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How to Get Medical Loans with Bad Credit

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Nearly 30% of U.S. adults say they or a household member had problems paying medical bills in the past year, according to the Kaiser Family Foundation. And nearly half (45%) of Americans said they would have trouble paying an unexpected medical bill of just $500.

When you’re unable to pay unexpected medical expenses, your borrowing options are typically limited. You could turn to credit cards or alternative (and risky) lenders like a payday lender. Or, you could avoid the debt altogether, allowing it to go to collections. This is the last thing you want to happen, as it will not only tarnish your credit but could even land you in court or have your wages garnished down the line.

Another option is using a medical loan to pay off your bills. By using a loan to pay off your medical debts, you’re essentially consolidating your existing debts — in other words, you’re paying off several debts and will be left with one single loan afterward.

Qualifying for a medical loan can be challenging if you have bad credit but not impossible. We’re going to cover how medical loans work, including how much you can borrow, what kind of rates to expect and the credit score you’ll need to qualify.

We’ll show you where to get medical loans and what the major requirements are so you’ll be prepared. And if you can’t pay your bills, we’ll share some steps you can take to help, including some advocacy groups and government resources for free or low-cost medical care. Lastly, we’ll provide you with some alternative financial options, in case you can’t qualify for a medical loan. 

How medical loans work

A medical loan is actually just a personal loan you can use to cover medical bills and expenses. It could be a good alternative to using high-interest credit card debt or a payday loan to cover your bills. Many banks are willing to work with borrowers who have poor credit and need a medical loan, especially local banks and credit unions. And if you shop around and compare rates carefully, you may even find medical loans offer better rates and terms than other forms of debt.

When you take out a medical loan, you’ll use it to pay off existing medical bills or expenses. In the end, you’ll have just one fixed loan payment to worry about and keep track of.

Let’s take a look at how you may use medical loans, how much you can borrow, the rates you can expect, the credit score needed and how soon you’ll get your money.

Uses for medical loans

  • Consolidating existing medical debt or bills.
  • Dental work, including dental X-rays, bridges, implants, fillings, sealants and root canals.
  • Orthodontics, including braces, appliances and headgear.
  • Adoption expenses, including counseling, preparation and training classes and social work services.
  • Cosmetic procedures, including a face lift, tummy tuck, breast augmentation, liposuction and Botox.
  • Infertility treatment, including fertility drugs, surgery and in vitro fertilization.
  • Hair loss replacement, including hair loss drugs, grafting and transplants for hair restoration.
  • Weight loss surgeries, including Roux-en-Y gastric bypass, laparoscopic adjustable gastric banding, sleeve gastrectomy and duodenal switch with biliopancreatic diversion.

How much you can borrow

Based on a review of personal loan providers in the LendingTree network, we found most offer loans ranging from $1,000 to $35,000.

Rates you can expect

Rates generally range from 6% APR to 36% APR and will depend on your creditworthiness. There are some lenders that offer medical loans to people with bad credit at a much higher rate. You’ll definitely want to shop around to be sure you’re getting the best rate, even if you have poor credit.

Credit score needed

Each lender has its own credit score requirements. For example, NetCredit requires a credit score of 500 to get a personal loan to cover medical expenses, with an APR ranging from 35% to a staggeringly high 155%. Other lenders aren’t as willing to work with bad-credit borrowers, and may have minimum credit score requirements that demand at least fair credit to qualify. The higher your credit score, the lower interest rate you can expect to be offered. For example, with a credit score of 660, you could expect a loan from Discover with an interest rate between 6% to 24.99%.

How long it takes to receive the money

The entire loan process, from application to approval to funding may take anywhere from 24 hours to up to seven days.  However, keep in mind that each lender is different and may require additional time to fund your loan.

Where you can get a medical loan

Your job is to shop around with as many lenders as possible to be sure you’re getting the best rate. When you’ve got bad credit, it’s even more important to shop and compare because you’re already going to be facing relatively higher rates than other borrowers.

Start with your local bank or credit union. There are tons of online lenders that offer personal loans these days, but you can still find very competitive rates by first going to local banks and credit unions. They are often willing to work with borrowers who have poor credit and, you never know, you might be able to to score a better rate.

Online lenders. The best way to compare offers from several lenders at once is to use the LendingTree personal loan marketplace. You fill out a short online form, and you may receive loan offers from multiple lenders at once. These offers won’t be guaranteed loan approvals, but rather a guide to let you know which rates they may offer you if you ultimately qualify for a loan.

How to compare loan offers

When you compare loans, consider all of the following:

  • Application process. Can the application be completed online? Are you able to create an account to check on the status of your loan?
  • Credit score requirements. Each lender will have its own requirements, so make sure you know your credit score and request loans from lenders that match your score.
  • Fees. Some lenders charge origination fees or prepayment penalties. This can affect the overall cost of borrowing. Origination fees are typically charged upfront, while prepayment penalties are charged if you pay your loan off before your original loan term ends.
  • Interest rate and APR. It’s good to know the interest rate being charged, but also consider the overall APR. This is the cost of borrowing money, including the interest rate plus any fees you’re being charged.
  • Terms. Each lender will offer a different term for your loan, so you’ll want to choose a lender that offers a loan term that’s favorable for your situation.

What does it take to get approved for a medical loan?

Here’s a list of what lenders are looking for when you apply for a medical loan.

  • Personal Information. Lenders require detailed information in your application, including:
    • Income details
    • Employment information
    • Bank account details
    • Creditor balances and account numbers (for payoffs or consolidations)
  • Credit score. Each lender has different credit score requirements. For example, with Discover, you’ll need a 660, while with LendingPoint and LendingClub you’ll only need a 600. The lowest credit score accepted by lenders in the LendingTree network is 500, but the corresponding interest rate is significantly higher than other lenders.
  • Credit history. Lenders like to see a history of credit with successful credit lines.
  • Collateral. Although most personal loans are unsecured, meaning they don’t require collateral, some loans may require collateral, so be sure to ask.
  • Employment. You’ll need to be employed and show sufficient income compared with your debts to qualify for a personal loan.
  • Documents. You may need documentation verifying your identity, employment and income. For example, income may be proven using tax returns, pay stubs or bank statements. Employer information is often verified with a phone call to your employer.

There are several reasons why you might be denied, including:

  • Your credit score is too low.
  • Your current outstanding debt is too high relative to income.
  • Length of employment with current employer is too short.
  • Lender doesn’t offer loans in your state of residence.
  • Collections, judgments, tax liens or delinquencies on your credit report.

What to do if you can’t pay your medical bills

Initially, when you don’t pay your medical bills, you may receive multiple notices from the medical provider asking for payment. This may include written notices in addition to phone calls.  

After your medical provider cannot collect from you, there’s a good chance the unpaid medical bill will be sent to a collection agency. In fact, 99.4% of medical debt accounts are reported by collection agencies.

Whether it’s the medical provider or a collection agency that reports your unpaid account to the national credit reporting agencies, your unpaid medical bills will have a negative effect on your credit score. And that can negatively impact your ability to qualify for other financing.

Negotiate your bill

One of the first things to do when you can’t pay your medical bill is to speak with the medical provider. In some cases, you may be able to negotiate the bill down. Ask for a payment reduction based on financial need to reduce the amount you need to pay. Couple this with a payment plan, and you’re set to go, even if it will take a while to pay off.

Ask for a payment plan

Ask your medical provider for a payment plan. In most cases, you won’t need to meet any criteria. All you have to do is agree to make regular payments. And as long as you’re making payments, your medical bill won’t be sent to collections and it won’t hurt your credit.

Shop around before you get treatment

Before you go for treatment, talk to multiple providers and see if you can get a better price on the treatment. Health care costs can vary widely, so it never hurts to get a few prices for comparison. There are many ways to research health care costs, but one of the best ways to negotiate a better price is to pay cash.

If money is short, you may be able to find a federally funded clinic to provide the medical service for a low cost or even free (see advocacy groups below).

Check for errors on the bill

Don’t trust your health care provider to be completely accurate. The American Medical Association estimates that 7.1% of paid medical claims contain errors. From typos to code errors, double-checking your billing statement could save you money.  Ask for an itemized billing statement and review it carefully. You might even want to reach out to a medical billing advocate, who can help you parse out some of the more confusing details (see next section for details).

Advocacy groups and crowdfunding platforms

Check out these advocacy groups and crowdfunding platforms if you need further assistance.

Other financial options

Here are some other financial options if you are unable to qualify for a medical loan because of bad credit.

HSA accounts

Health Savings Accounts (HSAs) can be established by an employer or an individual in conjunction with a qualified high-deductible health plan and allow an individual to save money to pay for qualified medical expenses.

Pros and cons

  • Pro. Stays with the employee if he or she quits or is fired.
  • Pro. Unused money stays in the account.
  • Con. Must have an HSA-qualified high-deductible health plan (HDHP).
  • Con. Maximum HSA contribution is $3,450 for an individual and $6,850 for a family.

FSA accounts

Flexible Spending Accounts (FSAs) are usually established by an employer and allow an individual to pay for qualifying medical expenses that are not covered by insurance.

Pros and cons

  • Pro. Contributions are deducted throughout the year, but the full amount is available immediately.
  • Pro. May be used with any type of health insurance.
  • Con. Unused funds are lost at the end of the year.
  • Con. Contributions limited to no more than $2,650.

Medical credit cards

Medical credit cards include the CareCredit card and the Wells Fargo Health Advantage card. These cards allow you to pay for health care expenses otherwise not covered by insurance.

Pros and cons

  • Pro. Pay for medical expenses immediately and receive treatment sooner.
  • Pro. Promotional rates may allow you to pay for a procedure upfront with little or no interest for a certain period of time.
  • Con. Failure to pay off the balance before the end of the promotional period will result in interest being assessed on the entire balance.

401(k) loan

You may use your 401(k) retirement account to help pay your medical expenses by taking out a loan against it. Although not all plans offer this option, you may borrow up to half the amount you’ve vested, to a maximum of $50,000 for a maximum term of five years at an interest rate comparable with the current market.

Pros and cons

  • Pro. Since you’re borrowing your own money, it’s easy to qualify
  • Pro. No income tax or early withdrawal penalties.
  • Con. Unpaid amounts become a plan distribution to you, which you must include in your gross income and pay an additional 10% tax on (if you’re under 59 ½).
  • Con. Unpaid amounts mean less saved for retirement.
  • Con. If you leave your job, you may be required to repay the loan in full.

Home refinance

If you have sufficient equity in your home, you may do a cash-out refinance to get the money needed for medical expenses.

Pros and cons

  • Pro. Receive loan proceeds in a lump sum.
  • Con. Because you’re refinancing, you’re starting over with your home payments.
  • Con. You’ll pay closing costs

Home equity loan

A home equity loan will allow you to borrow a lump sum of money from the equity in your house.

Pros and cons

  • Pro. Receive a lump sum of cash.
  • Pro. Fixed monthly payments.
  • Con. Your home is collateral for the loan.
  • Con. You’ll pay closing costs.

HELOC

A home equity line of credit may be used to tap the equity in your home to pay for medical expenses that are spread out over time, much like using a credit card.

Pros and cons

  • Pro. Pay interest only on the portion of equity you’ve used.
  • Pro. Lower interest rates than credit cards.
  • Con. Variable interest rates mean your payment could fluctuate.
  • Con. Your home is collateral for the loan.

What to watch out for

How to know when a loan isn’t a good deal

Some companies charge excessive amounts of interest for personal loans for people with bad credit. This could mean interest rates higher than 35% and up to 155%. Paying off these loans can become an uphill battle if they aren’t paid off quickly.

Payday loans are another thing to avoid for the same reason. Although they allow people with no savings or credit cards to quickly access needed cash, the interest rates charged are usually extremely high and result in more money being paid on interest than was initially borrowed.

Scams

Beware of loans and credit cards that promise you’ll qualify despite your credit history, or companies that guarantee you a loan if you pay an upfront fee. Other signs of a scam include:

  • Lender is uninterested in your credit history.
  • Lender requests upfront fees in exchange for guaranteed qualification.
  • Lender requests that money be wired.
  • The loan is offered by phone.
  • Lender is not registered in your state (Call your state attorney general’s office or your state’s banking and finance department to verify).

How to avoid paying more

  • Avoid late fees. Avoid late fees associated with missed payments, as they significantly increase the cost of the loan and may adversely affect your credit score.
  • Promotional rates. Take advantage of promotional rates, but pay attention when promotional rates end and if possible, pay off the loan prior to that time to avoid a spike in interest.
  • Deferred interest. Deferred interest can save you some money, but if you don’t pay off the balance due before the deferred interest period ends, you’ll pay interest on the full loan amount.
  • Subprime interest rates. Some lenders may qualify people with bad credit for a medical loan at a higher interest rate. Be sure to check what your interest rate is, and understand how much you’ll actually be paying over the life of the loan. Understanding this may be an incentive to pay it off quicker.
  • Know your contract. Read your contract and the fine print to make sure you understand what you’re signing up for.
 

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