Medical Loans: Financing for Healthcare Expenses

Medical care is very expensive in the United States. Although insurance will cover many procedures if you have a policy, deductibles are often high. In 2017, U.S. households spent $980 billion on health care — an average of more than $3,200 per person, according to the Centers for Medicare and Medicaid Services. Medical bills are also the biggest cause of U.S. bankruptcies.

Some types of care aren’t covered by health insurance at all and can come at a significant cost. In vitro fertilization, for example, averages around $12,000 for a single cycle, and the majority of Americans have no IVF coverage at all.

If you have medical costs you can’t afford to pay for outright, medical loans could provide the funds you need. Here’s what you need to know.

In this guide:

• What Is a Medical Loan?
• Companies That Offer Medical Loans
• Online Medical Loans vs. Bank Loans
• How to Compare Medical Loans
• Alternatives to a Medical Loan

What Is a Medical Loan?

In most cases, a medical loan is simply an unsecured personal loan the borrower uses to pay for medical care they can’t otherwise afford. There is no reason you need to specifically select a “medical loan” when you need financing for a medical procedure, as you can use personal loan proceeds for practically anything and will have a wider selection of lenders to choose from if you simply look for a “personal loan.”

Medical loans — or other unsecured personal loans — typically have a few key features that make them an ideal choice for financing medical care:

• Fixed loan amounts: With a credit card, you get a line of credit and can charge as much as you want up to the card’s limit. You can also charge more as you pay the card down. With a medical loan or other personal loan, you borrow a fixed amount of money upfront and don’t get access to more cash as you pay down the loan, which can help you control your overall costs of borrowing.
• Fixed repayment terms: Unlike credit cards, where you can make minimum payments for years with no end in sight, medical loans have a set repayment schedule so you’ll know how long it will take to get out of debt.
• Lower interest rates than credit cards: While the average credit card interest rate is 17.57% as of February 2019, you can usually find an unsecured personal loan with a lower rate, especially if you have great credit. 
• Choice of fixed or variable rate interest rates: Medical loan lenders and other personal loan lenders typically offer the option of a fixed or variable interest rate so you can choose the loan that works best for your budget and needs.
• Fast funding: In most cases, medical loan lenders or personal loan lenders release funds quickly after approval, usually within a couple of business days if not sooner. You can use the money for anything you want and can choose your doctors and caregivers.

Medical loans can help you afford many kinds of care that either aren’t covered by insurance or come with high deductibles and coinsurance costs. Many people choose to use medical loans to pay for:

• Cosmetic surgery
• Orthodontics
• Weight loss surgery
• Fertility treatment
• Consolidating existing medical debt

Companies That Offer Medical Loans

Although you don’t have to take out a specific “medical loan,” there are plenty of companies offering these loans with favorable terms. Here are some examples of companies that offer medical loans and the loan rates and other terms associated with each.

MyMedicalLoan.com

• Borrow between $1,000 and $35,000
• Fixed interest rates and no prepayment penalties
• Qualify with less-than-perfect credit
• Check your rate online and get a quick decision after submitting an application
• 8% origination fee

American Medical Loan

• Borrow up to $40,000
• Apply online and get a quick decision and fast access to financing
• Qualify even with bad credit
• Loans can be used to cover all types of medical expenses

OneMain Financial

• Borrow between $1,500 and $30,000
• Apply online and get a quick decision and fast access to loan funds — in some cases, by the same business day if you’re approved by noon
• Fixed interest rates and no prepayment penalties
• APRs from 16.05% to 35.99%
• Choose from a repayment term of 24-, 36-, 48-, or 60-month

LightStream

• APRs as low as 5.74% with autopay
• Borrow between $5,000 and $100,000
• Fixed interest rate and no origination fees or prepayment penalties
• Loan terms from 24 to 84 months
• Excellent credit required

Online Medical Loans vs. Bank Loans

You’ll notice many of the medical loans listed above are made by online lenders. You may also be able to find medical loans from credit unions and other traditional financial institutions. However, there are some differences between online lenders and more traditional lenders:

• Faster funding: Some lenders, such as OneMain Financial, allow you to receive your funds as soon as the same business day. Most local lenders move more slowly.
• Convenience: You can shop around with multiple online lenders easily and often get quotes within minutes without leaving your home.
• Easier loan approval or better terms: That’s because online lenders cater to different kinds of borrowers and there’s more variety in who issues loans. For example, loan marketplaces such as LendingClubactually match you with individual investors who fund loans. So, you’re not just relying on one bank or credit union to approve your loan.

Unfortunately, there are some potential downsides to getting a medical loan with an online lender. For example, some charge higher loan origination fees than what you’d find with a local bank. You can’t get in-person assistance with your application with most online lenders, either.

How to Compare Medical Loans

When you’re shopping for medical loans, it’s a good idea to get quotes from multiple lenders to ensure you find the best personal loan for your needs. Below are some of the key factors you’ll want to compare.

APR

The APR, or annual percentage rate, represents the overall cost of a loan product based on both fees and interest.

You’ll want to look for the lowest possible APR when taking out a medical loan because it can help lower your monthly payments and total costs of borrowing. More of your monthly payment will go towards principal, which means your loan simply doesn’t cost as much.

Origination Fees

Origination fees are upfront fees you pay to get a loan. Sometimes, the amount of the origination fee is added to your loan balance; it can also be deducted from your loan proceeds. For example, if you pay a 2% origination fee on a $10,000 loan, you’d either borrow a total of $10,200 (and receive $10,000 in loan proceeds) or receive $9,800 in upfront cash.  

Some lenders charge them, but others don’t. Ideally, you’ll want to avoid an origination fee — but if you can get a better interest rate with a lender that imposes one, it might be worth paying.

Application Requirements

You’ll also want to pay attention to what each lender requires for a successful application. Some lenders, for example, restrict their loans only to people with excellent credit scores, while others will look beyond imperfect credit when evaluating an application. Many lenders also allow you to have a cosigner if you can’t qualify for a loan on your own.

It’s a good idea to look for a lender that lets you check your rate without a hard credit inquiry. Too many hard inquiries on your credit report can hurt your score, so many lenders do only soft inquiries while you’re in the shopping-around phase.

Loan Terms

Finally, pay attention to the other terms of the loan, including:

• Minimum and maximum loan amounts
• Whether the interest rate is fixed or variable
• How long you have to pay back the loan
• Prepayment penalties or other fees

You should always look at the big picture to make sure you’re getting monthly payments you can afford with a loan that provides the funds you need for care.

Alternatives to a Medical Loan

Although medical loans can be a good way to pay for medical expenses, they aren’t the only option. Below are some other sources of financing worth considering.

Credit Cards

If you already have a credit card, using it to pay for medical care could be much faster and easier than getting approved for a personal loan or medical loan. However, chances are good the interest you’ll pay will be higher — unless you can qualify for a 0% APR credit card that lets you finance purchases interest-free so long as they’re paid off within a certain period of time, such as 12 months. Such credit cards typically require good credit.

Medical Credit Cards

Some credit cards are intended specifically for medical financing. For example, CareCredit is a healthcare credit card you can use to cover your deductible or to pay for treatments and procedures not covered by insurance. It also offers deferred-interest financing for up to 18 months on purchases of $200 or more.

If you go this route, make sure your provider accepts the credit card — and compare the rates and terms with other general-purpose credit cards to see if you’re actually getting a good deal.

Secured Loans

Secured loans are loans that require collateral in order to lower the risk to the lender in case of borrower default. You can also qualify for secured loans from banks and online lenders; these loans usually require you to use savings or investments as the collateral to secure the loan.

Secured loans can be easier to qualify for than unsecured loans — but in the process, you risk losing whatever collateral you put up if you become unable to make payments. In other cases, you may not have the money to post as collateral for a secured personal loan when you’re in need of fast funding.

401(k) Loans

401(k) loans are available from many 401(k) plans. You’d need to check with your plan’s administrator to see if you can borrow against your 401(k). The biggest benefit of these loans is that you pay interest to yourself.

Unfortunately, if you leave your job and can’t repay the loan, you could end up with the loan being treated as a distribution. This would mean you’d be taxed on it and owe a 10% penalty for early withdrawal. You’re also risking your retirement because the money won’t be invested in your account and growing to secure your future.

Bottom Line

Medical loans can help you cover health care costs you couldn’t otherwise afford. This can be important when you need fertility treatment or other costly care your insurance won’t cover.

Remember, medical loans aren’t the only financing option available to you — the best personal loans can also be used for medical care. Be sure to shop around and compare quotes to ensure your medical loan has the lowest rate and best terms for your financial situation.

If you are interested in more specific medical loan pages, you can find additional resources below:

• Dental loans
• Personal loans for plastic or cosmetic surgery
• Personal loans for treatment centers and rehab
• IVF loans
• Hip replacement surgery loans