Unexpected medical expenses not covered by your health insurance have the potential to create significant financial burdens in your life. When these expenses require fast repayment, you might need to consider taking out a medical loan. Medical loans are available in a variety of types and through multiple sources.
While some funds are specifically purposed for paying off medical expenses, others are structured as standard personal loans where borrowers have the freedom to use the funds as they choose. If you are feeling overwhelmed by sudden medical expenses, continue reading to learn more about medical loans and how they might help you today.
Are You Unfamiliar with Medical Loans? Here’s What You Need to Know
Most medical loans are personal loans used to pay for accrued medical expenses, which are unaffordable without some type of financial assistance. Unrestricted personal loans provide funds usable for any purpose you choose. Certain medical loans or grants require borrowed or awarded funds to be used for specific purposes, however. Unrestricted personal loans are generally available through standard banks, credit unions and multiple online lenders. Certain purpose-specific medical loans and grants are only available through limited sources.
Secured and Unsecured Medical Loans
A home mortgage or automobile loan are each referred to as secured loans. Secured loans provide funds secured by collateral. Your home is the collateral for a home mortgage loan. Your vehicle title is the collateral for an automobile loan. If you already have a home mortgage and a vehicle loan you might not have additional collateral to offer a lender. While secured loans tend to offer lower annual percentage rates (APRs) and friendlier loan terms, this type of financing is not always an option when looking to pay off medical debts.
Conversely, unsecured medical loans tend to have higher APRs but might be more readily available for your needs. Paying off your medical bills with a credit card might also be an option for you. Then again, it also might not be, especially if your credit limit is low, your account APR is high, or both. Some credit card accounts offer introductory low-to-no interest rates for a limited period. If your medical expenses are small to moderate this might be a viable option for you, provided you can pay off the debt before the APR significantly increases. Unsecured loans might have higher APRs than secured loans, but they still maintain the same APR and minimum monthly payment for the life of the loan. This makes a personal medical loan an excellent option for consumers who need to quickly pay down medical bills but do not have financially healthy credit card options.
Why Get a Medical Loan?
Your health insurance likely has some limitations to its coverage policies. Insurance companies are theoretically meant to protect the needs of patients. Ultimately, however, insurance companies are still businesses, which need to earn a profit to stay open. This means certain medical expenses you might incur might not be covered or reimbursed by your health insurance policy. Sometimes your health insurance does cover a treatment or procedure, but the deductible or co-insurance costs are still unaffordable (especially for major surgeries or other major medical procedures).
Insurance companies also do not typically cover procedures and related expenses for situations they do not deem medically necessary. These include elective surgeries as well as many dental and vision procedures. For example, LASIK eye surgery procedures are generally not covered by regular health insurance policies. LASIK does offer twenty percent discounts and financing options, however, the latter of which are considered medical loans.
Medical Loan APRs
When you take out a personal loan for the purpose of paying off medical expenses, you are subject to the terms offered by each lender based on your credit score (FICO) and other determining factors. Your FICO score has the most influence over the type of loan for which you qualify and how much your APR will be. FICO scores range between 300 and 850. Higher FICO scores indicate increased creditworthiness. Lower FICO scores indicate more risks to lenders. When you have a high FICO score, the APR on personal loan offers will generally be lower. Conversely, when you have a low FICO score the APRs you are offered will increase, if you qualify for a loan at all. Expect APRs between approximately six and twenty-six percent to be available for personal medical loans, depending on your FICO score.
Bad Credit Medical Loans
Medical loans for borrowers with bad credit might be available. If you have bad credit for whatever reason, be certain to review all loan terms before accepting any lending offers. For example, Upgrade offers personal loans for up to $50,000. APRs on these loans range between approximately six and thirty-six percent, however. Nothing is wrong with Upgrade (or any other lender) protecting their assets. If you have bad credit, you pose more of a risk to lenders, who will charge you more interest as part of the cost for extending you their funds.
How to Improve Your FICO Score BeFORE You Borrow
One way to reduce your APR or need for a bad credit loan is to raise your FICO score prior to applying for a medical loan. AnnualCreditReport.com allows consumers to download their full credit reports safely and securely from all major reporting bureaus one time each year for free. If you have any outstanding debts, pay them down or off as possible. Make on-time payments on all your open accounts for at least six consecutive months prior to applying for any loan. Finally, do not apply for any additional credit while building up to applying for a medical loan. Please note: The need to borrow money to pay off medical bills might occur suddenly, therefore rendering these FICO-improving strategies implausible. Still, following these strategies in general will improve your FICO score for both borrowing and purchase power purposes in the future.
Alternate Options
Sometimes medical grants are available to help qualified patients cover otherwise unaffordable medical expenses. The HealthWell Foundation is one such organization, as are FindHelp.org and the Aunt Bertha National Resource Directory. Medicaid might also be an option depending on your income level or disability status. A few additional alternate options for paying down high medical expenses include:
• Establishing a payment plan with the medical provider.
• Negotiate lower charges if paying solely out-of-pocket (most costs are elevated for insurance purposes and are easily reducible by medical creditors, even if they attempt to deny it).
• Hire a CoPatient.com professional to analyze your medical bills for errors and possible ways to save on charges.
Finding the Best Medical Loan Offers
Finding the best medical loan offers requires you to establish the best possible FICO score and creditworthy status prior to submitting any applications. Next, it is advisable to comparison-shop between multiple lenders to find the best options and rates. Avant offers emergency fund loans from $2,000 to $35,000 with APRs ranging between 9.95 and 35.99 percent. Avant loan terms range between twenty-four and sixty months, with an up-to 4.75 percent administration fee added to the loan total. With good credit, you might qualify for a six percent personal loan through a bank such as Wells Fargo, however.