an Emergency Fund
One of the best things you can do to prepare for an unexpected medical expense – or an emergency expense of any kind – is to put together an emergency fund. This is a savings account specifically reserved to help you handle any surprise expenses that may come your way.
The size of your emergency fund can vary based on a few different factors, but it’s usually a good idea to have at least a few months worth of living expenses saved up. We know this is a tall order, especially if you’re living on a tight budget, but no one expects you to save up this much overnight. Try to contribute to it when you can, and even if you can’t cover the entirety of your expense with the money in your emergency fund, every little bit helps!
2. Check in With a Nurse Hotline
A trip to the emergency room can get expensive, so while you want to put your health first, you also want to make sure you avoid going when it’s not completely necessary. If you’re struggling to make this decision, tap into your insurance company’s 24-hour hotline (assuming they have one) to speak to a nurse. They should be able to provide you with some guidance based on the details you give them. If you don’t currently have health insurance, you should be able to find a free hotline that provides the same service.
3. Maintain a Healthy Lifestyle
While some emergency medical situations are impossible to avoid, the truth is, a lot of health issues can be prevented by taking care of yourself. While no one is saying it’s easy, take stock of your lifestyle and see if there are any changes you can make to improve your health. Do your best to exercise, maintain a healthy diet, and cut out unhealthy habits like smoking and excessive drinking. You can also check in with your family doctor to see if there are any problems you should be aware of. If there are, they may be able to give you some guidance on more preventative measures for you to take.
Consider Medical Loans When You Have no Other Option
Like we’ve said, the only time you should consider taking on debt through medical loans is when your back is against the wall and you have no other options. Your first steps when facing a medical expense should be to see if your health care provider will agree to a payment plan, check to see if you can cut costs from your budget, and go through your insurance company. You should also focus on putting preventative measures in place to help avoid these expenses in the first place.
Having said that, if you’re facing down a hefty medical expense and you don’t want your bill to go to collections, personal loans for medical bills can be a viable option to get the money you need. If you want to learn more about online loans that may be able to help you out in times of emergency, click here!