Medical costs can add up quickly. The good news is you can use personal loans to pay them off.
Here’s a closer look at personal loans for medical expenses, including the pros and cons and how you can qualify.
- What are personal loans for medical expenses?
- What are the pros, cons of these loans?
- Where can you find this kind of personal loan?
- What are the eligibility requirements?
- Are medical loans secured?
What are personal loans for medical expenses?
Personal loans are typically unsecured loans — meaning they don’t require collateral — that can be used for a variety of purposes. You can use personal loans to help you cover medical expenses like surgeries, prescriptions, fertility treatments, and elective procedures.
A number of financial institutions, like banks, credit unions, and online lenders offer personal loans that can be used for medical treatments. To apply for a personal loan, follow these five steps:
- Compare lenders. Shop around and compare several lenders that offer personal loans for medical expenses. Compare interest rates, terms, fees, and eligibility requirements. Most lenders will let you prequalify and check your loan offer without any impact to your credit.
- Choose a loan. After comparing lenders, pick the loan that meets your needs. It should be affordable yet allow you to meet your goals. Avoid any loan that you know you won’t be able to pay back.
- Gather the necessary documents. Most lenders will ask you to submit various documents when you apply for a personal loan. These might include a government-issued ID, like your driver’s license or passport, as well as pay stubs and tax returns. Have these documents ready when you apply.
- Complete the application. Fill out the application online or in person. Be prepared to submit the required documents. Double-check your application to avoid errors or inaccuracies that may delay approval and funding.
- Get your loan funds. If the lender approves your application, you’ll sign your loan agreement. The lender may disburse your money as soon as the same or next business day. You can usually expect the funds via direct deposit, check, or prepaid card.
What are the pros and cons of loans for medical expenses?
Before you take out a personal loan to pay for medical debt, consider these benefits and drawbacks.
Pros of personal loans for medical costs
- One monthly bill: It can be overwhelming to keep track of several bills from multiple health care providers. With a personal loan, you can consolidate your medical debt into a single bill.
- Potentially low rate: Compared to credit cards, personal loans typically offer lower rates that can save you hundreds or even thousands of dollars. If you have good or excellent credit, you can qualify for the lowest rates.
- Fast funding: In most cases, you won’t have to wait long to receive the money. Depending on the lender, you may get it the same day you’re approved, the next business day, or in a few business days.
- Longer terms: Repayment terms for personal loans generally range from one to five years, or even longer. Longer terms can mean lower monthly payments that fit comfortably within your budget. Just keep in mind that with a longer repayment term, you’ll pay more in interest over the life of the loan.
- Chance to improve credit: If you make your loan payments on time, every time, you can build or improve your credit. Better credit may open you up to lower rates and more favorable terms in the future.
Cons of personal loans for medical costs
- No-interest payment plans might be better: Some medical providers and hospitals offer no-interest payment plans for medical bills. In these cases, a personal loan with interest might not make sense.
- May not qualify: Most lenders look at your credit score to determine whether to approve you for a personal loan. If you have bad credit, you might have difficulty qualifying.
- Can hurt your credit: Your credit score will take a hit if you fail to make your payments on time. The same holds true if you default on your loan.
- Limited funding: While you may be able to find lenders that offer higher maximum loan amounts, personal loans typically go up to $50,000. This may not cover your medical expenses and may require you to look elsewhere for additional funding.
- Might increase your debt load: Personal loans come with interest and potential fees, like origination fees (the cost of processing your application), late fees, and prepayment penalties.
Where can you find a loan for medical expenses?
You have many options for medical loan financing, including banks, credit unions, and online lenders. As you do your research, you’ll find that some lenders specialize in medical loans. If you have good to excellent credit, you may qualify for lower rates.
But many lenders also work with borrowers with fair or bad credit. Keep in mind that if you don’t have the best credit, you’ll likely have to settle for a higher interest rate that can increase your overall cost of borrowing.
What are the eligibility requirements for these kinds of personal loans?
While each lender has its own unique criteria for medical loans, most look at the following:
- Credit score: Your credit score is a three-digit number that indicates how responsible you are with debt. A higher credit score will increase your chances of approval and help you qualify for lower interest rates.
- Income: Lenders want to see that you have a stable income to repay your loan. Your income may come from various sources, like your job, Social Security benefits, or retirement benefits.
- Debt-to-income ratio (DTI): Your DTI compares your monthly debt payments to your gross monthly income. The lower your DTI, the better, since this shows that you can comfortably afford loan payments.
Are medical loans secured?
Medical loans are typically unsecured. This means that you won’t lose your house, car, or any other asset if you can’t repay your loan.
However, you may be able to find secured medical loans that are easier to qualify for — just keep the risk level in mind.