Can You Get A Personal Loan To Cover Unexpected Medical Expenses?

Can You Get A Personal Loan To Cover Unexpected Medical Expenses?

Unexpected medical expenses can be devastating. While good financial planning can mitigate the costs of unforeseen health challenges, medical bills can still cause financial and emotional strain.

A loan can help you handle medical expenses, bridging the gap that health insurance doesn’t cover. In this guide, we go over the advantages and drawbacks of taking out a personal loan for unexpected medical expenses.

The impact of unexpected medical expenses

Medical emergencies often hurt people’s financial security because of the high costs and stressful circumstances. Even insured adults receive surprising medical bills that are difficult to afford. Between imaging costs, facility charges, surgeries, and drug prescriptions, there are countless medical expenses that could easily add up to thousands of dollars in debt. A large fraction of bankruptcies in the United States are due to exorbitant medical bills.

What is more frustrating is that health insurance does not cover every situation. Some medical claims will not be accepted, and this can add even more financial and emotional stress to people. In these cases, a personal loan for medical expenses could be what you need to relieve your immediate financial burden.


Options for covering medical expenses

Other than personal loans, here are the other methods commonly used to pay for medical expenses.

Personal savings

Whether it’s a multi-purpose savings account or one specifically for emergencies, personal savings can cover medical bills. If you do deplete your emergency fund for medical expenses, make sure that you rebuild that stash to prepare for the future.

Health insurance claims and limitations

If you have health insurance, you can file a claim with your insurance company to see if the medical expenses are covered. You may need to first pay up to the deductible before health insurance kicks in and covers a portion of the rest.

Each health insurance policy has its own covered claims and exceptions. Make sure that you familiarize yourself with your health insurance policy so that you are aware of what it will cover in the event of a medical challenge.

Non-profit organizations and charity

Charitable organizations often offer financial assistance options to individuals who are facing challenging medical expenses. If you have a specific medical condition or need, look online or in your local community to see if there are supportive options that align with your needs.

Payment plans

Many healthcare providers will be happy to negotiate payment plans with you. Before you take out a personal loan, you might want to ask your healthcare facility what payment plans or debt relief they can grant you.


Understanding personal loans

A personal loan is a loan you can take out from a creditor, financial institution, or lender. Personal loans are versatile and allow individuals to finance large purchases and cover expenses.

The funds you get need to be repaid over the course of the loan tenure, along with interest and fees.

One of the many loan usages is using the loan amount for medical bills. Here are the main advantages associated with using personal loans for medical expenses:

  • Predictable repayment
  • Fast funds
  • Negotiable loan terms
  • Lower interest rates than credit cards

To receive a personal loan, you will need to submit a loan application to a prospective lender. Many lenders are able to disburse funds to your account within two business days of loan approval, and the loan disbursement process can often be expedited if you pay an extra fee.

Loan approval depends on various factors, mainly creditworthiness and financial stability. Exact eligibility criteria and requirements vary between lenders. Here are the common factors that affect your loan application results:

  • Credit score
  • Income
  • Debt-to-income ratio
  • Credit utilization
  • Credit history
  • Employment stability

Benefits of using personal loans for medical bills

How much you can benefit from a personal loan depends on various factors, such as your loan purpose, individual circumstances, and financial management skills. Let’s go over the most common advantages associated with using personal loans for medical expenses.

Immediate availability of funds

Personal loans are highly convenient because of the fast disbursement of funds directly into your bank account. If you get approved for a personal loan, some lenders are able to grant the funds to you almost immediately. This allows you to quickly pay for your medical bills, which can be necessary for any urgent health and recovery needs.

Medical bill consolidation

Personal loans allow you to consolidate multiple medical bills into a single, more manageable payment. This can simplify your debt repayment plan and facilitate your monthly budgeting.

Medical bill consolidation commonly involves using a personal loan to roll all your medical debts together. Other options include credit card balance transfers and home equity loans.

Potential tax benefits

Medical expenses may be tax deductible if they are for eligible unreimbursed payments. If you need to pay any medical bills, make sure that you research whether they are tax deductible so that you can save more money.

Avoidance of medical debt

Medical bills are often a necessity that cannot be avoided due to their inherently urgent nature. They may be for emergency room costs, surgeries, check-ups, and other essential medical procedures. This means that it may not be possible to avoid medical debt, resulting in a stressful financial burden.

Using a personal loan for medical bills can help you avoid your medical debt being sent to collections by the hospital. This means you won’t have to worry about a collector suing you for the outstanding balance or constantly contacting you until you pay off the medical debt.


Considerations before taking a personal loan for medical expenses

Before you take out a personal loan for medical expenses, it’s important to consider the various benefits and drawbacks. A personal loan does create a potentially long-term debt that requires monthly installments. On the other hand, loan debt might be preferable to medical debt.

Here are a few key points that you should keep in mind when weighing the advantages and disadvantageous of obtaining a loan for medical expenses.

Assess the cost of borrowing

Before you obtain a personal loan, you need to understand both the interest rate and any associated fees. To get a clear picture of your overall cost of borrowing in a year, you can look at the annual percentage rate (APR). The APR takes into account your interest rate and fees. It must be disclosed by the lender before you sign the loan agreement.

If you are able, try to boost your credit score before you shop around for the optimal loan. An individual with a higher credit score can qualify for more favorable loan terms and greater loan amounts.

Understand the loan terms and conditions

Review your loan offer carefully before you sign the loan agreement. It is critical that you understand the loan terms and conditions, such as any deadlines and penalties. Here are a few of the details that borrowers often miss when taking out personal loans in a short time frame:

  • Prepayment penalties (if you are charged for repaying the loan early)
  • Consequences of missing payments
  • When the loan will be considered defaulted
  • Repayment schedule and loan tenure

Staying well informed about your loan terms and responsibilities helps you avoid any unpleasant financial and credit surprises down the road.

Compare different loan offers

If you can afford to, it is advisable to assess different lenders before you take out a personal loan for your medical expenses. Comparing various competitive lender offers can help you save money in the long run and align you with the loan option that suits your needs best.

Evaluate your repayment capacity

Even if the loan amount satisfies the medical bill you need to pay, it is important to carefully evaluate your repayment ability. Consider whether you will be able to make the monthly payments. Here are the common factors that influence a borrower’s repayment capacity:

  • Income
  • Monthly budget
  • Employment stability
  • How the medical event affects the individual
  • Loan interest rate

Credit impact

Each time you apply for a personal loan, the prospective lender will pull your credit report. This results in a minor decrease in your credit score. If you miss a loan payment or default on the loan, this can heavily damage your credit score.


Alternatives to personal loans

Although personal loans offer numerous benefits, they are not the best option for every individual. If you don’t want to take out a personal loan or you can’t easily qualify for one, here are other options you might want to explore if you are facing medical expenses.

Medical credit cards

Credit cards are a common alternative to personal loans. You can use your existing credit card or specifically apply for a medical credit card.

Medical credit cards can only be used to pay for medical services. This helps you focus on repaying medical debt and cover your healthcare needs using credit.

Home equity loans

A home equity loan enables you to borrow against the equity built up in your property so far. You can borrow the lump sum amount that you need for this kind of loan. Home equity loans are secured loans, with your property serving as the collateral asset.

It is important to know that if you default on a home equity loan, the lender can foreclose on your home. This means that you lose the property and the foreclosure will stay on your credit report for seven years. This credit impact can make it more challenging for you to receive loans and credit extensions for a significant amount of time.

Payment plan with your medical provider

Healthcare providers and facilities understand that medical bills can place significant financial strain on their patients. It is a good idea to reach out to your medical provider and see what payment plans they offer so that you can try and make a beneficial arrangement. This could reduce the loan amount you need or allow you to forgo a loan altogether.

Borrowing from retirement funds

This option is often considered a sort of last resort due to the many negative consequences of borrowing from your retirement funds, such as taking money out of your 401(k) or your Individual Retirement Account (IRA). Note that withdrawing money from your retirement plan may result in extra income tax and withdrawal penalties. It is advisable to carefully weigh the pros and cons of borrowing from your retirement savings before choosing this option.

HSAs and FSAs

Individuals who have high deductible health plans may have a health savings account (HSA). Some employers also offer flexible spending accounts (FSA) that allow you to set aside pre-tax money for medical expenses. Before you take out a personal loan for medical expenses, check if you have an HSA or FSA.


Community support can be extremely helpful, especially if you are struggling to pay for expensive medical bills. You will need to create an online campaign where you can share your and/or your family’s story. Compassionate friends and strangers may be able to help you spread the word and raise the funds that you need for your medical needs.


Key takeaways

It is essential to plan for unexpected medical expenses by saving up a solid emergency fund and knowing your financing options. If you face challenging medical bills or needs, you might want to take out a personal loan to alleviate your financial strain.

Personal loans can be advantageous for many reasons. For covering medical bills, they can provide you with these potential benefits:

  • Immediate funds
  • Flexible use
  • Loan amount directly disbursed into your bank account
  • Plenty of time for you to repay the loan
  • Lower interest rates than a credit card

Before you commit to any decision that helps you cover medical expenses, make sure that you explore the different options. Here is a list of the most common ways people cover unforeseen medical bills:

  • Health insurance
  • Personal loan
  • Credit card
  • Payment plans
  • Emergency fund
  • Crowdfunding

At the end of the day, you should research your options to choose the best solution that aligns with your own individual circumstances. Consider your repayment capacity and alternatives ahead of obtaining a personal loan.

About The Author

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Ru Chen

Content Writer

Ru Chen is a content writer with several years of experience in creating engaging and well-researched articles. She mostly writes about business, digital marketing, and law. In her free time, she can be found watching horror movies and playing board games with her partner in Brooklyn.

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