Less Pain, More Gain: Loans for Medical Bills Explained
The Consumer Finance Protection Bureau reports that one out of every five credit reports has one or more medical collections in tow at an average bill of $600.
Many people found their medical situation worse after the Affordable Care Act because of higher co-pays and deductibles.
More and more people stuck without the finances for unexpected and unavoidable medical problems. That’s why loans are fast becoming a more commonly used option. Experts do caution, however, that consumers understand everything about medical loans before investing in one. Regardless of how desperate the immediate situation may seem.
Can I Get a Loan for Medical Bills?
It is very possible for many people to get a loan that is created strictly for medical bills. This is what is called a “medical finance loan” in some circles. The ability of an individual to obtain a loan for medical bills depends on many factors. Before this, however, it is even more important to know about the types of loans that are available on the general market.
Types of Loans used for Medical Bills?
Unsecured medical loan
An unsecured loan, also known as a personal loan, is a loan that a lending institution extends without a call for collateral. Unsecured loans are usually reserved for people who have earned trust with a bank. Interest rates can be lower when compared to other types of loans, although they are not always lower.
The Secured Medical Loan
A secured loan is a loan in which the lending institution requires collateral to extend. The items that are used as collateral are usually big ticket items such as a house or a car. In some instances, banks may take other big ticket items as collateral, but not often.
You do not always need to obtain a loan specific to medical procedures. At least in order to pay for a medical procedure. You may be able to pay for it using a generic financial tool like a credit card. The terms that you receive on a credit card will be contingent on the agreement that you have with the bank beforehand. Banks do not offer special treatment for emergencies in this case. – Not even medical emergencies. Make sure that you know what the terms and limits are on your credit card before you use it. The card may not be your best option.
Medical Credit Card
Some financial institutions offer credit cards that are made especially to help users with a medical debt. If you qualify for one of these special cards, you may often enjoy an early bird period of a substantially lower APR. However, you should pay off the entire amount before this grace period ends. If you do not, then you may be charged interest from the first day that you used credit on the card. Regardless of how much of the principal you have paid down.
Going through a Marketplace Lender
There are marketplaces online that compete for the business of people who need medical funding. You may be able to find a better deal here. Why? Because of the direct competition depending on how much money you need for the procedure. You can find a lender through Loan Shopping with Loanry®
Home Equity Loan
Also known as the HELOC or the second mortgage, the home equity loan is a special kind of secured loan that allows you more leverage. Atleast more than many of the other options that are mentioned here. The downside is that you are placing your place of residence up as collateral. If you cannot pay the debt for any reason, the financial institution may begin the process of obtaining ownership of your home. You also need to qualify with a substantial amount of equity in your home. The Federal Trade Commission limits the amount of money that you can borrow to 85% of the home’s appraised value.
For emergency purposes, you may be able to access the 401(k) account that your employer keeps for you. You do not need a credit check to borrow this money. You will not need to pay interest on the loan (although you will have to pay it back).
What is a Medical Loan?
A medical loan is a personal loan that is taken out for the specific purpose of paying for a medical procedure. It is given special consideration in many cases. You may be able to negotiate a lower interest rate or better terms because you are looking to have a medical procedure done.
There are many lenders set up specifically for the purpose of medical loans as well. During your research, make sure to look into specialized lenders. Also, make sure that you are getting the best financing for your medical procedure. You may be able to get 0% interest rates or longer terms to pay back a medical loan under certain circumstances.
How Much Do Medical Procedures Cost?
The reason that many people have to take out medical loans is the rising cost of medical procedures. Take a look at the average price for some of the more common procedures that you or a loved one may actually have need of.
- Appendectomy – $8,100
- Anti-reflux surgery – $25,200
- Breast augmentation – $5,800
- Colectomy – $24,200
- Ventral hernia repair – $7,000
- Rectal resection – $16,400
- Liposuction – $4,300
- Tummy tuck – $6,600
- Eyelid surgery – $2,400
- Breast lift – $6,500
- Bariatric surgery – $29,200
Depending on whether a procedure is elective or not, insurance may not cover any of the costs of the above procedures. Even if a procedure is not elective, you may not be able to rely on your medical insurance for the entire cost.
Be sure to go over your medical insurance policy to understand the terms before going into a loan office.
How Can I Get a Medical Loan for Bad Credit?
It is possible to get a medical loan with a low credit score. As a matter of fact, there are many lenders with a specialty in serving medical loans for bad credit.
No matter what, do not look to a predatory lender to pay a medical loan. There is a huge difference between a personal loan and a payday loan. The interest rates on payday loans are created to be larger than you may initially realize.
Getting caught in a predatory loan can put you in a cycle of debt that can be very difficult to get out of.
Installment loans are a viable option for people with bad credit. The best lenders always have this option available with longer terms and lower monthly payments to accommodate individuals who are stuck in a bad situation.
The best medical loans to get are those with amortizing terms. If you amortize a loan, then you are allowed to pay down the principal and the interest starting form the beginning of the loan.
If you are paying down interest only, then you may be paying for a longer period of time and paying more money overall.
Follow the best practices above to get the best deal on a medical loan. If you are reading this before you are in trouble, be sure to prepare yourself for a possible emergency with a cash fund.
Chris D serves as an editing and organizational partner for many medical professionals looking to infuse highly technical descriptions into professional copy for colleagues and for laymen. Chris has ghostwritten over 100,000 blog posts, press releases and marketing pieces for companies as varied as NuShape, Wolf Real Estate Professionals, Digital Pop Marketing, Mobilozophy and AuctionServices.com. He services clients through copy for print, direct mail, interactive media and broadcast. Chris is frequently published on Loanry® (www.loanry.com) and Cashry® (www.cashry.com) websites as well as a number of other web publications and properties. In 2014, Chris completed studies at Northwestern University and obtained a Masters in Journalism.
Ethan founded OfferEDGE in Dec 2013 with the mission to unify the financial quadrants through a system that allows businesses to be seen when consumers use a Single Sign On across Lending, Credit, Money and Real Estate. Taub invents the offers and IP, while overseeing all aspects of the company. He also has orchestrated the company’s earned media across the brands Loanry®, Cashry®, Debtry®, Budgetry®, Billry®, Taxry® and more. This includes over 500 publications that have been featured across the web.