Ultimate Guide to Medical Financing

Everything you need to know about financing your medical expenses

When your health insurance refuses to cover the medical procedure you need, you have to find another way. Medical care is expensive, but with the right tactics (and the right medical loan), you can afford the care you need. Whether it’s money for weight loss surgery, dental work, or LASIK, there’s a solution for your medical financing needs.

How much do medical procedures cost?

No matter what type of health problem you have, medical care is expensive. If you don’t have insurance, joint replacement surgery costs $16,500 to $33,000. Cataract surgery will set you back by $2,300 to $3,000. Gastric bypass weight loss surgery costs $2,000 to $24,000. Even routine diagnostic medical procedures, such as a colonoscopy, can average $1,000 to $3,000.

Even if you do have insurance, there’s a good chance you’ll have to meet a daunting deductible. Rather than reckoning with medical debt, which can damage your credit score, it’s best to find a medical financing option as soon as possible.

Financing medical procedures

Next time you’re facing a significant medical expense, consider the following options.

Apply for an unsecured personal medical loan

How it works

Also known as signature loans, unsecured loans allow you to borrow money without having to put up any collateral. Online personal medical loans are quick and easy to get when you have good credit. You can also get a personal loan from your local bank or credit union.

The interest rates on unsecured loans are usually fixed, which makes budgeting easier. You usually get a payoff period of two to three years or longer. The longer your payoff period, the more interest you’ll pay.

Online loans feature lower fees and more competitive rates than many bank loans. You don’t require collateral to get a personal medical loan. However, you may not be able to qualify for most personal medical loans if you have bad credit. Those few lenders that do offer medical loans for bad credit charge high interest rates. Also, you’ll pay higher interest rates than you would on an unsecured loan or medical credit debt.

Before applying for a personal medical loan, consider the pros and cons:

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing personal loans.

Pros
  • Lower fees and more competitive rates.
  • No collateral required.
  • Fast approval decision.
  • Some lenders allow you to “preapprove” before pulling your credit.
  • Fixed monthly payments.
  • Set repayment date.
Cons
  • You may not qualify for most medical loans if you have bad credit.
  • Fair and bad credit medical loans have high interest rates.
  • More expensive than 0% APR credit card deals.

Medical personal loans can help you finance expensive procedures. However, they are not the only medical financing options available. Here are some options you should consider before you apply.

Use a credit card

How it works. The simplest ways to pay for a medical procedure is to use a credit card. If you have enough credit on your card, you can use it to pay the medical provider. If possible, be sure to use a cashback card, so you get money back.

Another great option (if you qualify) is to apply for a card with a 0% introductory annual percentage rate (APR). These cards will let you pay off the balance within a 6-18-month grace period without paying any interest. However, you should only go this route if you are certain you can pay off the balance within the allotted time frame. If you still owe money after the grace period ends, you’ll be hit with prohibitively high interest rates.

A good example is the Citi Double Cash card, which offers an 18-month, 0% introductory APR. Just be sure to pay it off before the grace period ends — if you miss the window, you’ll be hit with a high interest rate.

If you don’t have good credit, you probably won’t qualify for 0% APR. In that case, take a look at the Indigo Platinum Mastercard, designed to help borrowers rebuild their credit history. If you’re unsure of your credit score, you can check it here.

Most medical providers take credit cards. If you can qualify for a 0% introductory APR for 6-18 months, you’ll have a chance to pay off the loan without interest. But if you don’t have good credit, you probably won’t qualify for these offers. If you do qualify and fail to pay off the loan on time, you’ll end up paying a lot of interest on the remaining balance.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing credit cards.

Pros
  • Accepted by most medical providers.
  • Potentially interest-free if you qualify for an introductory period.
Cons
  • You won’t qualify for a new card with poor credit.
  • If you’re still making payments after the introductory period, you could see prohibitive interest rates.

Use a medical credit card

How it works

A medical credit card is another great option for avoiding paying interest on your debt. Medical credit cards also offer a 0% APR for 6-18 months. But use your medical credit card with caution. If you fail to pay it off before the grace period ends, you’ll owe interest on the original loan amount, not just the debt that remains.

This option also enables you to pay off your loan without paying interest. But medical credit cards are riskier than credit cards with low rates during introductory periods. If you miss the payment window, you’ll be charged interest on the entire original figure. If your budget is tight or your income inconsistent, this option may be too risky. Also, not all medical providers accept medical credit card payments. If you plan to use one, confirm that your healthcare provider accepts it before the procedure.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing medical credit cards.

Pros
  • Interest-free credit.
Cons
  • High risk: if you miss the grace period, you’ll pay interest on the original loan amount, not just the remaining balance.
Apply to a marketplace lender

How it works

If you need help finding a lender, try visiting an online marketplace. Via the marketplace’s lending platform, you will be matched with a lender who can provide you with the funds you need.

Peer-to-peer loans generally range from $1,000 to $40,000 and must be paid off in one to five years, depending on the loan. LendingClub is one popular peer-to-peer lender.

If you have good credit, you will likely see fewer fees and easier approval than traditional bank loans. Interest rates at online marketplaces are also very competitive. However, borrowers with poor credit will find it difficult to get a peer-to-peer lending loan approved. If you do manage to get one, the interest rate probably will be high.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing personal loans.

Pros
  • Fewer fees than personal loans.
  • Easier approval process.
  • Competitive interest rates.
Cons
  • May not qualify without fair-to-excellent credit.
  • If you do apply with poor credit, interest rates will be high.

Secured loans

How it works

If you own a home and have equity, consider a home equity line of credit (HELOC) or a home equity loan (second mortgage). These types of loans are secured, which means they are backed by collateral — in this case, your home. This level of security enables HELOC lenders to offer very competitive interest rates, which are also tax deductible.

To qualify for a HELOC, you also must have sufficient equity in your home. The Federal Trade Commission says you may be able to borrow up to 85% of the appraised value of your home.

If you have a home with sufficient equity, it’s fairly easy to get these loans approved. The interest you pay on the loan is tax deductible, and interest rates are low. However, if you don’t pay off your loan, you risk losing your home. And both of these options feature variable interest rates, which means your payment will fluctuate with the market.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing home equity lines of credit (HELOC).

Pros
  • Easy approval process.
  • Deduct interest from your taxes.
  • Low-risk loan = low interest rates.
Cons
  • High-risk — you could lose your home.
  • Monthly payments will fluctuate with real estate market.

Get a loan from your 401(k)

How it works

If you have a 401(k) retirement savings account with your employer, you might be able to borrow money from the account. Because you are borrowing money from yourself, you won’t require a credit check to get the loan approved, and you won’t have to pay any interest. You can take up to five years to pay back the loan unless you quit working there. If you leave your job, you must pay the loan back within 60 days, or you’ll be penalized for an early withdrawal if you are not retirement age.

You don’t have to pay any interest when borrowing from your 401(k) since you’re borrowing from yourself. You can take your time paying back the loan as long as you stay employed. However, while this borrowed money is not in your 401(k) account, you won’t earn interest on it. And if you are fired or quit your job, you must pay back the loan within 60 days or pay a stiff early-withdrawal penalty.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when comparing 401(k) loans.

Pros
  • Easy approval process.
  • No interest or fees.
  • Long loan term.
Cons
  • Removing funds from your 401(k) lowers the amount of interest you’re making.
  • If you lose your job, your 5-year loan term becomes a 60-day term.

Conclusions on Medical Financing

Medical procedures and the expenses that come with them are an unfortunate fact of life. But if you find the right medical financing option and pay it off on time, you can keep medical debt at bay.

Take a look at SuperMoney’s Best Personal Loans Reviews and Comparison to find the perfect funding option for your financial situation.

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