Getting a medical loan with bad credit

Quick insights

• It’s possible to get a loan for medical expenses if you have bad credit, but the terms may not be as favorable as they would be for someone with good or excellent credit.
• There are alternatives to medical loans that you may want to consider, such as payment plans.
• If possible, it may be helpful to improve your credit score prior to applying for a loan.

When you’re dealing with a medical emergency, the last thing you’re probably thinking about is how you’re going to pay for it. Paying for these expenses can be stressful, especially if you have bad credit. That’s why it’s helpful to know your options, such as using a loan, and how to manage this.

Credit score models often have credit scoring ranges that go from poor to exceptional. If your credit score falls in the poor category, as referenced by some models, you might feel this is "bad credit." While there is technically no definition a "bad" credit score, in this article the term "bad credit" refers to low credit scores.

Understanding the need for medical loans

Life is unpredictable, and sometimes it can throw curveballs you weren’t expecting, such as a medical emergency or the need for expensive medical procedures. This is especially true in countries where healthcare is not covered entirely by the government.

A loan can be a useful financial tool to help cover healthcare costs that insurance companies don’t fully cover.

Some examples of why you may need a loan for medical expenses include, but are not limited to:

• Medical surgeries
• Fertility treatments
• Emergency room visits and stays

A loan can help manage these unexpected costs if you can’t pay for everything upfront, as it provides a way to spread the payments over a longer period of time. Note that if you don’t have health insurance, you may qualify for programs such as Medicare or subsidized health insurance through government exchanges.

Credit score requirements for medical loans

A medical loan is a type of personal loan. While you may get approved for a loan while having a bad credit score, you may find that it comes with a higher annual percentage rate (APR) and may not be approved for the loan amount you were hoping for. To improve your chances of getting more favorable terms, you may need to increase your credit score into the good or exceptional categories.

Can you get a medical loan with bad credit?

Yes, it’s possible to get a medical loan with bad credit. However, it could be more challenging, and the loan terms may not be as favorable as those for someone with good or excellent credit.

Applying for a medical loan with bad credit

When applying for a loan with bad credit, you should find loans that you qualify for and review each product’s details. For example, look at the credit score requirements for certain loans. If your score is below the requirement, you may need to provide additional documentation to the lender to help build your case for approval.

You may also want to consider adding a co-signer to the loan to help boost your chances for approval. A co-signer  becomes responsible for the payments should you be unable to make them.

Note that whenever you apply for a new line of credit, your lender will run a hard credit check. This will temporarily hurt your score, so keep this in mind if you have a low credit score already. Additionally, even if you’re approved for a medical loan, you will be opening up another cycle of debt. If you have a low credit score due to outstanding debts and balances, you may be setting yourself up for more financial stress.

For example, if you have the time and the ability to do so, consider improving your credit score prior to applying for a loan. You can start to do this by lowering your credit utilization ratio and making regular, on time payments to your credit cards and other loans.

Medical debt and credit reports

Medical debt is different from other types of debt because it generally does not appear on your credit report as long as the debt is not involved in collections.

Alternatives to medical loans for those with bad credit

A loan may not be the most feasible option for you, so you may want to consider some alternatives. These include, but are not limited to:

• Payment plans—work with your medical provider and insurance company to set up a payment plan for reoccurring fixed payments.
• Save for and use funds from a tax-advantaged health savings account, if you have one.
• Consider a loan from a trusted family member who may be able to offer low or no interest. Just keep in mind the impact a loan gone awry could have on your relationship.  Contact organizations such as the Patient Advocate Foundation to see if you are a candidate for receiving payment assistance.

In conclusion

No one wants to be put in a position where they’re facing major medical expenses, but when life throws us obstacles, we need to be prepared. You can empower yourself with the knowledge to apply for a loan or use alternative means to help cover the costs of expensive medical bills.