Medical Loans: A Comprehensive Guide

What Is a Medical Loan?

A medical loan is a personal loan you can use to cover medical expenses. Personal loans are installment loans ranging from a couple hundred dollars up to $100,000, and repayment terms can range from one to seven years.

Depending on your creditworthiness, you may qualify for an interest rate ranging from the single digits to upwards of 30%. Some lenders also charge origination fees, which can range from 1% to 12% of the loan amount.

Like other personal loans, medical loans are typically unsecured, meaning you don't need to provide collateral to qualify. Medical loans can be used for a wide range of health care costs, including surgeries, hospital stays, dental work, fertility treatments and even veterinary bills.

Pros and Cons of Medical Loans

A medical loan may seem like the perfect way to pay for medical expenses, but be sure to consider the pros and cons first.

Learn more: Personal Loan Requirements to Know Before You Apply

Should You Get a Medical Loan?

It's important to understand your situation and goals before determining whether a medical loan is right for you. That said, here are some situations where it could make sense:

• You have a strong credit score and can qualify for a low interest rate.
• You don't have enough cash savings to cover an urgent or necessary medical procedure.
• You want to consolidate multiple medical bills into one manageable monthly payment.
• You want predictable, fixed payments over time.
• You've explored other options, but they aren't available or sufficient.

On the other hand, here are some scenarios where a medical loan might not be the right choice:

• Your credit score is low, and you're likely to receive a high interest rate.
• You qualify for hospital financial assistance, a discount or a more affordable payment plan directly through your provider.
• You're already struggling with other debts, and adding another payment could push you toward financial hardship.
• You have access to a 0% intro APR credit card or another lower-cost option for spreading out payments.

How to Apply for a Medical Loan

If you're seriously considering a personal loan to cover your medical expenses, here are some steps you can take to apply.

1. Check Your Credit

The higher your credit score, the better your odds of securing a low interest rate. Reviewing your Experian credit report and FICO^® Score^☉ for free can give you a good idea of where you stand and which steps you can take to improve your score.

If you have some flexibility with your procedure or payment timeline, it could make sense to build your credit before applying.

2. Determine How Much Money You Need

If you already have your bill in hand, you may already know how much you'll need to borrow to pay it. However, if you're planning for an upcoming procedure or surgery, you may need to contact the medical provider to get an idea of how much it'll cost.

Then, take a look at your savings to determine how much you can pay before needing to borrow money.

Remember, too, that some lenders charge origination fees, which are deducted from the loan disbursement. So, you may need to borrow a little more than the bill amount to cover that cost.

Learn more: How Much Can I Borrow With a Personal Loan?

3. Get Prequalified With Multiple Lenders

Many personal lenders offer a prequalification tool that can give you a good idea of whether you qualify and what your loan terms might look like. You may get a quote that includes one or multiple offers that include varying interest rates, repayment terms, monthly payments and origination fees.

Because each lender has its own process for determining eligibility and terms, it's a good idea to obtain quotes from multiple lenders, so you can properly compare offers. It's also important to pay attention to funding timelines and potential loan restrictions.

4. Choose a Lender and Apply

The application process may be slightly different for each lender, but you can typically apply online. In general, you'll need the following information:

• Full name
• Social Security number
• Date of birth
• Citizenship status
• Contact information
• Permanent address
• Employment status
• Employer contact information
• Gross monthly or annual income
• Mortgage or rent payment
• Loan purpose
• Desired amount and repayment term

In some cases, lenders may ask for documentation to verify your identity, address or income.

5. Review the Offer and Accept the Loan

If you're approved, the lender will send you an agreement to sign electronically. Before you do, however, it's crucial that you carefully review the loan agreement so you fully understand what you're agreeing to.

After you sign the agreement, you'll usually receive the funds as a deposit into your bank account.

Alternatives to Medical Loans

Before you apply for a medical loan, it's a good idea to research and compare all of your financing options. Here are some to consider:

• Hospital financial assistance: Many hospitals and health care providers offer need-based financial aid, sliding-scale discounts or interest-free payment plans that can be much more affordable than a loan.
• Crowdfunding: Platforms like GoFundMe allow you to raise money from friends, family and your community to help cover unexpected medical expenses without taking on debt.
• Credit cards: A 0% intro APR credit card can be an option if you qualify, but you'll need a solid credit score, and it's important to pay off the balance before the promotional period ends to avoid a high interest rate.
• Health savings account (HSA) or flexible spending account (FSA): If you have an HSA or FSA, you can use those tax-advantaged funds to pay for eligible medical expenses without borrowing.
• Personal savings: While it's not ideal to drain your savings account, tapping into an emergency fund or investments is often a better choice than taking on new debt.
• Negotiating: Before considering any financing, it's worth asking your provider for a discount or payment plan. Many are willing to reduce costs or arrange extended terms if you explain your situation.

Frequently Asked Questions

The Bottom Line

A medical loan can be a helpful way to cover health care expenses when you don't have enough savings or other options. However, it's important to weigh the costs carefully, explore alternatives and understand how borrowing may affect your credit and overall financial health.

If you do decide to take out a medical loan, make sure you borrow only what you need and have a clear plan for repayment. And remember, monitoring your credit regularly is key to tracking your progress and staying on top of your financial goals.