A few years ago, I found out I needed extensive dental surgery. All told, it would cost me over $8,000. I did have decent insurance, but I found out it only covered up to $1,500 per year. I was on the hook for the rest of the bill.
At the time, I didn’t have much of an emergency fund. So, I did what many people do — I used a credit card. Over the months it took me to repay it, I paid hundreds more than I originally charged in interest fees, and I learned an expensive lesson.
If you’re like me and are facing an expensive medical procedure that your health insurance won’t cover, there’s another way to pay for it that doesn’t involve a credit card: personal loans.
What are medical loans
Medical loans are a form of a personal loan. They’re specifically designed to pay for medical expenses, including essential or elective procedures. They’re unsecured, meaning you don’t have to put up any property as collateral, and they can even be used to cover the cost of your deductible or out-of-network fees.
Medical loans have several key benefits:
1. You could get a lower interest rate
As a personal loan, medical loans tend to have much lower interest rates than credit cards, helping you save money. According to the Federal Reserve, the average interest rate on a credit card is 17.14%. By contrast, the average interest rate on a personal loan with a two-year term is just 10.63%.
To put those numbers in perspective, let’s say you had to pay for a $10,000 medical procedure. If you charged that amount to a credit card with a 17.14% interest rate and took two years to pay off your card, you’d repay a total of $11,882.
If you instead took out a $10,000 personal loan and qualified for an interest rate of 10.63% with a two-year term, you’d repay just $11,144.70. Opting for a personal loan over a credit card would help you save $738.
2. You can get money quickly
With a personal loan, you can get money in as little as two business days. When time is of the essence — like when you’re in pain because you need an emergency root canal — getting quick access to cash is important.
3. You can spread out your payments
With a medical loan, you can have up to seven years to repay it. That longer repayment term can make the payments more affordable and give you more breathing room in your budget. By spreading out the cost over several years, you’ll pay more in interest, but it can make medical procedures doable when they’d otherwise be out of reach.
Medical loan alternatives
While medical loans can be a smart way to pay for procedures, they’re not for everyone. Only those with good to excellent credit will qualify for loans with the lowest rates. And, if you have less-than-stellar credit, you may have trouble finding a lender willing to work with you. If that’s the case, consider these other financing options:
Payment plans: Some doctors and dentists offer low-interest payment plans, so you can spread out the cost rather than having to come up with the total all at once.
Medical credit cards: Some people have good luck with medical credit cards like CareCredit. With this option, you can qualify for 0% interest if you repay the total with a set period, such as six months. After that, you’ll pay the normal APR — which can be quite high.
Credit cards: If you have good credit, you could qualify for a credit card that has a 0% introductory APR. You’ll have several months to pay off the balance without worrying about interest charges, then the card will revert to its normal APR.
If you decide that a medical loan makes the most sense for you, compare offers from multiple personal loan lenders. Shopping around will help you find the best rates so you can get your medical procedures completed as soon as possible.
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