How Do Medical Loans Work? A Complete Guide

Medical Loans

Medical bills are outrageous with even the simplest procedure costing thousands of dollars. Laser eye surgery is as much as $3,000 per eye and spending weeks in a hospital because of major surgery is hundreds of thousands of dollars.

People with healthcare insurance have a portion of the cost paid by the insurance company, but they still end up with thousands of dollars in debt. How can a person take care of these bills without incurring the wrath of collection agencies?

People need financial help and medical loans are a popular method for both the insured and uninsured to pay for needed medical procedures.

Why People Need Financial Help

When you get surgery or other procedure in a hospital or by a doctor, you pay for more than just the procedure. You pay for the endless lawsuits the doctors and hospitals must pay for every year. Hospitals and doctors have malpractice liability insurance, and these costs go up every year as well.

If you get a Tylenol at a hospital, the cost of the pill is only a few cents, but the bill you receive can be $80 or more. Medical costs are exorbitant for many reasons. You pay for the actual procedure, the expertise of the surgeon, the time of the nurses and other assistants, the hospital room, and much more.

Doctors and hospitals know the procedures are needed to save a life or create a better quality of life. Without them, people die. There is no other option than to have the procedures, so both insured and uninsured are over a barrel.

Hospitals also have unique billing systems that confuse people and are difficult to understand. Instead of having one bill that covers all the various aspects of the procedure, you’re billed by the individual doctors and specialists.

For example, if you have an appendectomy, then you receive a bill from the hospital that covers the hospital room, medicine, and more, but you also receive a bill from the doctor. There is a separate bill from the radiology department and the anesthesiologist.

You receive another bill from a company that took your blood and ran tests. Instead of a single bill for a simple procedure, you receive bills from many different companies each with different billing cycles and due dates.

How can a person understand and pay for all these different bills?

What Is a Medical Loan?

When faced with a mountain of medical bills, many people resort to receive money through medical loans. You may see advertisements for them online or in the buildings of banks and other lenders.

If you have a problem that requires emergency service, the ER must treat you until you are in a stable condition. If you have a heart attack, then you could be sent to the primary hospital or transferred to another hospital via ambulance or helicopter, depending on the severity of the emergency.

When you get the bills from the various providers, go after a medical loan to pay off all the providers and have a single loan payment. A medical loan is a personal loan used specifically for the financial management of medical expenses.

They are generally unsecured personal loans, which means there is no collateral like there would be on a car or home loan. Since there is no collateral, they can be more difficult to get than a secured loan. The lender looks at your credit rating and determines if the risk is low enough to provide the loan.

There are also secured medical loans, but they must have a form of collateral the bank can take if you default.

A medical loan isn’t just for emergency procedures. If there is an elective procedure insurance won’t pay for, then get a medical loan to pay for it. Unsecured medical loans have a higher interest rate than secured medical loans because the risk is higher for the lender.

The Medical Loan Process

If you know you need or want a medical procedure, then many lenders can pre-qualify you. You go to the medical provider and get an estimate on the procedure. Visit a lender, tell them the situation and the estimated cost.

The bank looks at your information and qualifies you for the loan before the surgery. Many medical providers of elective surgery require payment upfront for the procedures or loan pre-qualification.

If the situation was an emergency or after a procedure, then you visit the bank and explain to them how much you need. They’ll look over your credit information, your employment history, and pay stubs, and decide if you qualify.

Ideally, you get enough to pay for your medical debt, so you can have a single payment. It’s best to shop around for medical loans so you can get the best interest rate and save money. Lenders have different terms and interest rates, so you can research which are best for you.

The time it takes to get a decision depends on the lender and how much you need. It can range from a few days to a few weeks.

Benefits of a Medical Loan

If you have medical debt, then the biggest benefit of this financial assistance is the ability to pay the debt and avoid the confusion of medical billing and collection agencies. If you are pre-qualified for a medical loan, then you can have the elective procedure.

Medical debt is different from other types of debt because it’s not often voluntary. When you get a credit card or take out a car loan, it’s a decision you make. Medical debt occurs because your life or quality of life is on the line.

If you’re in a car accident or other emergency, then you may be unconscious and receive treatment whether you want it or not. The choice is removed.

When faced with large debt, many people resort to using credit cards to pay the debt. While this may be fine for a small debt, it’s problematic for large debt. Credit cards have exorbitant interest rates. You pay far more with credit cards than you would with a medical loan.

Medical loans also have flexibility for paying back the loans. People pay smaller loans within a year and larger loans paid off over a few years.

Problems with Medical Loans

The biggest drawback to a medical loan is many lenders have a cap. Medical procedures are expensive and for the uninsured cost hundreds of thousands of dollars. Lenders often cap personal loans at $40,000 or a percentage of your total income versus your debt.

This may only cover a portion of your total bill. You still must figure out how to pay the rest. Borrowers with bad credit also face high interest for the loans or required to provide collateral for a secured loan.

Since medical debt is often unexpected, people seek a loan even though they don’t have the budget for the monthly payment. They fear collection agencies and civil lawsuits.

Lenders also can include language in the loan that charges a penalty if you pay it off early or other hidden charges. Go over the loan documents carefully when choosing a lender.

Alternatives to Medical Loans

If you can’t qualify for a loan, then there are other options. Credit cards pay the debt but be wary of the high-interest rates. Many doctors’ offices partner with loan or credit card companies to pay for elective procedures.

Don’t just choose them because the doctor mentioned it, or you saw an ad in the office. Many times, they have high-interest rates and shorter payment terms. Credit cards should be used as a last resort to pay for medical debt unless you can pay the full balance off quickly.

Doctors understand their procedures are expensive. If you don’t want a loan, then ask if the office has payment plans. You may need to meet a portion or all of the cost before the doctor agrees to the procedure, but payment plans don’t have interest rates.

If you have a line of credit with a lender, then you can use it as well. A line of credit is usually connected to your home and is a pool of money you have access to at any time. When you use the money, you must pay it back like a traditional loan.

The biggest benefits are there is no loan application since you already have access, and the interest rates are generally lower than traditional loans.

Choose a Medical Loan Today

Medical debt impacts thousands of people throughout the United States. There are millions of people who are uninsured or under-insured and have hundreds of thousands of dollars in medical debt because of emergency procedures.

If you have trouble understanding or paying off medical debt, then consider getting financial help. Medical loans are a popular method of consolidating your debt and paying for elective procedures.

If you want more information about medical loans, then please explore our site.

How Do Medical Loans Work? A Complete Guide
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