How to Get a Medical Loan with Bad Credit?

Michael Lefler
by Michael Lefler
Published: February 3, 2020

Content

How Do Medical Loans Work?
What is a Secured Medical Loan?
What to Do if I Can’t Pay My Medical Bills?
Can Medical Bills Impact My Credit Score?
What Are Other Options Available to Me?
What to Consider Before Taking Out a Medical Loan?
So, What’s the Bottom Line?

If you had an unplanned medical expense arise tomorrow, how comfortable are you with covering the cost out of pocket?

If you are among the 45% of Americans who said they would struggle to pay an unexpected medical expense of $500 or more, medical financing might be something to consider, should you find yourself in this not so uncommon situation.

Even with employer coverage, the cost of healthcare is steadily increasing, according to Kaiser Family Foundation, about 40% of people with employer coverage had some difficulty covering a medical expense last year.

So, what exactly are healthcare loans, and how do you go about obtaining one? Are there medical loans for bad credit? As with any financing options, including no credit check loans or any other types of loans, there are things to look out for and unique challenges depending on your specific financial situation.

Educating yourself on your options for medical financing is the first step in making the best decision for you and your family.

How Do Medical Loans Work?

Medical examination can be covered by a medical loan for bad credit

First, let’s uncover what a loan for medical bills is, what it may cover, and the benefits and downsides in opting to take out a loan for medical expenses.

What Is a Medical Loan?

A medical loan is a personal loan used to cover the cost of medical expenses; ranges and rates vary considerably based on creditworthiness. However, there is a wide variety of options, so with the right time and research, you will be able to find the best loan option available to you, or perhaps a better-suited alternative.

Weighing the Pros & Cons of Medical Loans

When applying for a medical loan, especially a medical loan for bad credit, it is important to weigh the pros and cons.

One significant upside to medical financing is you may be able to get funding as quickly as a couple of business days; this might be a considerable benefit, especially in the event of a medical emergency.

Financing your medical expenses with a personal loan may save you money over putting it on a traditional credit card; while interest rates on traditional credit cards tend to hover in the double-digit range, personal loan options can be found at 6% APR or less.

Quick funding and lower rates are definitely an advantage, however, if you have a weaker credit score, that rate range on a personal loan may not be much better than the traditional credit cards offer, in which case seeking one of those alternatives may be more advantageous to you.

What Can A Medical Loan Be Used For?

So, what type of medical expenses may these types of loans be used for? Loans for medical procedures are used to cover a wide variety of medical costs, but are commonly used for:

  • The consolidation of existing medical debt
  • Costs associated with family planning, such as adoption or infertility treatment expenses
  • Elective cosmetic procedures like tummy tucks, botox, facelifts, or breast augmentations, and hair loss restoration
  • Orthodontic or dental work
  • Weight loss surgeries
  • Physical therapy
  • Hospital bills

How Much Can I Borrow for a Medical Loan?

It is common knowledge that medical care in the United States can be quite costly, so how much can you borrow for medical procedure financing? Generally speaking, you can take out loans for medical procedures that range from $1,000 to $35,000 depending on the lender you select, your income and credit score, and the term of the loan.

Healthcare loans are just like personal loans in the sense that each lender has their specific requirements in order to obtain approval, so doing your due diligence and taking the time to find the lender giving you the funds you need at an interest rate and term you feel comfortable with is imperative.

What are the Interest Rates on a Medical Loan?

Keep in mind; interest rates vary significantly based on your credit score. With fair credit, one can expect to see rates fluctuate between 6% and 25% APR; but it should also be noted that medical loans for bad credit may have alarmingly high annual percentage rates, ranging between 35% to 155% APR.

As with any financial decision, choosing the right medical financing is something that you should consider carefully, so the more time you have to weigh your options, the better off you will be.

How Long Does It Take to Obtain One?

If you have a well-established relationship with your financial institution, consider asking them to explore what rates they can offer you. Still, if time is of the essence, many online lenders can offer same day approval and funding within just a couple of business days, some even boast same day funding! That said, if you have a more complex financial situation, your lender may take a little more time considering the loan offer available to you; in this case, funding your loan for medical bills may take up to a few weeks.

How Do I Qualify for a Medical Loan?

Are you thinking loans for medical expenses might be the right fit for you and wondering what the next steps I need to take to get my healthcare loan are? Be it to consolidate outstanding medical debt, or to cover an emergency expense related to healthcare; there are many options available to you. But first of all, you should know what exactly you need to obtain the loan.

What Does It Take to Get Approved for a Medical Loan?

Before applying for a medical loan, you need to be sure that you possess all the necessary information that will be required by lenders:

Personal Information. Lenders will require all your detailed information, including documentation confirming your identity, verifiable income details, bank account details, employment information, account numbers, and creditor balances.

Credit Score. All lenders have various credit score requirements. So, it’s necessary to check if you comply with your chosen lender requirements every time you’re applying for a loan. If you know that your credit is not so high, it would be wise to consider bad credit loans as a solution.

Credit History. It’s a significant advantage if you have a good history of credit and therefore, a good credit score. It immediately increases your chances of obtaining the desired loan.

Collateral. Sometimes it’s not necessary, but it’s better to ask your lender about the requirement, in case if they do need you to provide collateral.

Why Might I Be Denied for a Medical Loan?

Unfortunately, simply having outstanding medical debt or planning for an upcoming medical procedure is not enough to automatically qualify you for medical financing.

Here are several reasons why you might be denied for getting a medical loan:

  • You do not have sufficient income compared with your current outstanding debts
  • Your credit score is too low for getting a loan
  • You have a too short period of employment with the present employer
  • You are a resident of a state where the loan is restricted
  • Your credit report has a lot of collections, tax liens, or delinquencies

Apply for a Medical Loan

Even if you have bruised credit, options are available; you can apply for a bad credit payday loan with us and get your rate estimate without any negative impact on your credit score and may be able to gain approval within just a few hours. With advances in lending technology, online application processes are streamlined and simple! You do not have to spend hours in your local financial institution but can go through the entire process from the comfort of your own home.

If you have questions or feel overwhelmed and confused by the process of borrowing a loan for medical bills, though, it is recommended you discuss options with a financial professional to ensure you are clear about the cost of your loan over time and make sure you are making the best decision for yourself in the long run.

What is a Secured Medical Loan?

In contrast to an unsecured loan that requires only a signature and a normal credit score, this type of loan is designed to pay medical expenses that use the borrower’s assets for collateral.

Secured medical loans provide a lot of attractive features in case if you have collateral: low APRs and an opportunity to get a longer term from a loan (up to 10 years or more) and borrow a larger sum.

Secured medical loans are easier to get for customers who have bad credit, but only if they have collateral. But in this case, customers assume full responsibility, as in case if they do not repay the loan on time, they can lose their collateral.

What to Do if I Can’t Pay My Medical Bills?

Medicaments financed through a medical loan

Considering the fact that almost all medical providers are able to send your unpaid medical bill to a collection agency that will negatively impact your credit score and ability to qualify for another financing – you need to be ready to take all necessary measures to win this debt battle.

Negotiate your bill

It is probably the most useful thing to do in case if you can’t pay your medical bill. Speak to your medical provider and ask for a payment reduction.

Ask for a payment plan

In case if you have not succeeded in negotiating your bill down at once, you always can to make regular payments. No worries. As long as you are making payments, your medical provider will not send the unpaid medical bill to any collection agencies.

Shop around

It’s always necessary to look for various providers who are able to offer you a better price on the treatment. So, before you go for treatment, allow some time and spend it to get a few prices for comparison. Just for the record, a federally funded clinic provides the medical service for a low cost.

Check your bill carefully

Even though medical providers seem professional enough, you shouldn’t completely trust your health care provider. The statistics reveal that almost 8% of paid medical claims contain such errors as typos, code errors, etc. Believe that double-checking your itemized billing statement indeed can save you money.

Can Medical Bills Impact My Credit Score?

Ironically, your credit score could be lowered due to unpaid medical bills, but it couldn’t be improved if you pay them promptly. It happens because the three major credit bureaus, Experian, TransUnion, and Equifax, do not include a medical history on credit reports.

The credit bureaus will take into consideration only bills that are at least 180 days past due. And in case if your unpaid medical bills appear on your credit history, you need to be ready to assume their presence for seven years beyond the initial delinquency date, and it will definitely have a negative impact on your credit score. Just for the record, about 30% of unpaid medical debts have been forwarded to collection agencies in the last two years.

But do not worry. Credit bureaus that use FICO Score 9 reduce the impact of medical bill delinquencies. Also, there are some states that offer additional ways to protect you from the negative effect, such as California and Massachusetts, that do not let medical bills go to collection agencies and other states that prevent wage garnishments or home liens due to unpaid debts.

What Are Other Options Available to Me?

Papers presenting available alternatives for medical loans

But what if you are denied, or simply are not comfortable with interest rates or monthly payments available to you after applying for medical financing? Here are other ways to cover the cost of healthcare without taking out a loan for medical bills:

Consider a promotional 0% APR credit card offer: If one is available to you, paying off a medical bill on one of these is a great option if you are able to pay off the total balance within the promotional period!

Apply for a medical credit card: Though rates may be higher on these specialized credit cards than they are on personal loans, they are an alternative financing option that may be approved with a lower credit score than loans to pay for medical expenses.

Check with your employer to see if they offer an HSA account: A health savings account is a flex spending account offered by many employers that allow you to set aside money (tax-deferred) out of each paycheck that may be used towards out of pocket healthcare expenses.

Ask for a payment arrangement: Discuss your situation with the medical provider you owe money to, they may be able to work with you to come up with a repayment plan before they send your debt to a collections account.

Use a secured loan: With a lower credit score, securing your loan for medical bills with upfront collateral may be a way to obtain loan approval. Ask your lender about secured loan options during the application process.

Borrow against your 401k: Check with your 401k provider to see if emergency loan options are available to you. These loans are typically easy to obtain because it is your own money you are borrowing; however, tax penalties or other fees may apply.

What to Consider Before Taking Out a Medical Loan?

High-interest rates. If you have bad credit, be prepared to meet a lot of companies that charge an excessive amount of interest (higher than 35% and up to %150) for personal loans as well as payday loans that allow you to quickly get needed cash with no savings or good credit score. In case if you do not pay off these loans, their interest rates can be extremely higher than the initially borrowed sum. Be sure to verify what your interest rate is. It will help you understand how much you will pay.

Watch out for scams. The main signs of typical scammers include:
a) Requests for upfront fees in exchange for your guaranteed qualification
b) Disinterest in your credit history
c) Offering the loan by phone
d) Non-registration of a lender in your state of residence. In this case, you should verify it with your state attorney general’s office or with your state finance department).

Know your contract. To avoid any possible confusion, you should carefully read your contract, and be sure what you are signing up for. For example, fees associated with missed payments are always mentioned in a contract. Late fees may increase the cost of the loan and affect your credit score. So, if you haven’t known about this side of a medical loan, it will be your fault only. Ignorance of the law is no excuse.

So, What’s the Bottom Line?

When considering medical financing, being fully aware of what you’re able to pay each month and setting yourself up to make payments on time is the most important factor. There are options available to help you pay off medical expenses, and paying off your medical bills before they’re sent to collections and negatively impact your credit score. When making any financial decision, carefully consider all options available to you before jumping in.

References and Sources
  1. New Kaiser/New York Times Survey Finds One in Five Working-Age Americans With Health Insurance Report Problems Paying Medical Bills – https://www.kff.org/health-costs/press-release/new-kaisernew-york-times-survey-finds-one-in-five-working-age-americans-with-health-insurance-report-problems-paying-medical-bills/

  2. “Medical Loans & Patient Financing” – https://www.debt.org/medical/medical-loans-financing/

Mike Lefler shares his interest in a wide range of different subjects, including his love for finance-related writing. The passion for writing, related exceptional skills and his years of study, along with a Master’s Degree at Southwest Minnesota State University led him to become one of the brilliant authors in the massive finance arena and in the area of Financial Planning and Lending Industry.

At the same time, his ability to identify the main points of various aspects and intention to significantly contribute makes him a great team member and a valuable part of 1FirstCashAdvance.

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