Should You Use a Personal Loan to Pay for Medical Expenses?

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Whether you plan for a medical procedure or end up having to go to the doctor unexpectedly, it’s easy to end up owing a healthcare provider a substantial amount of money. Unfortunately, people don’t always have the cash available to pay for their medical expenses when they get the bill, so they may turn to loans or other options.

Is Using a Personal Loan to Pay for Medical Expenses a Good Idea?

Personal loans are a legitimate way to pay for health expenses or consolidate medical debt, but there are better alternatives, so you should consider this option last. One advantage of a personal loan is that it is usually unsecured, which means the lender can’t repossess your car or foreclose on your house if you used those assets as collateral. Most of the time, personal loans also have a fixed term, ranging from one to seven years, for example, which allows you to budget for a monthly payment and pay off the loan within a reasonable amount of time

Of course, unsecured loans pose a higher risk for lenders, which means you’ll pay a higher interest rate. If you have excellent credit you can usually secure an interest rate of between 10% to 13%, but rates as low as 5% or 6% with automatic payments are possible. Those with poor credit normally end up paying interest rates in the 28% to 32% range, but it is possible to see rates as high as 36% in many states.

Where to Get a Personal Loan

Finding lenders that offer personal loans is relatively easy. You’ll want to compare the offerings of many lenders to find the personal loan that best fits your situation. If you use a local bank or credit union, see what it can offer. You may want to check with other banks and credit unions in your area as well to see if they can provide a lower interest rate or better terms. Once you have an idea of what is available locally, check out personal loan lenders online. Both traditional online lenders and peer-to-peer lending websites offer a variety of personal loan products that may fit your needs better than what you can find locally. After you have explored your options , compare loan offerings to find the one that works best for your situation.

Alternatives to Consider

Before you make your first payment, consider these money-saving strategies.

Consider Hiring a Medical Bill Advocate

Medical bill advocates offer a variety of services, including verifying that your bill is correct, getting incorrect charges removed, negotiating your payment to lower the cost of the bill, and persuading your insurance company to cover more than the initial claim amount. Medical bill advocates charge a fee for this service, either as an hourly rate or a percentage of the amount they save you. But if you have a large medical expense, the cost may be well worth it. You may be able to find an advocate through your employer as a benefit.

Negotiate Costs With the Medical Provider

If you don’t have the money to hire a medical bill advocate, you can always try to negotiate with the medical care provider yourself. While negotiating doesn’t always work, sometimes it can result in a huge savings. You’ll want to talk to someone in the billing department at your medical provider because he or she is likely to be the person in the best position to discount your bill.

Make sure you have a game plan before you start negotiating. Know how much you can afford to pay, either up front or on a monthly basis, to help aid you in your negotiations. If the bill is particularly large, you may want to have a loan or credit card ready to pay the negotiated amount, just in case the billing department offers you a one-time discount for paying immediately.

Look Into Payment Plans

Medical providers want to get paid for the work they do. As a result, some billing departments may be willing to offer payment plans. The terms will vary from provider to provider; some charge zero interest while others will charge some. If you can’t get your bill discounted, an interest-free payment plan may be your next best option.

Investigate Charity Care Programs

If you’re in a tough financial position and are due for a medically necessary procedure, you may want to explore financial aid programs. Some medical providers and nonprofit organizations offer special charity care or financial assistance programs to help those in need pay for essential medical procedures. You’ll need to apply directly with the provider or organization to receive financial assistance. Medical providers may even be able to put you in touch with other organizations in your community that can help.

Use Your Credit Card

If you’re able to pay off your medical expenses within the next 18 months, you may want to consider applying for a credit card with a 0% introductory APR on purchases and use it to pay off your medical expenses. Unfortunately, if you’re not able to pay the balance before the introductory offer period ends, you’ll have to pay interest.

A word of caution: Using a credit card that has no 0% introductory offer to pay for medical expenses usually isn’t a great idea. APRs on credit cards averaged 16% in November 2017, which is higher than what you would pay for most personal loans. If you select the minimum payment option that credit cards provide, you might stretch out your repayment period beyond seven years (which is a longer term than most personal loan companies offer), and end up paying back a lot more interest.

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