Ultimate Loan Guide 101: Should I Use A Personal Loan For Medical Bills?April 16, 2019
Medical bills are often unpredictable, catching people off guard with no clear way to pay them.
If you’re one of the millions of people who struggle to pay medical expenses, you’ve probably thought about throwing those bills on a credit card, but there may be a better way.
A personal loan for medical bills can get you out from under crushing debt.
What Is a Personal Loan?
A personal loan is an unsecured loan, meaning you don’t have to put up collateral as security. That means if you fail to make the payments, the lender can’t take your car or anything else you put up to secure it.
People use personal loans for lots of reasons, including home renovations, car repairs, and medical bills. Loan amounts range from as low as R14,000 to as high as R1,405,000 with loan terms from one to seven years.
It’s similar to a debt consolidation loan, where people borrow money to pay off their other debts, like credit cards. You can read more about debt consolidation loans on our blog.
Can I Qualify?
Because a personal loan is unsecured, lenders rely heavily on your credit-worthiness. So, your credit score counts a lot here. Credit scores range from 300-850, depending on which model the lender uses.
Borrowers will need a score in the “good” range to qualify for a loan with a lower interest rate.
Lenders will also look at your employment history, your income and your other debts. Lenders won’t have anything to seize if you default on the loan, so they’ll want to make sure you’re a good risk.
If your credit score is high, and you aren’t carrying a lot of other debt, you may qualify for a loan with an interest rate much lower than a credit card. And that brings up another question.
Is a Personal Loan for Medical Bills Better Than a Credit Card?
Most of the time, yes. The key here is the interest rate. Credit cards typically come with interest rates in the 15-20% range. If your credit score is exceptional (above 800), you could qualify for a personal loan with an interest rate below 10%.
The only exception to this would be if you can find a credit card with a 0% introductory offer.
If the credit limit is high enough to cover your medical bills and the introductory period is long enough, this would be a good option. Bear in mind, if you can’t pay off the bill before the interest rate increases, it’s not a good deal at all.
Where Can I Apply for a Personal Loan?
You can check with your bank or other financial institution about a personal loan. You can also find lenders online. You can find more information about which option might be better for you on our blog.
Wrapping It Up
Not everyone can qualify for a personal loan for medical bills. Before you apply, you might consider some other options first.
- Try to arrange a payment plan with the provider. They will often let you set up a plan with a lower interest rate than a credit card.
- Make sure the debt is accurate. People make mistakes, so be sure to verify it with the medical provider. Check with your insurance company, too, to make sure the debt isn’t covered.
- Negotiate for a reduction. Ask your medical provider if they offer any programs to help people who can’t cover the whole bill. They may be willing to reduce the debt if you agree to pay it off within a certain period of time.
Please reach out to us with any questions you have about the loan process and to get started with your application.