A medical loan is a type of personal loan that can cover medical expenses that your medical insurance won’t cover. Medical loans can cover the cost of treatment including drugs, medical bills, transport charges, accommodation expenses, and many other health-related expenses.
If you don’t have medical insurance or want medical treatment that is not covered by your medical insurance plan then getting a personal loan might be the best option. Some people might opt to pay with credit cards but the interest rates can be very high. If you have a good credit score, you can secure a medical loan quickly to get treatment as soon as possible.
How Do Medical Loans Work?
Before you get a medical loan, you’ll have to decide if you want to get an unsecured or secured medical loan. Secured medical loans require collateral such as home equity, gold jewelry, a car, or any other valuable asset. Secured medical loans can be the best option for individuals with low credit scores and bad credit history to secure a loan at a lower interest rate. This is because the lender can sell the asset if the borrower is unable to pay back the loan.
Unsecured loans do not require collateral. Such loans are preferred because if you are unable to pay the loan amount, you don’t lose your valuable asset. However, these loans are offered to people with good credit scores and excellent credit histories. If you have an excellent credit score, lenders such as Credible can offer you a medical loan at an interest rate as low as 3.49%.
Medical loans give you complete flexibility in getting the treatment that you need or want. Your medical insurance may not cover procedures such as dental implants, cosmetic surgery, or experimental procedures. Or pay for additional medical expenses such as air tickets or hotel charges if you go for treatment outside the country. Medical loans can be attained quickly and can cover most medical expenses.
How to Apply for a Medical Loan?
Medical loans are offered by banks, financial institutions, credit unions, and online lenders. Some healthcare organizations and government institutions also offer loans. Before you apply for a medical loan, check if you are eligible for a government health benefit or if you can set up a fundraiser to collect funds for your condition. Getting a medical loan should be the last option especially if your financial situation will deteriorate because of the loan.
You might be able to find some other way to finance your health procedures if you need critical health treatment. But you should not wait if you need life-saving treatment immediately and don’t have sufficient cash or adequate insurance.
To apply for a medical loan, you have two options - apply online, or in-person at the lender’s office. Applying online is quick and cost-efficient. To apply, you’ll need to provide credit check, job detail, salary verification, bank statement, and other types of financial information. If your credit score is 580 or more, you might want to consider Avant which offers a cap of 35,000 and the interest rates range between 9.95% and 35.99%.
Medical loans are approved much faster than most types of loans. But some lenders can take as long as one week to approve your loan. Once your loan is approved, the amount is ready to be deposited into your bank account almost instantly. Afterward, you’ll have to pay back the amount in monthly payments.
What Will Be Your Interest Rate?
Your interest rate will depend on several factors such as your credit score, credit history, and job security. If you have a good credit score and are able to make payments on time, lenders will be willing to loan the amount at low-interest rates. SoFi offers medical loans and dental financing of up to $100,000 to individuals with credit scores at or above 680.
Medical loans work just like personal loans. Some lenders don’t even mention that you are taking a medical loan and treat it just like a personal loan.
To secure the best interest rate, research multiple lenders and find the best one. Many lenders have online interest rate calculation tools that you can use to estimate the loan interest rate. So, the actual interest rate that you’ll be offered by the lender will be close to the one you’d have estimated.
If you do not have a good credit score, you can consider getting a secured loan. Secured loans require collateral such as a house, car, or any other asset. In case you fall behind on loan payments or are unable to pay the loan, you’ll lose your valuable asset.
Advantages of Medical Loans
Medical loans have several advantages over getting credit card debt or dipping into your investment accounts. Here’s why medical loans are better:
- 1. Fixed Interest Rate: The interest that you’ll pay on the medical loan is fixed so you’ll pay the exact same amount every month.
- 2. Quick Funding: It is not uncommon for healthcare providers to deny treatment until you pay upfront for the treatment. In such situations, medical loans are readily available and can be used with great flexibility.
- 3. Low-Interest Rates: Medical loans can be availed at lower interest rates especially if you have a good credit score. They are better than credit card debt on which you will be charged higher interest which also compounds monthly.
- 4. Easy Repayment and Varied Loan Terms: Medical loans have easy repayment options. You can split the loan into monthly, quarterly, or annual payments depending on how you are comfortable paying the loan. You can also increase the loan repayment term to decrease how much you pay at once.
- 5. Flexibility: You can have the freedom to use the funds for your treatment as you like. You can choose to get treatment at the health institution of your choice, pay for travel and accommodation expenses, buy medical equipment, and even pay for monthly expenses if your condition is keeping you off from work.
Disadvantages of Medical Loans
Getting a medical loan is not the best choice for everyone. If you are getting a medical loan, you should also consider:
- Limited Loan Amount: Some healthcare treatments can be extremely expensive. As most medical loans offer caps up to $50,000, the medical loan may not be sufficient to afford the treatment you need. This is because loan lenders want to profit from loans and bigger loan amounts have high risk. Some medical loans have higher caps but they are only offered to high-earning individuals and those who have an excellent credit history.
- High-Interest Rates: If you have a bad credit score, getting a medical loan can be expensive. Your interest rate can be as high as 36%, therefore, exploring other options might be a good idea such as using your credit card to pay for the treatment.
Medical loans may or may not be the best option for you. But you should not put off treatment due to higher medical expenses. If you need immediate health treatment, getting a medical loan is crucial. In some cases, using medical loans to pay for the treatment you need sooner can help you avoid health complications and save thousands of dollars down the line.