Medical Loans

When patients or families need access to funds to pay for medical and surgical procedures or treatments, specialized medical financing companies can help facilitate this process by offering medical loans. These medical loans can finance a wide range of medical, surgical, cosmetic, bariatric, dental, and therapeutic procedures and treatments. These procedures can cost thousands of dollars and are not covered by conventional medical or health insurance plans. As a result, patients often forego these needed treatments because they can’t afford them. While the general rule is that good credit is required to obtain a medical loan, financing options exist for people with less-than-perfect credit.

Financing for a medical procedure could be the most critical type of loan for which you ever apply. Whether it’s in vitro fertilization (IVF), elective or cosmetic surgery, or dental rehabilitation, major medical therapies can change your life and the lives of those around you. Therefore, it is essential to consider every option before taking on a medical loan because:

  • Your health insurance may actually cover some or all of the surgery;
  • You might be able to take out a conventional loan from a bank, credit union, or online lender;
  • You may be able to use an alternative financing source such as an online lender or in-office financing that may even offer cheaper interest rates; or,
  • A combination of all of these options could be available to you.

All financing options have their advantages and disadvantages. In most cases, medical financing is an unsecured personal loan. However, appropriately evaluating where you stand with each option is key to developing a custom-tailored borrowing strategy that will improve your health while not overburdening you with debt through either a high-interest rate or concise repayment terms. The latter is also crucial, particularly for medical loans, as there may be instances where patients are mandated a ‘rest period’ post-procedure which generally prevents them from heading back to work and earning a full-time salary or wage. In this case, an inflexible loan that requires fixed repayments that begin almost immediately may not be the most favourable option.

Obviously, having some or all of your medical, surgical, or dental treatment, procedure, or therapy covered by insurance is the most desirable option. But health and dental insurance can be confusing. Most insurance companies have 24/7 benefits hotlines if you are insured. Get on the phone with one of their insurance specialists and have them walk you through every aspect of your plan and how it relates to your upcoming treatment. You don’t want to show up for your procedure, provide your insurance details, and then be told after the fact that you’re not covered for the medical or dental care you received. Believe it or not, this happens all too often, and you’ll be held accountable for the outstanding hospital bill.

Taking out an unsecured personal or signature loan may be an option to fund your medical treatment. Though most banks or credit unions don’t advertise a “medical loan”, they are compassionate about funding important health needs. Obtaining an unsecured loan is relatively simple if you have good credit, a strong credit history, a low debt-to-income ratio, and stable employment and income. Banks and credit unions generally have a low Annual Percentage Rate (APR), and you can borrow between $5,000 and $35,000. Depending on your personal situation, they may even lend you more. It would help if you shopped around for the right loan that fits with your repayment abilities. There is no harm in benchmarking multiple lenders against each other and negotiating rates to ensure you get the amount you want as well as the most competitive terms and rates. In many cases, these loans can be funded within a day or so, allowing you to immediately proceed with your treatment plan.

Alternative lenders such as online and Peer-to-Peer (P2P) lenders specialize in providing medical loans and generally issue loans up to $35,000. However, it may be possible to borrow a higher amount if you have exceptional credit and high income. You should note that if you have an average or a lower credit score, alternative lenders may be your only option, given the incremental risk you present as a borrower. These lenders have approval processes that are less rigorous than banks and credit unions, allowing them to lend money to borrowers who may not qualify for loans from banks. However, there is a downside involved – namely, higher loan fees and APR. As such, it is important to understand all aspects of the loan for which you’re applying. The fine print of your loan may contain language that sees a higher APR triggered in the event of late payments or non-payment. You need to ensure you read every word of your financing agreement to secure a loan that seems manageable at inception and doesn’t become a high-interest and unmanageable debt.

Do not use your credit or charge cards to cover medical bills. These cards carry the highest interest rates, and you could end up saddled with the debt for a lot longer than if you took out a loan specifically for your procedure. Depending on the credit card, you could be paying an APR of up to 23%. If you have a medical bill for $10,000 on your credit card, this translates to up to $2,300 per year in interest in addition to any additional cardholder fees you may have to pay. It is often the case that people immediately swipe their credit or charge card to pay a medical bill. You should carefully consider the financial ramifications before doing so. Especially in the case of cosmetic surgery, many people “impulse buy” these services. In the heat of the moment, the desire for people to look or feel better about themselves through veneers, breast augmentation surgery, or botox can outweigh any financial aspect of purchasing services. However, it is best to take your time making these decisions for your overall personal and financial health.

If the surgery is cosmetic or elective, and you can delay undergoing the procedure, saving up some money, using your health insurance for partial coverage, and offsetting the balance with a signature loan is also a great option. This approach shows maturity in your personal financial management. You’re sharing the responsibility of your health among various cash and non-cash options. If you have decent credit and this is your plan, nearly every bank would issue you a loan as long as you show them that you’re working up front to lessen their risk and your overall debt. However, even if you are financially responsible, there may be unforeseen emergencies that you can encounter. To that end, understanding your financing options, even as a contingency plan, is a smart thing to do. 

credit tips!

According to a survey conducted by Statistics Canada, 35% of Canadians say they would face challenges if asked to cover a $2,000 expense in the next month.Medical PieCreating a “slush fund” that you allocate a portion of your monthly earnings to is a sound personal finance tactic. The “slush fund” can be used for any purpose, including medical, dental, surgical, or therapeutic treatment. If IVF is a requirement for you and your family, for example, setting up a separate fund for this purpose will save you from having to take out a larger loan to cover the cost of the service (which can run up to $100,000). Having cash on hand is always the best way forward in any medical-related situation. But, given that emergencies do come up, cash that has been saved coupled with responsible borrowing will help lessen the impacts of a sudden debt as a result of a health issue or other expense. Be sure to plan accordingly, so you don’t find yourself in a tricky financial situation.

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