One big medical bill is all it takes to wreak havoc in your finances. This can be true even when you have exceptional health insurance. In fact, according to a study by NORC at the University of Chicago, 57% of individuals who responded were surprised to get a medical bill that was not covered by their insurance. This means that you could easily end up owing a substantial amount of money to your healthcare provider. When left unpaid, your medical bills can quickly snowball into larger debt. So how do you pay off medical debt if you have no cash on hand? Does it make sense to opt for a personal loan in such a situation?
Are personal loans a good option to pay off medical bills?
Personal loans are a legitimate way to pay off medical debt. But, is it a smart move? Is it sensible to take on a new form of debt to repay an existing one? The main advantage of a personal loan is that it is unsecured. This means that there is no collateral involved. So you don’t have to worry about your assets being seized if you fail to repay. Likewise, personal loans come with a fixed repayment term ranging from 1 to 7 years. This makes it possible for you to plan your finances and allocate money towards your monthly installment. This also helps you become debt-free within the stipulated time period as long as you’re not acquiring more debt during that time.
However, the downside is that personal loans mean a higher risk for lenders. So you may not even qualify for one unless you have a decent credit history. Moreover, like all other unsecured loans, personal loans can carry high-interest rates. With excellent credit, you may be able to qualify for a personal loan at 10%-13% interest. But with poor credit, the interest rates can go up to 32%. So before you decide to apply for a personal loan to settle your medical bills, you might want to consider other options.
Alternatives to Consider
- Negotiating with the Medical Provider. Sometimes, billing departments at the hospital and doctors’ offices are willing to lower your bill amount. This is possible if you explain the financial difficulty you’re in. Sometimes they even give a one-time discount to help you settle the bill within a set amount of time.
- Ask for a Payment Plan. When you’re unable to pay the bill amount in full, the medical provider may allow you to pay it off in monthly installments. Some providers even offer their own credit-based payment plans. If this option is available, there is no need to take out a personal loan.
- Hire an Advocate. Medical bill advocates help you negotiate the bill amount with the medical provider. They also offer other services such as checking for errors in your bill, having incorrect charges removed, and persuading your insurance company to cover more than what was initially covered. Although medical advocates charge a fee for their services, it is completely worthwhile if they can help you save a large amount of money.
If none of these options work for you, there’s no harm opting for a personal loan to pay off your medical debt. However, be cautious when choosing your lender. Research the best personal loans available in the market and make sure you’re settling for the interest rate, repayment term, and conditions that suit you best.