Health care spending in the U.S. reached $4 trillion in 2020, a 9.7% increase from the previous year. Federal government health care spending grew by 36%. Americans are struggling to bear the burden, so medical loans are becoming more popular. In this article, we’ll cover how to shop for medical loans and other ways to finance medical expenses.

What is a medical loan?

Medical loans are personal loans that can be used for emergency or planned procedures. They’re a good option if you need money quickly and are required to pay for medical care up front. Patients often use them when insurance companies won’t cover certain medical costs or only approve payment for a percentage of what’s being charged.

How do they work?

Medical loans work very much like any other type of personal loan. The applicant will need to apply for the loan, submit themselves to a credit check, and verify their salary. In some cases, borrowers with less than perfect credit may be required to get a cosigner or post collateral to secure the loan. Once approved, funding can be accessed quickly, sometimes the same day.

How do I use a medical loan?

A medical loan is a personal loan, so it can be used for a wide range of procedures, including chemotherapy, fertility treatments, urgent care or emergency room visits, weight loss surgeries, dental procedures, and cosmetic surgery. The funds can also be used for long-term care treatments like physical therapy and rehabilitation.

Pros and cons of medical loans

ProsCons
Fixed interest rate and fixed monthly paymentsInterest payments on loan. Other options may not come with interest.
Prompt approval and fast funding, sometimes same dayHigh interest rates and low approval rates for bad credit borrowers
No limitations on how you use itLoan origination fees
Flexible amounts. Borrow only the amount that you needSmaller loans are hard to find for less expensive procedures

There are benefits and drawbacks to taking out a personal loan for medical expenses.

The drawbacks:

You’ll be paying an interest rate, which can be high for bad credit borrowers.

Other payment options, like direct billing from the medical provider, don’t come with interest.

There are also loan origination fees and minimums for how much you can borrow.

Smaller medical loans for minor procedures are harder to find.

Alternatives to medical loans

There are several alternatives to medical loans that might be a better fit for your situation. Some of these come with a higher risk and others might cost more in interest payments.

Credit Cards:
This is an expensive way to go, but in some cases, it may be the only option. You can use your credit card to pay medical bills if you can’t get a loan, as long as you’re willing to pay the interest charges, which average close to 20%.

Home Equity Loans of HELOCs:
This is a cheaper option from an interest rate perspective, but it puts your home at risk. Home equity loans and HELOCs are secured by the equity in your house. Defaulting could lead to foreclosure.

 

Payment Plans:
In some cases, the medical provider may be willing to put you on a payment plan. This is common for less expensive procedures, but major surgeries and elective procedures like cosmetic surgery usually require up-front payment.<

Medical Bill Forgiveness for Financial Hardship:
Patients experiencing legitimate financial hardships may be eligible for medical bill forgiveness. Ask your medical provider about this or research debt relief options online.

Can I get a medical loan if I have bad credit?

Borrowers with credit scores below 670 are considered “bad credit borrowers” by most lenders. That doesn’t mean you can’t get a loan. Applicants with scores between 580 and 670 can be approved, but they’ll pay a higher interest rate and may only be eligible for smaller loan amounts. You may want to work on improving your credit score before you go this route.

Pros and cons of medical loans for bad credit

The obvious benefit of getting a medical loan when you have bad credit is that you’ll be able to pay off your medical bills. The downside of that is the high interest rate you’ll need to pay for the loan. Weigh these two factors carefully. It might be a better option to allow the medical bills to go into collections and pay them off later when you can get better loan terms.

How do I qualify for a medical loan?

A medical loan is a personal loan, so it can be used for a wide range of procedures, including chemotherapy, fertility treatments, urgent care or emergency room visits, weight loss surgeries, dental procedures, and cosmetic surgery. The funds can also be used for long-term care treatments like physical therapy and rehabilitation.

Choose the amount
you want to borrow

Check your
credit score
(> 670 is considered “good”)

Research multiple
medical lenders

Select a lender and
submit your application

How do I apply for a medical loan?

Once you’ve done your research and selected a preferred medical lender, the next step is to fill out the application. Most medical lenders allow you to do this online. Be prepared to provide a driver’s license or state ID, proof of income, verification of employment, and access to your credit report. You should also know exactly how much you want to borrow.

How do I compare medical loan lenders?

There are lenders that specialize in medical loans, but most traditional banks and credit unions offer personal loans, so don’t limit your search to strictly medical lenders. The comparison should be made using the following four variables:

Interest rates:

Borrowers with lower credit scores may be charged higher interest rates, but it varies from lender to lender.

Repayment Terms:

One of the benefits of choosing a personal loan to pay medical bills is that you can choose the loan term. It usually ranges between one and seven years.

Loan amounts:

Many lenders don’t do smaller loans under $600, so you may need a different option. We’ll cover that in our “alternatives” section below.

Fees:

Check the origination fees and any monthly charges you’ll incur during the life of the loan. Use those as a comparison point between lenders.

Commonly asked questions about personal loans

Medical loans are available from online lenders and traditional banks and credit unions. They are generally personal loans, so you simply need to apply and provide proof of income and employment, a valid state ID or driver’s license, and access to your credit report.

That depends on the medical provider. They may offer their own financing, or you may need to apply for a personal loan to pay medical bills.