Even if you have insurance, you may have trouble covering unexpected medical expenses. One method of paying off medical bills is using a medical loan, or medical consolidation loan.

What are medical loans?

Medical loans are personal loans used to pay off medical expenses.

Medical bills don’t come with interest. However, if they aren’t paid off, they will go to collections. In collections, the bills become medical debt and can affect your credit. This is why many people choose to take out a medical loan even though they will be charged interest — it keeps the bill from getting to collections.

How do they work?

A medical loan works like any other personal loan. You work with a bank or credit union to borrow the amount you need to pay your expenses.

How to get medical loans

Unsecured loans don’t require collateral. With these types of medical loans, your interest rate is determined by your credit. If you have a good credit history and your income level shows you could reasonably make monthly payments, your interest rate could be as low as 6 percent.

Secured loans, such as home equity loans, require some kind of collateral. They could get you a better rate if you have a poor credit history. However, you also increase the risk of losing the collateral if you can’t keep up with the loan payments.

Once you receive your loan, you use it to pay off as much of your outstanding medical charges as possible. Then you make monthly payments on the loan until you pay it off completely.

What will a medical loan do to my credit?

Opening a line of credit can lower your credit score for a little bit, but it won’t usually cause lasting damage. This is very different from a medical debt collections account, which can stay on your credit report for 7 years.

When you get a personal loan to pay off medical bills, your credit score should be fine in the long term as long as you make your monthly payments on time.

Alternatives to medical loans

Medical credit card

medical loans and financing; dollar bill with pills on topSome healthcare providers offer medical credit cards at their offices. If you qualify, you can use it to pay off your medical bills. These cards usually have a period of 6 to 12 months during which you are not charged any interest. If you can pay it off within this zero-interest period, this could be a good option.

However, if you don’t pay it off, you’ll have to handle all the interest charges at once. That’s because the interest on most medical credit cards is deferred.

Payment plan

Ask your doctor’s office if they would be willing to set up a payment plan for you. They may be open to billing you monthly instead of asking for a lump-sum payment. The advantage with a payment plan is that you would not be charged interest. It would simply split your total bill into even installment payments.

Income-driven hardship plan

This is a payment plan with monthly payments determined by your income level. If you have a low monthly income, ask about this kind of plan.

Credit counseling

Talking to a certified credit counselor is a free way to discuss your options. However, your medical debt should already be in collections if you’re speaking with a counseling agency.

If your credit counselor decides that a debt management program (DMP) is the right debt solution for you, you can enroll with the agency.

Debt management program (DMP)

To enroll in a DMP, you must be enrolling primarily for credit card debt. You can then add your medical collections account to the program. This is a good option if you want to preserve a good credit score.

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Debt settlement

Settling your medical debt means making an agreement with the collector to pay less than what you owe. You can negotiate this yourself or work with a debt settlement company. It will get you reduced monthly payments, but it will also hurt your credit score.

Note: If you choose debt settlement, watch out for scams. Identity thieves and predatory lenders alike try to trick people with too-good-to-be-true debt settlement offers.

Bankruptcy

When you know there’s no way you’ll be able to pay off your medical debt, filing for bankruptcy is an option that will get you a clean slate. It will hurt your credit, but you will get a chance to start over.

Questions about medical loans and financing

Q:Are medical loans tax deductible?

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A: Yes, you can deduct medical expenses even if you paid them with a personal loan. You must itemize your tax return, though.

Q:Can I get a medical loan with no credit check?

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A: The only loans you can get without a credit check are payday loans, and those are bad news. If you see a company advertising a loan with no credit check, be wary. It could be predatory lending.

It’s still possible to get a loan with bad credit, but it will likely have a very high interest rate.

Q:Should I pay medical bills with a HELOC?

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A: It depends on your situation. If you know you can’t pay your bill, using a Home Equity Line of Credit (HELOC) can work in your favor. It may also be better than paying off the bill with a high-interest-rate credit card because the interest rate would be lower.

Q:Can I get a medical loan for dental work?

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A: Dental loans and medical loans are both just personal loans used for those respective expenses. You can definitely apply for a personal loan to cover expenses from dental work.

Q:Are there medical loans for elective surgery?

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A: Yes, you can get a medical loan for elective surgery. If you will have trouble making the monthly payments, this can be a very bad idea. Generally, it’s best to save medical loans for necessary procedures.

Q:Are there medical loans for pets?

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A: You can get a personal loan to cover veterinary expenses. You can also talk to your vet about setting up a payment plan with the office.

Q:Are there medical loans for fertility treatments?

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A: Yes, you can take a personal loan to pay for fertility treatments. You can also ask your doctor about financing plans.

Q:Does the VA offer medical loans for veterans?

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A: The U.S. Department of Veterans Affairs offers financial hardship assistance to Veterans who have trouble affording family medical expenses. Learn more about the application process here.

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