How To Get A Medical Loan With Bad Credit

Lyn Ridley - 2020-10-05T21:00:00.000Z

A medical loan can deliver the funds you need to cover a medical emergency or have that elective procedure you’ve been putting off for so long. This type of lending product can be used to finance a broad range of treatments:

Emergency room visits: This is essential for patients who don’t have health insurance and require urgent treatment.
Cosmetic surgery: Procedures like these aren’t usually covered by health insurance and can cost upwards of $10,000.
Dental work: Teeth whitening and orthodontics are often not fully covered by your insurer either. A loan can help you pay for them in affordable installments.

If you’re a borrower with weaker credit and are worried about your chances of being approved for a healthcare loan, several effective strategies are described in this article. Keep reading for a closer look at the different ways you can apply for a medical loan.

Your Options

There are several types of loans you can consider when you need to pay for medical costs. You’ll find available options that are ideally suited for borrowers with bad credit below.

Bank Or Credit Union

Traditional lenders are a good place to start looking - especially if you’re an established client with a good track record.

Your bank may be more likely to approve you for a loan even if your credit isn’t perfect. This is especially true if you’ve been a customer for several years or have a mortgage or credit card issued by the bank that’s in good standing.
If your bank rejects your loan application you can always join a local credit union. These institutions are community-based and often go the extra mile to provide their members with loans and other forms of credit.

Online Loans

There has been a rapid expansion in the number of online loan companies offering fully digital applications and fast lending decisions over the past decade. This type of lending product may be ideal if your medical procedure is urgent and you need cash without delay.

Most online loan companies will process your application on the same day - and some even offer instant approval.
Any documentation required by the lender can be uploaded in digital format and if your loan is approved you’ll receive the funds by electronic transfer.
While this loan type is quick and convenient, you’ll want to ensure that you can afford the monthly installment. The APRs on unsecured personal loans are usually higher than those offered by banks and credit unions.

Home Equity

If you’ve paid down your mortgage over the years and the market value of your home has increased you probably have equity in your home loan. You can borrow against this amount and use the funds to finance your medical expenses.

A home equity line of credit (HELOC) is a popular loan type that uses real estate equity as collateral. You can draw on your line of credit like you would a credit card - up to the maximum limit set by your lender. You’ll only be charged interest on the amount you’ve used.
Home equity loans are term loans with fixed monthly installments. Like HELOCs they are secured by the equity in your mortgage. This type of loan has a fixed end date by which the full amount will have been repaid. This makes it an attractive option for borrowers who are keen to pay down their medical debts for good.

401(k) Loan

It’s possible to withdraw a certain amount from your retirement savings and use the proceeds to pay for your medical expenses. However there are a few things you’ll need to consider.

A 401(k) loan reduces your total retirement savings and also means that you won’t be earning as much on the remaining money you’ll eventually need when you’re no longer working.
If you quit your current job, the total amount you borrowed becomes due immediately. This could put you in a tight situation financially - and that’s the opposite of what you want.

Establishing An HSA

A Health Savings Account is a great way to put tax-free income aside to cover your medical expenses. You’ll need your employer’s approval and cooperation before you can set one up.

You can contribute a total of $3550 per person or $7100 per family to your HSA.
These funds can be used for medical expenses only (some cosmetic procedures qualify) and any unused amounts roll over from year to year. The interest earned on an HSA is also tax free.
You’ll want to ensure that the financial institution you choose to invest your money doesn’t charge excessive monthly fees as these can eat into the value of your HSA.

Conclusion

A medical loan could be the perfect way to pay for your healthcare expenses even if you have bad credit.

Exploring the loan types we covered in this article - from bank and credit union loans to online lenders, home equity borrowing, and a 401(k) loan - is a great first step towards approval.