What you need to know about medical loans – Bankrate
- January 20, 2021
- By: Greenpath Financial Wellness
Does it make sense to pay medical costs with a medical loan? BankRate asked GreenPath’s Katie Bossler to weigh in.
Medical debt can be a significant challenge for Americans.
Even those with health insurance in the United States can incur thousands of dollars in medical bills making it tough to pay back. One in four Americans have trouble paying their medical bills, and half of the country has delayed or declined medical treatment due to finances.
While preventive care and emergency treatment are important; for people unable to cover those expenses upfront, medical loans can help with costs.
What is a Medical Loan?
A medical loan is a personal loan that is taken out for the specific purpose of financing medical treatment.
In most cases, medical loans are unsecured loans, meaning you won’t have to risk your home (or anything else) in the name of your health.
However, unsecured personal loans for medical bills are typically best suited for those with good credit scores who can get a good interest rate.
If your credit score isn’t great – especially if you’ve struggled to pay medical bills in the past – you can also apply for a secured medical loan. The trade-off is that you’ll need to offer some form of collateral, which you’ll lose if you find yourself unable to pay the loan. But you’ll get a much lower interest rate and will have less to pay off in the future.
GreenPath Weighs In
A medical loan is a type of personal loan, the proceeds from which can be used to pay for medical expenses. In fact, many lenders may not even distinguish the loan as a medical loan, but instead will state in their loan terms or literature that medical costs are an acceptable use for the loan proceeds, says Katie Bossler of GreenPath Financial Wellness.
It is best to keep in mind several downsides with regard to medical loans. Some of the downsides are:
- High-interest rates for bad-credit borrowers. While personal loans generally have lower interest rates than credit cards, keep in mind that having bad credit could make your medical loan more expensive. Bad-credit borrowers will often see interest rates cap at 35 percent on personal loans.
- Limited funding. It’s no secret that medical treatment can be extremely expensive, and in some cases, medical loans may not be sufficient. Your loan amount largely depends on your financial profile, but many lenders have caps of around $40,000.
The Bottom Line
The best option is to proceed with caution.
Medical bills are among the highest expenses Americans will pay in their lives. While the cost of elective and preventive procedures might seem prohibitive, remember that taking good care of your health now can help prevent a serious illness later that results in tens or hundreds of thousands of dollars in medical bills.
Although many Americans decide to put off medical treatment due to cost, medical loans exist for a reason. But there might be other options that are more suitable to your specific financial situation.
We Are Here To Support You
Understanding how to manage expenses like medical costs and loans starts with a conversation. Our financial counselors are available to talk. They can help you figure out a plan and will walk through your whole financial picture to help you understand the best way to borrow money.
Katie Bossler has been with GreenPath since 2003. She currently serves as a Quality Assurance Specialist and is based out of our Detroit office. Katie passionately believes everyone can achieve financial wellness and is grateful to dedicate her work to help GreenPath remix the American Dream so it works for everyone.