Medical Loans: The Ultimate Guide on Medical Financing

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medical loans and financing guide

Considering medical loans?  The United States is driven by debt and that runs true in the medical field. Even with insurance, individuals are finding the cost of healthcare to simply be too much.

When your health is on the line — and insurance is being a “big bully” — a medical loan to pay for procedures, tests and medical bills may be necessary.  Luckily, there are a few options you can explore, even if you have bad credit.

That’s right, there is a system built around lending to those who are unable to afford the rising costs of healthcare.

In this guide, we’ll cover what a medical loan is, your medical loan options and more.

What Exactly is a Medical Loan?

The first question you likely have is:  “what is a medical loan?” Put simply, a medical loan is typically an unsecured note, or personal loan that is used explicitly for medical expenses.

According to LendingTree there are three ways to obtain a medical loan.

First, is the unsecured personal loan which we’ve mentioned. This may not be the best option for you as it will require healthy credit scores and lower debt to income ratios.

However, the benefit is:  should you become delinquent on your loan, since it’s unsecured, you won’t risk losing assets such as your home.

A second type of medical loan can be in-house financing or medical credit. Depending on your provider, you may be able to obtain a line of credit, but this may carry high interest rates. The benefit to this is if you are in a situation where you need extra financing this may hold you over until you find more efficient methods.

The final type is a simple credit card. While this isn’t specifically a medical loan, it can be used to cover immediate costs and allow you to find the cash to cover the rest of your expenses.  You can use a personal credit card or apply for a Care Credit card.  Not all healthcare providers accept Care Credit, so make sure yours does.

Current State of Medical Loans

As with any type of lending, it’s critical to ensure the lend practices and dollars do not grow out of hand. A perfect and relevant example would be the current levels of student loan debt.

Starting in 2018, New York Daily News reported that Americans borrowed $88 billion to pay for medical bills.

“Among the 36 Organization for Economic Co-operation and Development nation member, America had the greatest healthcare costs in 2017 at $3.7 trillion – which amounts to more than $10,000 per person.” – New York Daily News

To put that into perspective, the average amount of student loan debt per person in the United States according to Debt.org in 2017 was $37,172. This brings on fears of individuals potentially needing to file bankruptcy in the event of a major health crisis.

West Health in conjunction with Gallup, published a survey that gathered various data points from more than 3,500 Americans on the impact of high healthcare costs. An interesting statistic that was published was,

“…despite 45% of respondents reporting fears of bankruptcy if a major health event strikes, 1 in 4 skipping a medical treatment due to costs and American collectively borrowing an estimated $88 billion to cover healthcare costs in the past year, most (64%) say they are “completely” or “mostly” satisfied with their personal experiences with the healthcare system.” – West Health-Gallup Survey

So with the current research there appears to be the problem of having a system that most people would say is properly functioning, but the costs associated are leading to financial stress.

Another finding that was published states nearly 3 million Americans borrowed $10,000 or more to pay for healthcare in the past year.

Medical Procedures Not Covered by Insurance

Given the statistics associated with the current state of medical financing, you might be asking how some of these costs are incurred. The answer is there are several different procedures that are not covered by insurance.

BenefitsPro.com came out with an article going over the top 10 medical services not covered by insurance.

Adult Dental Services

Some dental services are not covered by insurance, which has led to more than one in three Americans delaying their dental care. Depending on the type of dental care, you can postpone the procedure for some time, but eventually it will need to be completed.  Find out more about dental loans and procedures here.

Children’s Dental Check-up

Depending on your type of insurance, certain children’s dental procedures may not be covered. This goes along similarly to the adult dental services.

Children’s Eyeglasses

Vision is an expensive cost that typically is not covered under general insurance. Furthermore, insurance typically only covers the exam and lenses, while only covering a percentage of the frames. Taking it even further with children’s glasses, 87 percent of health plans do not cover children’s eye glasses.

Weight Loss Surgery

The average cost of weight loss surgery is $29,500 and this is typically not covered by insurance. For many, they are unable to afford the cost, resulting in the need to finance. This is a reason why many insurance plans incentivize their people to stay healthy through premium deductions if certain goals are met.

Weight Loss Programs

From a previous example we know that many weight loss surgeries are uninsured and the same goes for weight loss programs. With obesity continuing to be an issue in the United States, this is something that may be likely to change in the future.

Acupuncture / Chiropractic Care

If you are looking for a more holistic approach to your medical needs, you may want to double check if your insurance covers holistic procedures. While a good treatment for chronic pain, 92 percent of plans exclude acupuncture or chiropractic care as part of their benefits.

Private Nursing

For the elderly, it can be costly to have a nurse come to their home for proper care and treatment. Private nursing is in a similar category as acupuncture that 92 percent of plans are not willing to cover private nursing benefits. This results in elderly moving into nursing homes and assisted living facilities.

Long-Term Care

The final cost on the list that is not covered by healthcare is long-term care. This cost is mainly out of pocket, which results in many people needing to either sell their homes or find other means of long-term financing. While it mostly pertains to elderly individuals, young people are also in need of long-term care.

Infertility Treatment

Those of you looking to utilize the benefits of infertility treatment may want to check with your insurance provider. 94 percent of healthcare plans don’t cover infertility treatments. Keep in mind too, the average cost for this treatment can quickly rise about $10,000.

Cosmetic Surgery

For those of you looking to get Botox injections, breast implants or a nose job, you may have to reach into your own pocket as 98 percent of health plans do not cover cosmetic surgery procedures. While it can be debated, many people are turning to various financing options to afford the procedures.

How to Get a Medical Loan

While we already briefly discussed the various types of financing, we’ll go into greater detail on how to research the best option for you. There are several methods to consider when trying to finance a medical cost.

Unsecured Loan/Personal Loan

This first and likely best option is the unsecured loan or personal loan. Depending on the provider you utilize, you can find loan limits as low as $1,000 all the way up to $100,000. The main reason this is likely to be your best option in financing are the interest rates.

They will almost always be the lowest of all your options and provide reasonable payments.

Another benefit is since they are unsecured you won’t have to risk assets such as your house or vehicle.

This may not be an option for you if you have bad credit.  If that’s the case, continue reading below for alternative financing options.

Medical Credit Card

The next option is to open or use a personal credit card. Luckily in the United States, obtaining a credit card is simple and if you are in good financial standing you should be able to find a card. If you are searching for a credit card, be sure to look for a provider that offers a zero percent interest rate introductory period. Many times, this will last 12 to 15 months.

A draw back to a credit card are the high interest rates. If you plan to carry a balance past the introductory period, you may want to look at other options.

In-House Financing

Like in-store financing, in house financing is done through the healthcare provider. This is a great way to potentially finance the entire cost of your procedure. Also, depending on the type of in-house financing, you may find the rates to be competitive with personal or unsecured loans.

401K Loan

Another method of financing many fail to look at or simply forget about is a 401K loan. This loan is secured by funds inside your 401K and is a much more efficient way to use funds in your 401K without withdrawing and suffering high penalty rates. However, this is repaid through payroll so ensure your cash flow is in order before going this route.

Home Equity Line of Credit (HELOC)

The last method in our list is a line of credit against the equity in your home. For example, if your home is worth $100,000 and you have $70,000 remaining on the mortgage, you have $30,000 in equity you can potentially use to borrow against. This method is an effective way to tackle larger medical expenses.

While there are several other options out there, it’s up to you to find the right one. Different lending sights include peer-to-peer lending, traditional lending and lines of credit.

Pros and Cons of Medical Loans

Now that you have a list of options and understand how medical loans can work, you need to understand the benefits and drawbacks.

Some of the benefits include keeping your cash flow open, especially if the medical expense is unexpected. By borrowing, instead of paying thousands of dollars up front, you can spread that cost over the life of the loan. Furthermore, it can limit the stress associated with an unexpected cost.

However, a negative impact to consider are many of the medical loan options contain higher than normal interest rates. While it can help to cover short-term and unexpected costs, if you plan to carry a balance, you’ll want to research the variety of options to find the best fit for you.

As medical costs continue to rise and insurance plans become more select in what they cover, it’s up to you, the individual, to ensure you have enough money in place to cover medical expenses. If not, you can turn to medical loans to assist in the payment process.

With the growth of financial technology and lending practices, you are likely to find at least some sort of financing option, even if it isn’t the best.

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Medical Loans:  The Ultimate Guide on Medical Financing