The last thing anyone needs are crippling medical expenses as the economy struggles to fully recover from the COVID-19 epidemic in 2022. Sadly, a lot of people have them. The astounding scope of the medical debt problem was revealed by an Affordable Health Insurance study conducted in February 2022.
According to a poll, 55% of Americans owe money for medical expenses. Only 23% of people, or one in four, owe more than $10,000. It makes sense that many customers are curious about their alternatives for getting out from under a mountain of medical debt and if consolidating their debt would be a wise move.
It’s critical to realize that medical debt differs from credit card debt and bank loans. Medical debt often carries no interest and offers far greater flexibility in terms of repayment options, including the possibility of negotiating a reduced repayment amount. Read on to learn more about how to consolidate hospital bills.
Why Consolidate Medical Debt?
Under the more general category of debt consolidation, which combines many obligations into a single account and is paid for with a loan that is repaid in monthly installments, medical debt consolidation falls. Even if there are many different types of debt, including credit card debt, consolidation is only relevant in this case for medical expenses.
Instead of making many payments to various institutions, consumers take a new loan for the whole amount of medical debt they owe (Yes, many have more than one doctor or hospital to pay). Your necessities, including those for housing, food, and transportation, are taken into account when consolidating medical debt.
Your monthly budget should allow for the payment. But if you don’t make a payment, it might have major repercussions, including unraveling the consolidation process. The greatest options for consolidating medical debt include banks, credit unions, internet lenders, and nonprofit credit counseling organizations. We’ll look at some potential solutions.
The Best Way to Consolidate Your Medical Bills
Consolidating medical debt is possible in a number of ways. Personal loans, home equity loans, and credit card debt transfers are a few examples of them. Consolidation is also possible with some debt management plans.
A hospital or healthcare professional will often cooperate with you, so keep that in mind. If you get a medical bill that you know, you won’t be able to pay, speak with your physician and try to work out a payment arrangement that works for you.
Both failing to communicate and paying late will not help. In fact, failing to let your healthcare provider know that you probably won’t be able to pay a debt is a serious error that eventually costs you more money. The greatest options for consolidating medical debt include banks, credit unions, internet lenders, and nonprofit credit counseling organizations.
Individual Loan
The combined medical bills will be paid off by a personal loan, but you will have a monthly payment that includes interest fees, which means you will pay more for your medical debt than you were initially charged.
It would make more sense to make monthly payments straight to the medical provider and avoid the interest fees connected with a personal loan, as medical debts normally don’t have interest costs. Together with the supplier, this may be resolved. If you decide to use a personal loan, make sure to compare rates to get the best debt consolidation loan.
Housing Equity
Your home’s equity is used as the basis for home equity loans and home equity lines of credit (HELOC). The equity is calculated by deducting the amount owed from the home’s current market value. You thus have $50,000 in equity if your property is worth $250,000 and you owe $200,000 on it.
Banks and lenders will let you create a home equity line of credit based on the whole amount of equity. 80% of the equity is often available for borrowing. The benefit of a HELOC is that you only pay interest on the amount you actually borrow. You would borrow $20,000 and pay interest just on that amount if you had a $50,000 HELOC and $20,000 in medical debt.
The money taken out of the HELOC is essentially a consolidation loan based on your house. Consolidating medical debt should be possible with home equity loans because they often have the lowest interest rates and are tax deductible. However, doing so necessitates accountability because it is not a wise move to put a secured asset (your house) at risk for an unsecured obligation (medical expenses).
Credit Cards
It could seem like a fast fix to settle medical debts using credit cards, but doing so is expensive and shortsighted. The absolute final option should be this. Even if you were able to transfer your medical debt to a card with a 0% interest rate on balance transfers, you would still need to pay it off within the allotted introductory period (usually 6 to 18 months), or you would be subject to interest rates starting at 16% or more.
A 3%–5% transfer charge on the amount transferred to the credit card must also be paid. Simple monthly payments on the medical debt would accomplish the same goal with 0% interest and no deadline that would result in interest charges being added, unlike with a balance transfer card.
Additionally, it’s crucial to study the credit card offer’s tiny print. Often, a credit card may offer a balance transfer card with no interest fees for, say, 12 months. However, if you miss a payment or do not make the 12-month deadline, all the interest will accelerate, and you will have much more to pay back.
Medical credit cards, which resemble regular cards but are only intended for use with healthcare providers and facilities, are sometimes accepted. Occasionally, application forms are accessible at medical offices. There are introductory interest rates that are occasionally low. Read the small print one again.
Counseling for credit
To help you deal with medical debt, counselors at a nonprofit credit counseling firm can evaluate your income and debts and give solutions for debt relief. Credit counseling could be the greatest option for people who borrowed money or used a credit card to settle their medical expenses because they normally do not include interest charges.
Counselors may direct you to a debt management program that may cut your monthly payment and credit card interest rate, making it simpler for you to pay off the debt.