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What are medical loans?

What Is a Medical Loan? All the Information You Need To Know Before Applying

Updated on February 9, 2023


An urgent medical expense can be overwhelming with the cost of doctor appointments, surgeries, and prescription drugs. Your insurance may only cover some of it. Sometimes you may also have to take time off from work if the medical emergency is related to you or a family member.

In addition, the cost of healthcare in the United States is exceptionally high. According to the National Health Expenditure Account (NHEA), U.S. healthcare spending reached $4.3 trillion or $12,914 per person. Fortunately, medical loans can help you get the money you need if you have medical expenses you can't afford. 

In this article, find out everything you need about a medical loan to decide if it's right for you.

What Is a Medical Loan?

A medical loan is a personal loan you use to cover medical costs. These are generally unsecured loans that do not require collateral like your house or vehicle to get approval. Once approved, you receive a lump sum loan and repay over time with a set number of equal scheduled payments.

Why Should I Get a Medical Loan?

Handling a medical emergency can be stressful. There can be a variety of expenses you pay for during the treatment and recovery. A medical loan is right for you if you or anyone in your family needs treatment immediately and doesn't have adequate insurance or funds to pay for the medical expenses. These loans are worth considering if they enable you to pay your medical bills.

How Do Medical Loans Work?

Usually, a medical loan works like an emergency loan taken out to cover medical expenses. You can easily apply for a medical loan online or by visiting the lender's store location. Most lenders may allow you to get prequalified, wherein you can know the estimated rates and terms at which you can borrow the loan. The lender can ask for documents proving your identity, residence, and income once you apply for the loan. However, the loan requirements of every lender can differ.

After approval, you get the loan proceeds as a lump sum amount within the pre-decided timeframe. Once you get the money, you must repay the loan by making fixed monthly payments until you pay the loan in full with interest.

Who Qualifies for Medical Loans?

The borrower's credit scores and income are typically used to determine if they qualify for a loan. Lenders could ask for your credit scores and check your credit history for negative items like missed or late payments. You may be eligible for a lower interest rate with a good credit score, helping you save money. 

However, some lenders base their lending decision on factors other than your credit score. The lenders may require a minimum monthly or annual income to ensure you can repay the loan on time. It would help if you also made enough money to repay your loan after paying off other obligations like your home or student loan. Your debt-to-income ratio (DTI) can help lenders know how much you owe each month and how much you earn.

What Can I Use a Medical Loan For?

Medical loans can be used to pay various healthcare expenses that standard insurance policies might not fully cover. Besides, these short-term loans could also prove helpful when you require funds to pay for the tests or treatment for something your insurance does not consider medically essential. Below are a few common reasons for obtaining such a loan:

  • Pay bills from unexpected medical emergencies
  • Consolidate medical debt
  • Equipment financing
  • Finance a cosmetic surgery
  • Fertility treatments
  • Pay for dental procedures
Pros and cons of medical loans

Pros and Cons of Medical Loans

Like any other form of credit, medical loans have advantages and disadvantages. Understanding these pros and cons goes a long way in helping you determine if they're the right for you. So, here are some of the key benefits and risks of a medical loan:


  • A medical loan is a fast funding option that can help you pay for both expected and unexpected medical expenses.
  • Since medical loans have an interest rate less than credit cards, they can be considered a less expensive credit option.
  • Most medical loans are unsecured, meaning no collateral like a house or car is needed.
  • You can combine several high-interest loans into one with a lower interest rate by using medical loans to consolidate medical debt


  • You may not find a medical loan useful when you require less than the minimum loan amount set by the lender. At the same time, when medical treatment is very costly, more than a medical loan is needed.
  • Even though personal loans often have lower interest rates than credit cards, your medical loan could be expensive if you have bad credit.

How to Choose a Medical Loan?

Before signing the loan agreement, picking the best medical loan for your needs is always wise. You should compare and check what different lenders offer instead of accepting the first offer you receive.

Below are some of the critical factors you should keep in mind while choosing a medical loan:

APR or interest rates:
It would help if you searched for the lowest APR available when applying for a medical loan. You can lower your total borrowing cost and monthly payments by doing that.

Loan requirements:
You should know each lender's requirements to qualify for a medical loan. For instance, some lenders only offer such crisis loans to borrowers with good credit ratings. In contrast, others would consider factors other than your credit score to determine your loan eligibility. If you need help getting a loan, many lenders also let you have a co-signer.

You should know the fees lenders impose when comparing different lenders. While some lenders don't charge any costs, others could impose origination fees, which could add to your cost of borrowing.

Loan terms:
The length of time you have to repay a personal medical loan is specified in the agreements. Your monthly payments largely depend on your loan term. To ensure you receive monthly payments you can afford, you should look for a lender who offers flexible repayment terms.

How to get a medical loan

How to Get a Medical Loan

Like any other personal loan, you can obtain a medical loan from online lenders, banks, and credit unions. These loans may also be available from healthcare providers.

You can follow the below steps to get a medical loan if you're sure that it is the best option for your situation:

Step 1: Know how much you need
The first step in applying for a loan is estimating how much money you need and can afford to borrow and repay. Calculate the loan amount that will be most manageable based on your monthly budget.

Step 2: Find out your credit
Because your credit score plays a significant role in evaluating your loan eligibility and borrowing capacity, you should check your credit report before applying.

Step 3: Compare lenders and loan options
The best way to determine a lender's potential loan terms is to prequalify. You can prequalify with multiple medical loan lenders to easily compare and find the best loan.

Step 4: Complete and Submit the application
You can submit the loan application once you've prequalified and decided on a medical loan. Usually, lenders will send the loan immediately to your bank account if your loan is approved.

Will a Medical Loan Lower My Credit Score?

A loan taken out for medical expenses can help your credit report if you repay it on time and in full each month. Your credit score may suffer if the loan causes your debt-to-income (DTI) ratio to increase too much, and you need to be on time making payments or defaulting on the loan.

Alternatives to Medical Loans

If taking out a medical loan may not be the right option for your situation, you can consider any of the alternatives given below:

Negotiate Medical Bills

It's a good idea to call the billing department as soon as you receive your bill to negotiate and lower the value of your medical treatment. It could help, especially when you don't have health insurance or when you have insurance that only covers part of the bill. You can also check whether they have a forgiveness program or allow you to enter into a repayment plan. The repayment plan can enable you to pay an affordable monthly amount toward the bill.

Review Your Bill For Errors

Remember that only some healthcare organizations can negotiate, and those may be flexible. That is when you can get the assistance of a medical bill advocate who can help spot potential errors and negotiate on your behalf to reduce your total bill. Some third-party services like CoPatient can help you do this better. Keep in mind that these services are not free of cost.

Set Up A Payment Plan

Several health providers offer payment plans, some of which are interest-free. Discuss your concern about paying for the treatment with your doctor before submitting any loan or credit card applications. Working out a payment schedule directly with your provider may be the most cost-effective medical loan financing choice, which may surprise you.

Open A Medical Credit Card

Some credit cards are designed exclusively to finance medical expenses like CareCredit. This health care credit card can help you pay for treatments and procedures that are not covered by insurance or to cover your deductible. If you choose this alternative, you can check if your provider accepts the medical credit card well in advance. Also, check whether you are genuinely receiving a fair deal by comparing the rates and terms with those of other general-purpose credit cards.

Get Prequalified

Prequalifying for a loan can make comparing medical loan interest rates from several lenders simpler. Lenders often run a soft credit check on your records when you check to see whether you prequalify to avoid affecting your credit score. Your credit history, income, and debt-to-income ratio are among the few factors that lenders can consider when deciding whether you qualify for a loan. You should compare information such as loan terms, APR rates, and loan size once you have been prequalified for medical loans. Doing this might save you thousands of dollars in the long run.

Use A Credit Card With A Low Introductory APR

As a medical loan alternative, you can apply for a credit card with a 0% introductory APR offer if your credit score is high. You can use this card to pay off medical debt and pay the balance off before the promotional period expires. After the promotional time passes, the interest rate on your credit card returns to its normal level. Usually, promotional rates are available for 12 to 18 months.

Secured Loans

You can also apply for a secured medical loan if your credit score improves. You'll have to provide collateral to obtain and qualify for these loans. Adding collateral to the loan reduces the risk to the lender if the borrower defaults. For this reason, secured loans are much more accessible than unsecured ones. You can also look for secure online loan bad credit options to pay urgent medical bills. However, you can only make your payments if you lose the collateral.

Credit Cards

You can also use your standard credit cards to finance less-expensive medical procedures apart from the medical credit cards with an introductory 0% APR. Make timely payments, so you don't hurt your credit score.


Medical bills are some of the highest expenses you will pay in your life. While the cost of procedures may seem like financial setbacks, taking care of your health now will prevent a serious illness that can result in thousands of dollars in medical bills.

You might decide to put off medical treatment because it's too expensive, but medical loans are here to help you get the care you need.

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Harita Solanki

Harita Solanki is a passionate advocate for personal finance and believes in empowering individuals to take control of their financial lives.

Her expertise covers a wide range of personal finance topics, including budgeting, saving, credit, debt management, and retirement planning.

With over six years of dedicated experience in the finance industry, Harita has helped countless readers of CASH 1 Loans make informed decisions and achieve their financial goals.

As a dedicated writer, Harita has contributed to numerous financial publications, sharing her knowledge and insights to help readers navigate the complexities of personal finance.

Her writing style is approachable, concise, and tailored to the needs of everyday individuals looking to improve their financial well-being.