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Should You Take Out a Personal Loan to Pay Medical Bills?

Christy Bieber, The Motley Fool

Is it a good idea to use a personal loan to pay medical bills? Get some advice here on the best way to cover your medical costs. 
Image source: Getty Images. 

Doctor talking to older patient.

In the first half of 2017, more than 43 million Americans under age 65 reported having trouble paying medical bills, according to The National Center for Health Statistics. Struggling with medical bills is not uncommon because many insurance policies have very high deductibles and out-of-pocket costs -- not to mention the millions of Americans who have no insurance coverage at all.

If you are having a hard time paying for the care that you or a loved one needs, it’s important to understand all of your options for covering costs. This includes considering a personal loan to help you pay current medical bills or to assist you in consolidating and paying off past bills you may have already incurred.

Options for financing medical care

When you’re in need of medical care, having your insurance cover any necessary costs is ideal. If you don’t have insurance or have out-of-pocket expenses you can’t afford to pay even with a policy, you’ll need to look into all of your financing options.

In some cases, medical care facilities will give you discounts for paying cash. You should talk with your doctor or caregiver about options for reducing the costs associated with your medical expenditures. There are also services that help you to negotiate down hospital bills or other medical bills. While you’ll usually be charged a small percentage of what you save if you use these services, getting help in reducing costs can be important since hospitals and doctors often mark up the costs of care significantly for patients without insurance.

You can also talk with your caregivers about whether they offer any options for paying on a payment plan or whether they have any in-house financing. Sometimes care facilities have relationships with companies that make medical loans and can help you to get credit to finance your care. If you go his route, make sure the terms of the payment plan or financing are reasonable and that you can’t do better securing financing on your own.

If you have to borrow money to pay for your bills from an outside source instead of choosing a clinic payment plan, you have a number of possible options including putting your bills on a credit card as well as using a personal loan.

Should you use a personal loan to pay medical bills?

Taking out a personal loan could be the best way for you to pay for any medical care that you can’t afford out of pocket. There are a number of reasons why it can make sense to use a personal loan, including the following:

  • Many different lenders offer personal loans. You can shop around with banks, credit unions, and online lenders. Because you have so many options, you can often find a loan with a favorable rate and good terms.
  • Interest rates are usually lower than with credit cards. While you can sometimes use a credit card with a special 0% promotional APR, the standard rate on credit cards is generally well above a typical personal loan rate. When the 0% rate on credit cards expires, it’s common for the rate to jump up dramatically -- making your loan much more expensive to pay in the long run.
  • You’ll have a fixed repayment schedule and timeline. When you take out a personal loan, you’ll know up front how much your monthly payments will be for the entire life of the loan (as long as you choose a fixed rate loan). You’ll also know exactly how long it will take to pay the loan in full. In most cases, you’ll have around three to five years for repayment.
  • You can often secure funding quickly. Many personal loan lenders -- especially online lenders -- will get you your money in around a week or less from the time you apply for a personal loan. When you need medical care quickly, you often can’t afford to wait too long for funding to come through. 

You will need to make sure you can qualify for a personal loan if you hope to use it to cover your medical care costs. Personal loan lenders want to see a good credit score, proof of income sufficient to pay back the loan, and that you aren’t drowning in other debt before they’ll be willing to make a loan to you. If you can’t qualify on your own, a cosigner could help.

How to use a personal loan to pay medical bills

You can use a personal loan in two different ways to pay medical bills.

  • You can take out a personal loan before you get care. In this case, you’d borrow the amount your doctor indicates you’ll need for your procedures and use the proceeds from the loan to pay for your care.
  • You can use a personal loan to consolidate medical debt. If you owe money already for past care you’ve received, you could take out a personal loan to consolidate all the existing medical debt you have in one big loan. Ideally, if you obtain a lower interest personal loan, you can reduce the rate you’re paying on existing debt and lower the total cost of repayment.

You should also consider carefully whether you want to look specifically for a personal loan that is meant for paying medical bills or whether you simply want to search for a general personal loan. There are some lenders that offer “medical loans,” but there’s a more narrow range of them and there’s no reason to restrict yourself only to these loans. You can use the proceeds from a general personal loan for anything you’d like, including medical care, so just shop for personal loans to have access to the widest choice of lenders.

A personal loan can help you get the care you require

A personal loan is a great financial tool to help make paying for medical care -- or paying off medical debt -- easier. Just be sure to find a lender that will offer the amount you need at the most affordable rate possible so you don’t pay more than is necessary for your care.

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