Medical Loans: Should you use a personal loan to pay for medical procedures?

Health insurance helps you pay for medical care, but if you have no coverage or limited coverage, you’ll have to pay costs out-of-pocket. And most providers won’t treat you until you come up with the money, even if you’re in pain or sick. Medical loans can help you get medical care faster when you can’t pay in cash. 

You can use medical loans for inpatient or outpatient surgery, emergency care, medical devices or equipment, dental or vision care, and even elective procedures. But should you get a loan to pay for medical bills? 

Understanding how medical loans work can help you to decide if this borrowing option is right for you. 

What is a medical loan?

A medical loan is an installment loan to cover medical or health care expenses. You can find these unsecured personal loans at traditional banks and online lenders. 

Medical loans deliver a lump sum to cover a wide range of health care costs. You then pay back that money with interest in monthly installments.

Some of the things you can use medical loans to pay for include:

• Cosmetic surgery
• Weight loss surgery
• LASIK treatment
• Hospital bills for lab tests or screenings
• In vitro fertilization 
• Cancer treatment
• Treatment for other chronic illnesses
• Braces or dental implants
• Travel expenses associated with medical care

You could also take out a medical loan to consolidate existing medical debt. You'd use the loan proceeds to pay off outstanding medical bills, then make one payment to the loan going forward. 

Since these loans are unsecured, there's no collateral required. Medical loans typically have fixed interest rates so you have predictable monthly payments. You can easily calculate how much interest you'll pay over the life of the loan.  

Pros and cons of a medical loan

5 reasons to take a medical loan

When should someone take out a medical loan? The answer depends on your financial situation and medical expenses. However, there are a few scenarios in which a medical loan could be a good financing option. 

1. You need to borrow a significant amount. Medical loans can take time to set up and there may be fees involved. For smaller amounts, it might be cheaper and easier to use a credit card and repay it right away. 
2. You have good credit. A good credit score helps you qualify for the lowest rates on a medical loan, better than other financing options. 
3. It's an emergency. An emergency fund can provide you with cash for unexpected expenses. But if you're short on emergency cash, you might use a medical loan to make up the difference. 
4. You're changing insurance. If you're changing insurance companies or starting a new job and your health insurance hasn't kicked in yet, you might use a medical loan to pay for health care temporarily until your new plan takes effect. 
5. It won't strain your budget. Medical loans require monthly payments over a period of months or years, depending on how much you borrow. Taking out a medical loan could make sense if you've reviewed your budget and know that you can afford the monthly payments. 

Medical loans can help you put your health first when you don’t have ready cash.

When to avoid medical loans

Now, when should you not get a medical loan? 

If a medical loan is the only way for you to get necessary treatment, you’ll probably take it for the sake of your health and worry about repaying it later. That’s understandable. But medical loans may be a bad idea if your budget is already under stress because of other debts. 

If borrowing’s a last resort, do everything in your power to find another way to pay, or to find a way to pay off medical debt fast – perhaps by selling something or taking a side gig when you’ve recovered. You should also speak to your healthcare provider about a payment arrangement – many hospitals have patient ombudsmen to help you navigate payment options.

We'll dig into payment plans a little later when we discuss medical loan alternatives. 

How to apply for a medical loan

Applying for a medical loan isn't that different from applying for any other personal loan. First, you'll need to decide how much you want to borrow. 

Once you do that, you can start shopping around to compare lenders. Again, you can start with your current bank then cast the net wider to see what online lenders have to offer. 

As you compare medical loans, pay attention to the following:

• Minimum and maximum loan limits.
• Loan fees, including origination fees, late fees and prepayment penalties.
• Repayment terms.
• Interest rates.
• Approval requirements.
• Allowed uses for loan funds.
• Funding speed.

It may be a good idea to check your credit before applying so you have an idea of what kind of rates you're likely to get. You could also get rate quotes from different lenders. Just be sure that getting a rate quote won't trigger a hard check of your credit. 

Once you find a lender, the next steps are simple. You'd need to fill out the application and submit any required documentation. Depending on the lender, you might be able to do that online.

The lender will review your application and decide whether to approve you. If approved, it may be possible to get your loan funds the same day or the next business day. 

Medical loans for bad credit

Bad credit doesn't necessarily bar you from getting a medical loan. There are lenders that offer bad credit personal loans, including loans for medical expenses. 

You might also consider personal loans that allow cosigners. Having a cosigner with good credit could make it easier to qualify for medical loans. You may also be able to snag a lower interest rate on the loan. 

Getting a bad credit medical loan means paying a higher interest rate. If you're considering medical loans for bad credit, improving your credit score could help you get a better rate. Some of the best ways to boost credit scores include:

• Reviewing your credit scores for errors and disputing any that you find.
• Becoming an authorized user on a family member's credit card.
• Paying bills on time and paying down existing debt.

Of course, if you’re ill or in pain, you’re probably  not interested in waiting for your credit to improve before taking care of your health. In that case, take whatever loan you can get, work on your credit and refinance to a lower interest rate when you can. 

Alternatives to medical loans

Medical loans aren't the only way to pay for health care. There are other options if you need money to cover medical expenses. 

• Payment plans. Your health care provider may offer installment payment plans that allow you to pay medical bills over time, and they can be more affordable than medical loans.
• Home equity loans or lines of credit (HELOCs). These can take longer to set up, but their interest rates are lower because they are secured by property. Just remember to include all fees plus the interest rate when comparing costs.
• Discounts. While you're asking your health care provider about payment plans, be sure to ask about discounts. Your doctor or hospital might be willing to cut you a break on the total bill if you agree to pay it off in installments. 
• Charity care. Charity care programs offer financial assistance to people who can't afford their medical bills. These programs are more common with hospitals rather than individual doctors, but you could ask your physician if they offer anything similar. 
• Medicaid. Medicaid is a government-sponsored program that offers free and low-cost health care to low-income individuals and families. You can apply for Medicaid through your local Social Services department and you may be able to backdate your coverage to pay for existing medical bills. 
• Credit cards. You could also use a credit card to pay medical bills in place of a loan. Credit cards can offer flexibility and some might earn rewards for medical expenses, but it's important to check the APR so you know how much interest you'll pay. 
• Friends and family. If you don't want to get a bank loan or a loan from an online lender, you could borrow from friends and family or ask for donations on social media. Keep in mind that defaulting on loans from your loved ones will strain relationships.

It's also a good idea to review your bills for errors, like double billing or charges for care you didn't receive. You can then contact the provider to have the bill adjusted. Exploring all the options can help you find the best way to deal with medical bills.