What is a medical loan?

A medical loan is a type of unsecured personal loan. Personal loans are fixed-rate loans 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 features can differ among lenders.

Medical loans can be used for expenses like:

• Emergency room visits.

• High deductibles.

• Out-of-network charges.

• Dental work.

• Cosmetic surgery.

• LASIK.

• IVF and fertility treatments.

• Gender-affirming surgery. 

If you have outstanding medical debt already, a medical loan with a low rate can help consolidate debt into one monthly payment for the loan term, which can help you pay it off faster.

» MORE: Best debt consolidation loans

Pros and cons of medical loans

Pros

• A medical loan can cover expected and unexpected medical costs.

• Some online lenders have fast approval and funding.

• A low-interest loan can be a good way to consolidate existing medical debt.

Cons

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

• Some lenders have origination fees.

• They may have higher interest rates than other options.

How to get a medical loan

The process to get 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 can afford: Use a personal loan calculator to estimate monthly payments and determine whether they fit comfortably within your budget.

3. Pre-qualify and compare loans: Pre-qualifying lets you see potential loan terms, including the loan’s interest rate, loan amount and payments, without impacting your credit score. Compare offers from multiple lenders and identify the best loan for your needs and budget.

4. Complete the application: Once you’ve decided on a lender, you can formally apply. Lenders typically send the loan proceeds directly to your bank account, with funding available within a few days after approval.

» MORE: Requirements for a personal loan

How to choose a medical loan

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

Annual percentage rate. A loan’s APR represents the true cost of borrowing, including interest and fees, and ranges from about 6% to 35.99% on personal loans. APRs can help you compare apples-to-apples between different loans and lenders — the loan with the lowest APR is generally the cheapest. 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 a loan. The fee typically ranges from 1% to 10% of the loan amount, and most lenders subtract the origination fee from the loan proceeds. For example, 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 approval and funding process. Some online lenders can provide loan funds as quickly as the same day.

» MORE: Best personal loans for quick cash

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 in interest over the loan term.

Here is what that can mean for your costs: a five-year, $5,000 loan with a 21.99% interest rate would cost $3,284 in interest payments. The same loan at 35.99% APR leads to a total interest cost of $5,838, which is more than the original 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 your loan 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 be held responsible for any missed loan payments.

• Pre-qualify: Getting pre-qualified with a soft credit check can help you identify lenders and terms that fit you best, without impacting your credit score. Taking this additional step may help you avoid being rejected on a formal loan application, which requires a hard credit check and can drop your credit score a couple of points. 

» 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. Payment plans provided by your medical provider may be a cheaper way to pay for health care expenses. Plans can be interest-free and generally require monthly payments for a set term. Some health care providers require a deposit followed by monthly payments, while others accept just monthly payments until the debt is repaid in full.

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

Credit card for medical expenses. CareCredit is one example of a specialty credit card for medical expenses that offers short-term financing. The card, issued through Synchrony Bank, is accepted by over 260,000 health care providers. CareCredit can cover medical events related to LASIK surgery, dentistry, cosmetic surgery and general health care.

Approved borrowers may receive 0% interest for a promotional period of six, 12, 18 or 24 months for expenses above $200. However, if the balance is not paid off by the end of the term, CareCredit will charge interest retroactively from the purchase date. The standard APR for CareCredit financing is 29.99%, which may be higher than rates on other credit cards.

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 one credit card for medical expenses to make keeping records for tax deductions or a health savings account easier.

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

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