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Understanding the Costs and Benefits of Medical Loans

A recent study found that Americans face $140 billion in outstanding medical debt. Another survey noted that more than half of all adult Americans say they’ve gone into debt due to medical or dental bills. A quarter of those adults owe more than $5,000. With medical bill problems on the rise, more consumers wonder whether a medical loan might be a solution. 

Medical debt can result from several scenarios, including billing disputes, large copays, prescriptions not covered under insurance, and serious medical conditions, including disability, surgery, accidental injuries, rehabilitation, etc. 

In a worst-case scenario, if you do not pay your bill, the medical provider could turn over a debt to a third-party debt collector and report a past-due debt to credit bureaus. Your credit score could suffer as a result. While some credit scoring models weigh medical debt differently than other consumer debt, others weigh these debts equally.  

What Are Medical Loans? 

Medical loans are personal loans designed to pay for medical, dental, and other health-related expenses often not covered by insurance. Medical loans are unsecured, which means you don’t need collateral to get the loan. A medical loan may also be called a “Health Improvement Loan.”

How Do They Work?

These types of loans are known as “installment loans,” as you repay the loan with regular installments, often monthly, over a set period of years. Depending on your credit history, loan amounts may range from $5,000 to $50,000, or potentially more, and have varying interest rates.

Similar to personal loan interest rates, medical loan interest rates are based on the following:

  • Your credit score and credit report or history
  • Amount and length of the loan
  • Your income
  • Your existing debts
  • How much your state allows for interest rates 
  • Other factors

While medical loan interest rates tend to be lower than credit card and mortgage rates, they often increase for longer terms. For example, a 60-month term will have a higher interest rate than a 12-month term, though exact rates ultimately depend on the lender.

What Do Medical Loans Cover?

Medical loans can cover any healthcare costs you and your family experience, including: 

  • Hospital bills, including emergency room visits
  • Medical expenses, including surgery or doctor visits
  • Dental expenses, including orthodontics and dental implants
  • Prescriptions 
  • Fertility treatments
  • Medical equipment
  • Cosmetic surgery
  • Health or medical supplies
  • Deductibles and copays

Are Medical Loans Different From Personal Loans?

While the names may differ, medical and personal loans operate similarly. Banks, credit unions, and online institutions may create special pages on their site that advertise “medical loans,” but often, they do not differ much from other types of personal loans. Like medical loans, personal loans are repaid in regular monthly installments over time and can also be used for medical expenses, among other situations, such as:

  • Debt consolidation
  • Home Improvement 
  • Transportation
  • Vacations, weddings, and other events

Unlike personal loans, some medical loans are used only in specific situations, such as fertility loans, and work with specific providers and borrowers to finance fertility-related costs. Remember that these loans cannot be utilized for other medical costs.

Who Is a Good Candidate for Medical Loans?

A good candidate for a medical loan is someone who has amassed recent medical debt or needs immediate treatment but does not have the proper insurance coverage or income to pay for the services out-of-pocket.

Those with a good credit score, a healthy income or steady job, and a solid credit history of on-time payments and no delinquencies will be able to land the most favorable interest rates and terms. In general, lenders are looking for applicants with scores of 670 or higher.

Medical Loans for Those with Bad Credit

If you have debts, delinquencies, and other credit issues, you’ll likely pay a higher interest rate on your loan as lenders may see you as a riskier borrower than someone with fewer debts and a higher credit score.

However, if you do have bad credit, seeking loans from credit unions or peer-to-peer lenders may provide more flexibility. Further, some private lending options may provide financing for those with bad credit. In the meantime,

consider improving your credit score. 

There are numerous ways to improve your credit score, such as paying existing bills on time, consolidating debt, paying off a credit card, working with lenders to remove negative remarks from your credit report, etc.

Pros and Cons of Medical Loans 

Medical loans may be used for many types of urgent, necessary, or completely optional procedures if insurance leaves you with a bill or you do not have medical insurance. Here are the pros and cons of medical loans to help you decide whether to research, apply for, or accept a medical loan offer. 


Medical loans can be easy to apply for, widely available, and easy to access, making them a good option for a specific group of borrowers. The many advantages of a medical loan include the following:

  • Common terms ranging up to 60 months 
  • Lower interest rates than credit cards 
  • Broad availability from online lenders, credit unions, or managed by physicians’ offices
  • Wide range of uses, including elective surgery

Borrowers can choose from various lenders, compare rates and fees, and choose a term that works best for their budget. Because these are installment loans, the repayment structure is dependable and diversifies your credit mix. 


Medical loans may be challenging in some situations, particularly if you have poor credit or don’t have the time to compare options. Some disadvantages of a medical loan include the following:

  • Origination, documentation, or other fees, depending on the loan
  • Interest rates rely heavily on credit score 
  • It can be hard to find fine details on some loans online
  • Those with poor credit may have a hard time finding a lender

Those with bad credit may not find a lender willing to offer a medical loan. Once a lender is found, you may be surprised by high interest rates or fees.

Where to Find Medical Loans 

Banks and online lenders may offer medical and dental loans or personal loans that act as medical loans, and credit unions offer medical loans to members of the general public. In some cases, you must have a checking account with local credit unions to be allowed to borrow from them.

In some cases, medical centers work directly with lenders to offer loans. Generally, these are for expensive treatments that may not be covered by insurance, including fertility treatments, bariatric surgery for weight loss, cosmetic, and plastic surgery.

When shopping for a medical loan, compare:

  • The total amount available 
  • The interest rate based on your credit score
  • The monthly payment 
  • Any fees (including early repayment fees)
  • Loan repayment period

Alternatives to Medical Loans

If you need to pay your medical expenses and don’t want or don’t qualify for a medical loan, other options are available. You may also qualify for special federal and state healthcare assistance programs or national charitable programs, which could help minimize upcoming or existing medical bills. 

Wait to Pay

Due to the No Surprises Act, important changes occurred that may give you more time to pay off debts before you apply for a medical loan or a credit card out of desperation. Changes to medical debt include:

  • Medical debts in collections won’t appear on a credit report until one year after the original delinquency date
  • Medical debts paid in full after being in collections will be removed from your credit report
  • Medical debts under $500 won’t be reported to credit bureaus

In addition, the new No Surprises Act contains many consumer protections against surprise medical bills and ways to file a complaint about surprise medical bills. 

Credit cards 

With traditional credit cards, a large balance will accumulate interest rapidly. This approach can be especially challenging in an era of high interest rates. This debt is also treated with standard conventions without the special consumer protections outlined in the section above.

There are special medical credit cards that only work at enrolled providers and may offer special no-interest-charged promotional periods. You may also be able to find another introductory 0% interest rate card or a balance-transfer card. However, if attempting to juggle card balances to take advantage of teaser 0% rates, ensure you’re ready to pay off the card before the interest rate expires.

Payment plans 

Hospitals, physicians’ offices, and other providers may offer payment plans that allow you to pay off the debt over time. Some even offer charitable assistance to those who can’t pay bills. If available, either of these approaches may be preferable to a medical loan. 

Here are some ways of approaching the topic with a provider’s billing department: 

  • Can I qualify for a reduced bill if I pay the whole amount upfront?
  • Can I pay my debt in installments, with 0% or low interest? 
  • Can I receive a rate similar to patients who have insurance?
  • Do you have an assistance program that could help me pay my bill? Where can I find more information about the programs available to me?

If you’re offered a payment plan for medical bills, compare that to a loan for medical bills. How long do you have to repay the debt, and at what interest rate? Are there any fees or other costs? What is the monthly payment? The answers can help you make a wise financial decision.