MoneyLife

Where To Get a Loan for Medical Bills

By Lindsey Ryan
loan for medical bills

It might surprise you that a large source of American debt is due to medical bills. Sourcing funds and securing a loan for medical bills can be quite an uphill task. This article will guide you through everything you need to know about a medical loan, including how to secure one. Let’s dive in!

What is a medical loan?

A medical loan is a personal loan offered to those who qualify and need assistance paying for medical-related expenses such as medical bills, medical procedures, and medical reconciliation charges. These costs are usually not covered by health insurance. 

Taking out a medical loan can help you better manage the high costs of medical care. By scheduling your loan repayments as part of a payment plan, you can pay for medical procedures over time instead of all at once.

What happens if you cannot pay your medical bills?

In cases where a bill is unpaid, the medical practice will take action to recoup their money. When that does not work, they may sell the unpaid medical bills to a collections agency.

You are given a six-month grace period before the debt appears on your credit report. Once it impacts your credit score, the debt will remain on your report to be there for seven years from the date of delinquency. This isn’t an ideal situation as medical loan debt can seriously harm your credit score.

However, many algorithms attach less significance to medical collections than other forms of debt. Also, the grace period gives you six months to explore other means of repaying your loan. 

How long does medical bill debt stay on your credit report?

When a medical practice sells your loan to a collections agency, it will reflect on your credit score, but only after at least six months have passed. Once the debt is reflected on your credit score, it will remain there until you repay the loan or after seven years have elapsed—whichever comes first. 

So, this means that if you settle the bills before seven years pass by, you can heal the damage that medical loan debt causes to your credit report. After the debt is paid off, any evidence of your debt will be erased from your credit report. 

However, your payments on the loan will remain a visible part of your payment history. If you don’t pay the loan within seven years, then the debt will continue to reflect on your credit report in a negative way. 

7 ways to pay for your medical bills

There are many ways to pay your medical debt without causing damage to your credit standing. Here are 7 different payment options for repaying medical loan debt! 

1. Payment plan

To their credit, many medical practices and facilities offer payment options to their clients. Also, they are very likely to offer payment plan options when they detect financial distress. A payment plan is the smartest way to repay your medical loans and avoid having to deal with collections. 

Depending on what you can afford, it’s possible to tweak the payment plan values to reflect your current situation. You can also choose to divide your debt into equal payments that you repay over some time. The minimum repayment limit will heavily depend on the total amount that you owe and the terms of your medical loan.

Make sure you know if there are any extra costs that could be added to your loan total over time, like a high interest rate. If you come across additional billing charges or any other fees that you don’t recognize, ask for clarification from your lender.

2. Medical bill forgiveness letter 

In cases where your medical expenses have become impossible to pay, the debtor can apply for medical forgiveness. You will have to provide proof of your inability to pay the debt before you can receive debt reduction or total termination of your debt.

Before sending a letter requesting medical bill forgiveness, you should take action to verify your debt. Make sure the amount you’re claiming is correct. Take a look at your payment history to ensure that you have paid what you’re claiming. 

Next, ask the medical facility that you owe money to if they are willing to work out a payment plan. By being respectful and honest, you will be able to write a compelling medical forgiveness letter that contains proof of your transactions to-date.

To write a proper medical debt forgiveness letter, apply the following tips!

  • The letter should be as short and straight to the point as possible.
  • Include financial information like your sources of income and your monthly payment amount. 
  • Remain courteous and polite all throughout the letter.
  • Provide information about your financial hardships that are preventing you from repaying the loan.
  • Propose a definite settlement offer.

If the medical practice agrees to the settlement that you propose, you will need to obtain a document proving their acceptance with your settlement offer. In a case where your debt was reduced instead of terminated, the document must state the new payment sum agreed upon by both parties.

3. Credit builder loan

Credit builder loans are another effective way to cover your medical debt. There are a ton of credit builder loans out there, but the MoneyLion Credit Builder Plus loan is highly recommended. With a reserve account that yields interest over time and same-day funding to handle co-pays, it’s quite the bargain. 

The terms are affordable and you could receive up to $1,000! Great, isn’t it? Credit builder loans are an excellent way to both pay off your debt and strategically put your credit back in good standing.

4. Line of credit

If you have tangible equity in your home, you might qualify for a loan. Equity on your home can also make you eligible for a line-of-credit transaction using the house as collateral. 

The funds you generate from equity can help you pay your medical bills. However, this may be an unlikely option for you if you don’t have any means to pay back the loan because putting your property up as collateral could cause you to lose your home in the long run.

5. Credit card

Credit cards make it possible to pay for your medical treatment while skipping hefty interest fees. With an introductory 0% APR credit card, this is quite possible. 

However, it’s a bit risky because you have to repay the credit card debt if you want to escape charges. Also, credit cards impose a high-interest rate if the credit is not paid in full by the due date.

6. Personal loan

With a personal loan, you have a wide range of options because you can decide to pay back the loan over time or all at once. These loans almost always have lower interest rates especially compared to the interest rates of medical practices. 

Personal loans are either secured or unsecured. While secure loans make use of collateral as security, unsecured loans rely on credit history and credit standing. However, if you’re looking for a better alternative to paying off your medical loans, we recommend the credit builder loans from MoneyLion!

7. 401(k)

If you’re part of your employer’s 401(k) program, then you should have no issue borrowing against it. You can also do so for an IRA account as long as you do not surpass your credit limit. You can withdraw up to $10,000 or half of your account balance—whichever value is greater. 

However, you are not allowed to withdraw more than $50,000 in compliance with the IRS. The downside of using your 401(k) to pay for your medical bills is that you will be using money that would’ve otherwise been a long-term investment. To add to this, you’re required to repay the loan after paying tax on whatever income you earned. 

Use the MoneyLion Instacash solution

We have identified how important it is to be on top of our medical debt situation. However, you can make your life a lot easier by using our MoneyLion’s Instacash! Get up to $250 without hard credit checks, interest rates, or monthly fees. You can channel these funds to your medical bill payments, all while having absolutely nothing to lose! 

Sign Up
Sign Up

Build your credit and save

Join Credit Builder Plus to get a loan up to $1,000, credit monitoring, exclusive rewards, access to 0% APR cash advances, and more. Over half of members raise their credit over 60 points within 60 days!

Sign Up