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- Medical loans are personal loans that can be used on a range of health-care expenses from hospital stays to deductibles.
- Medical loans are unsecured, meaning you won't have to put up any assets as collateral.
- Banks, credit unions, specialized healthcare financing companies, and online lenders all offer medical loans.
Dealing with a health issue can be very stressful. And that pressure can intensify if you find yourself facing the prospect of paying thousands of dollars out of pocket to cover either all of the expenses, or a portion that your health insurance doesn't cover.
A medical loan is one way to make these situations more financially manageable.
What are medical loans?
A medical loan is a type of personal loan that can be used to pay for ea wide range of xpenses 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.
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Medical loan advantages include flexible repayment options, longer repayment terms and higher loan amounts than some other personal loans. They also typically offer lower interest rates, longer repayment terms, and higher loan amounts.
As with any loan, it's important to be fully aware of all the terms and conditions of any medical loan you're considering.
"Any time a consumer is extending themselves financially and overextending themselves in a situation where they don't have the confidence of their repayability toward their financial commitment, then they should just evaluate, if it's the best move for them," says John Owens, a financial wellness expert and executive vice president at Monterey Financial. "Maybe some other options are delaying the decision until they are in a better financial spot."
How do medical loans work?
Like most personal loans, medical loans typically come with fixed interest rates and a fixed repayment period. That compares to credit cards, which charge variable rates and offer fluctuating payments.
Medical loans are 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.
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.
"The loan agreement contains clauses showing that the funds' end use is for medical purposes," Wayne Bechtol, a senior tax accountant and board advisor at Fiona. "Banks are comparatively lenient with medical loans by not insisting on high credit scores as they do for personal loans."
In addition, medical loans typically offer lower interest rates, longer repayment terms, and higher loan amounts than personal loans, says Julia Mathers, an executive with Pasha Funding, an online loan comparison platform.
Is a medical loan right for you?
Healthcare can be very expensive, so it's important to first evaluate your ability to repay a medical loan. How stable is your financial situation? How steady is your income? Don't forget that you have to repay the loan. While it's more stable than your credit card bill, it's still a financial burden.
"When determining if a medical loan is right for you, it is important to consider the interest rate, fees, loan amount, and repayment terms," Mathers says. "It is also important to compare the loan offers of different providers to find the best option for you."
Carefully evaluate how big of a loan you'll be taking, and what insurance may cover. You may also be subject to additional expenses that aren't immediately evident.
Create a realistic budget and repayment plan. Budgets allow you to get the most out of your paycheck. Without one, there's a chance you could run out of money before your next pay date. And don't just make a budget and move on. Track your spending and income and adjust as needed.
Who offers medical loans?
Banks, credit unions, online lenders, and specialized healthcare financing companies all offer medical loans.
Some medical financing companies market their financial products directly to healthcare practices, says Erin Jackson, a healthcare attorney at Jackson LLP Healthcare Lawyers.
"I'm concerned that patients may believe they're signing up for a payment plan with their doctor's office when they're actually signing up with a third party to take out a loan or open a credit card," Jackson says. "If the patient misses a payment and interest begins accruing, this can begin to damage their credit score."
Several factors go into selecting a reputable medical loan provider. First, start with your credit rating, consider what rates you may be eligible for, the associated fees and always check customer reviews.
These are some of the biggest lenders that offer medical loans:
SoFi Personal Loan
SoFi offer personal loans from $5,000 to $100,000, with APRs ranging from 8.99% to 25.81% (with all discounts).
LightStream Personal Loan
LightStream offers loans from $5,000 to $100,000. APRs range from 7.99% to 25.49% (with AutoPay discount, rates vary by loan purpose).
LendingClub Personal Loan
You can get a loan ranging between $1,000 to $40,000 from LendingClub. Its APRs are between 9.57% to 36.00%.
How to apply for a medical loan
Applying for a medical loan is a straightforward process, as Bechtol explains:
- 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. "You should keep a cushion of 25% because medical expenses can spiral uncontrollably," Bechtol says. "Though you need the funds badly, it must be manageable simultaneously."
- 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. Should you be approved, it won't take long to get the funds.
Medical loan pros and cons
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Medical loan alternatives
Not interested in a medical loan? There are alternatives. You can use a credit card, the best option of which is most likely going to be to focus on credit card introductory offers. 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.
See Insider's picks for the best zero-interest credit cards >>
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, according to the Consumer Financial Protection Bureau. And it can hurt your credit score.
Some medical care providers offer financing options like payment plans that allow you to pay in installments, according to the CFPB. 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.
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.
Finally, while you may have personal savings set aside for a trip to Hawaii, your health may take precedence and may be where you need to spend.
Medical loan FAQs
How do I borrow money for medical expenses?
You can borrow money to pay for medical expenses with a medical loans. It's a type of personal loan — sometimes marketed as a healthcare loan or a surgical loan — that can be used to pay for a wide range of medical costs.
What credit score is needed for medical financing?
The credit score needed for a medical loan will vary depending on the lender. The loans are unsecured, so you won't have to put up any collateral. Some lenders may be comparatively lenient with medical loans by not insisting on as high a credit scores as they might for other types of personal loans.
Do banks give medical loans?
Medical loans are available from banks, credit unions, specialized healthcare financing companies, and online lenders. Some examples include United Credit, Ally Financial, and American Medical Loans.
Can you take out a loan to pay for surgery?
You can pay for surgery and a range of other healthcare expenses with a medical loan.