5 Best Medical Loans in 2023

What is a medical loan?

A medical loan is a type of unsecured personal loan. Personal loans are fixed-rate loans that you pay back over a set term, typically two to seven years. Unsecured means the loans do not require collateral. Banks, online lenders and credit unions all offer personal loans, but interest rates and convenience in applying can differ among lenders.

Medical loans can be used for expenses like emergency room visits, plastic surgery, LASIK surgery, IVF or gender-affirming surgery. Medical loans can also be used to consolidate medical debt or pay for high deductibles and out-of-network charges.

» MORE: Personal loans for plastic surgery

How to get a medical loan

The process of getting a medical loan is generally the same as for any personal loan:

1. Know your credit score: Your credit score is a key factor in determining whether you qualify for a loan and how much you can borrow. You can check your credit score for free on NerdWallet.

2. Figure out how much you need: Use a personal loan calculator to estimate monthly payments based on your credit score and determine whether they fit comfortably within your budget.

3. Pre-qualify and compare loans: Pre-qualifying for a medical loan lets you see potential loan terms, including the loan’s interest rate, loan amount and payments without impacting your credit score. Pre-qualify with multiple lenders to compare offers and find the loan that gives you an amount you need and a payment you can afford.

4. Complete the application: Once you’ve pre-qualified and chosen a loan, you can formally apply for the loan. Lenders will typically send the loan directly to your bank account, with funding available within a day or two after approval.

» MORE: Pre-qualify with lenders on NerdWallet

How to choose a medical loan

Below are key factors to consider when selecting the best medical loan.

Annual percentage rate. A loan’s APR represents the true annual cost of borrowing, including interest and fees. Comparing APRs can help you make an apples-to-apples cost comparison between different loans and lenders. APRs on personal loans range from about 6% to 36%. To get the lowest rates, you'll need excellent credit.

Origination fee. Some lenders charge one-time origination fees to cover the cost of processing the loan. The fee typically ranges from 1% to 10% of the loan amount and is included in the APR calculation.

Most lenders subtract the origination fee from the loan proceeds. A $5,000 loan with an origination fee of 3% would cost $150, leaving you with $4,850.

Loan term. The length of the repayment period affects your monthly payments. A longer repayment term results in lower monthly payments, but higher total interest paid over the life of the loan. Aim for a loan term with payments that fit within your budget.

Speed. If you need fast funding to cover health care costs, consider a lender with a quick application to funding process. Some online lenders can provide funding within a day or two, while others can provide funding within a week.

» MORE: Best personal loans for quick cash

Pros and cons of medical loans

Pros

• A medical loan can be used for expected and unexpected medical costs.

• Some online lenders can make applying and funding fast.

• Can be a good option if you’re consolidating existing medical debt at a lower rate.

Cons

• The lowest rates are only for good- or excellent-credit borrowers.

• There can be additional fees like origination fees.

• High interest rates can mean you pay back more than the amount you borrow.

Medical loans for bad credit

If you have fair or bad credit (689 credit score or lower), you may receive a high APR on your medical loan, which means you’ll pay more interest over the loan term. That can leave you paying for more than the loan amount itself. Let’s look at an example.

A five-year, $5,000 loan with a 35.99% interest rate would cost $5,838 in interest. This rate leads to a total cost of $10,838, which is over twice the loan amount. Financial experts generally advise that APRs should not exceed 36%.

There are ways for borrowers with low credit scores to improve their credit. Here are a few steps you can take:

• Review your credit report: Check your credit report to ensure there are no errors, wrong accounts or incorrect credit limits that may negatively impact your credit score.

• Add a co-signer: A co-signer can help boost your application. Your chances of getting approved may increase, or you may get a lower APR on the loan. But keep in mind that your co-signer will also be held responsible for loan payments if you miss any.

• Get pre-qualified: Getting pre-qualified can help you get an idea of your loan amount and term options, payments and the APR you can expect. It will only do a soft pull on your credit, so there will not be a negative impact on your credit score.

» MORE: Compare medical loans for bad credit

Alternatives to medical loans

Here are other ways to pay for medical procedures or pay off medical debt that may be better for your wallet than a medical loan.

Payment plans. Your best option may be to establish a payment plan with the medical provider and avoid paying interest on the debt if it’s repaid within the term, says Kari Jean Glosser, CFP® formerly at Abacus Wealth Partners in Santa Monica, California.

Some health care providers require a deposit followed by monthly payments; others may accept just monthly payments until the debt is repaid in full, says Glosser, who used a payment plan for her dental surgery.

» MORE: Financing dental work with a personal loan

Ask your medical provider about any fees or charges associated with the payment plan so you know the full cost of this option.

Medical credit cards. These are lines of credit available through many medical providers.

CareCredit is a specialty credit card that offers a short-term financing option. The card, issued through Synchrony bank, is accepted by over 250,000 health care providers and retail locations. CareCredit can be used to cover medical events related to LASIK surgery, dentistry, cosmetic surgery and general health care.

CareCredit’s approval and terms are based on your credit score. Interest accrues during the term (6, 12, 18 or 24 months), and if you pay the principal balance in full by the end of the promotional period, you'll owe 0% in interest. But CareCredit defers interest, so if you don’t pay your balance within the promo period, you could be looking at paying all your interest retroactively from the date of purchase.

0% credit card. A 0% interest credit card is another option that can include perks like a sign-up bonus and rewards. You’ll need strong credit to qualify, and you must pay off the debt in full before the promotional period expires or you'll pay high interest charges.

It’s best to dedicate a regular credit card only for medical expenses. Mixing medical debt with other purchases makes it harder to keep records for tax deductions or a health savings account, Glosser says.

Other options. If you’re facing hospital bills, a medical bill advocate can help spot potential errors and negotiate on your behalf to have your total bill reduced. You can also work with services like CoPatient that can locate mistakes on your medical bills and negotiate lower rates.

Qualify for assistance. If you are experiencing economic hardship, you may qualify for a hardship plan from your health care provider or financial assistance from a charity organization or government programs. Look to these options first before taking out a loan.