Medical debt is one of the leading causes of bankruptcy in the U.S. Unlike other types of debt, like consumer debt, medical bills are not a result of unhealthy spending habits. If you feel you need to see a doctor, you should go without hesitation for your health, but when you're stuck with a large bill after you receive care, it can be disheartening or seem unavoidable.
If you are struggling to pay your medical bills, you may be able to consider medical debt consolidation in some instances. Here are four ways to take advantage of medical debt consolidation.
Enroll in a Debt Management Program
Debt management programs (DMP) help consumers consolidate unsecured debt (usually credit card debt) despite what their credit score is. With a DMP, you can also consolidate other loans and medical bills but it's best to use this option if you have a debt with a high interest rate attached to it, like a $7,000 credit card balance with an 8 percent interest rate.
This is recommended because a DMP helps lower your interest rates for outstanding balances, but since medical debt doesn't usually have an interest rate attached to it, it won't really do you any good to consolidate medical debt on its' own with this method. However, if you have different types of debt that causes you to struggle with paying off your medical bills, this option may be a good idea to help simplify everything so you can pay off all your debt.
First, you should try to contact the hospital or provider to see if you can negotiate a settlement or payment plan to relieve yourself of the debt burden. Sometimes the hospital will be accommodating and sometimes they won't, but it's worth a try. You can even hire a professional to negotiate the medical debt for you.
They may even have their own specialist who can help you consolidate your debt to make it more manageable to pay off. Just remember, you aren't the only one struggling with unpaid medical bills. With a debt settlement, you must agree to pay a lump sum to the creditor in order to have the debt written off. If you do obtain a debt settlement agreement, it will show up on your credit report and show that you were responsible for the debt.
Secure a Medical Debt Consolidation Loan
Unlike with a DMP, there are some lenders who specialize in medical debt consolidation loans. If you have large medical bills and are unable to settle on repayment terms with the healthcare facility you owe, you can search for medical debt consolidation agencies who can help offer you more reasonable terms.
Just keep in mind that interest may be higher on your new loan since medical debt consolidation loans are unsecured.
Tap the Equity of Your Home
Home Equity loans can be useful for quite a few things; overwhelming medical debt being one of them. While a home equity loan does offer up your home as collateral, if you have medical bills that are way past due, have an interest rate attached to them, or are on the verge of declaring bankruptcy, you may want to consider this option if you have equity in your home.
With a home equity loan, you can choose to either receive a lump sum payment to pay off your medical debt or you can get a home equity line of credit (HELOC) and pay it off over time. The interest you pay while repaying the home equity loan can be deducted from your taxes.
Don't Avoid Paying Your Medical Bills
Failing to pay your medical bills can ruin your credit score, cause legal issues for you if your account is transferred to a collection agency, or even prompt you to declare bankruptcy. It's important to take medical debt seriously, communicate with the creditor and explore all your options when it comes to repaying the debt.