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A Flexible Spending Account (FSA), if available through your employer, is the ideal choice to finance medical expenses such as surgical procedures and equipment not covered by insurance. As you will see, an FSA offers below zero-interest funding and approves bad credit borrowers without a credit check.
However, many people do not have access to an FSA or have emergency needs. This leaves two alternatives.
Unsecured personal loans send money directly to your bank account and put you in control of how to disperse the funds. You repay the lender in fixed monthly installments that retire the debt over a preset term.
Medical credit cards send money directly to the provider – if they participate. You repay the issuing bank with flexible monthly payments that could lead to ballooning debt if you fail to pay off balance fast enough.
Personal Loans for Medical Expenses
Unsecured personal loans are the primary alternative for people who cannot use an FSA to finance medical expenses. You do not pledge collateral such as a home, boat, or automobile with an unsecured contract. Also, personal loans feature fixed monthly installment payments that retire the obligation over a set term (6, 12, 24, 36 months, etc.).
Start a personal loan request here. (Affiliate Link) If approved, you can use the funding to pay the bills from any healthcare provider – regardless of their affiliation with patient finance companies.
- Emergency medical expenses not reimbursed by insurance such as deductibles, copayments, coinsurance, and balance bills from out-of-network providers
- Cosmetic procedures typically not covered by insurance such as LASIK, breast enhancement, weight loss surgery, and others
- Durable medical equipment such as wheelchairs, scooters, beds, lifts, walkers, bath accessories, and other items that improve the quality of life at home
Taking out an unsecured personal loan to pay medical bills presents special challenges for people with bad credit. Adverse payment history appearing on your consumer report translates into a low FICO score. Poor scores tell lenders that you have a high risk of future delinquency and default.
Therefore, patients with poor borrowing credentials should expect to pay more to use other people’s money (larger origination fees and higher interest rates). Also, finding a lender willing to approve your request requires creative approaches.
- Online lenders often approve a higher percentage of bad credit borrowers than your local brick and mortar bank branch. The secret to success is getting your credentials in front of a large network of finance companies with one web-based form submission. Online lead brokers perform this function – as with the affiliate company connected to this article.
- An FSA provides medical loans to employees with bad credit. Employers who offer an FSA must allow all employees to enroll, regardless of how poor their borrowing qualifications might be. In addition, the employer must reimburse claims immediately for any qualified healthcare expense – even before the person funds the account with payroll deductions.
- Financial assistance programs often favor patients with low income and poor borrowing credentials.
No Credit Check
Borrowing money via an unsecured personal loan for medical expenses is possible without a traditional credit check. In this case, the lender does not pull a consumer report from one of the big three bureaus (Equifax, Experian, or TransUnion) and log a hard inquiry on one of these files.
Patients often want to work with “no credit check” lenders because they have no history on traditional files or the history they do have is full of delinquencies and defaults. Also, people want to avoid multiple hard inquiries that might suppress their already low FICO scores further.
You have two options to finance medical procedure expenses without a credit check.
- Loans based on income rather than credit focus on affordability. Therefore, you must provide evidence for steady employment and sufficient earnings to support the projected monthly payments. Also, the finance companies often use consumer reports from alternate bureaus who source data from rental properties, utility companies, and other non-traditional data providers.
- Employers must allow all employees to enroll in an FSA without a credit check. By law, employers cannot pull a copy of your consumer report or consider your FICO score – even though they could lend up to $2,700 per employee per year.
Make sure that you investigate charitable organizations in your local area before taking out a loan to finance the purchase or rental of medical equipment or supplies. A significant number of families donate unneeded equipment after their loved ones pass away or recover.
Many charitable organizations take in donated equipment, refurbish the items, and make them available to others at more affordable prices – sometimes free to low-income households without insurance.
- Medical Loan Closets run by local churches, charities, and volunteer organizations provide rehabilitation equipment for uninsured people recovering from accidents and illness related conditions.
- Goodwill network affiliates in some states operate durable medical equipment thrift stores where patients can buy or rent refurbished items at a fraction of their original price.
Best Medical Credit Cards
There is no single best medical credit card for every patient and every situation. The ideal choice for each person reduces expenses in some fashion – when possible. The lower costs can come in the form of insurance claims payments, tax savings, or avoided borrowing costs.
A credit card for medical bills only is a revolving account type that includes flexible repayment terms and account borrowing limits. Also, deferred interest promotional periods are another common feature that is a dual-edged sword when combined with flexible payments.
- Zero interest charges provided you pay off 100% of the revolving balance by the end of the promotional period
- High penalty interest charged from day one if you do not retire 100% of the revolving balance by the end of the period
- Paying the minimum monthly payment each month elongates the repayment period and allows penalty interest to compound and swell balances
The best medical credit card for plastic surgery is often your health insurance membership card. Your health insurance plan will fund the majority of any plastic surgery expenses because the procedures are typically medically necessary.
Be careful not to conflate cosmetic and plastic surgery together. The two terms have distinct meanings and implications for the ideal way to finance each procedure type.
- Plastic surgery reconstructs facial and body defects due to birth disorders, trauma, burns, and diseases. Healthcare plans commonly approve claims for this type of work.
- Cosmetic surgery enhances appearance by improving aesthetic appeal, symmetry, and proportion. Healthcare plans typically reject claims for work that is not medically necessary.
The best medical credit card for dental work is often a debit card associated with an FSA obtained through work. An FSA debit card is the ideal way to finance dental work and other qualifying healthcare expenses. Consider these huge advantages.
- The debit card enables a 12-month interest-free loan for dental expenses. Schedule the procedure at the beginning of the FSA plan year. Your employer must fund all qualifying expenses even before you make any payroll contributions.
- You then have up to 52 weeks to repay your employer using pre-tax payroll deductions. Pre-tax payroll deductions reduce the income reported to the IRS and your state revenue department. Reducing reported income saves money in three possible areas.
- Federal income tax
- State income tax – if applicable
- FICA taxes – up to 7.65% for many patients
Borrow money from a medical credit card issuing company only after exhausting the preferred alternatives noted above. Exposing yourself to possible interest charges, late fees, and delinquencies on your consumer report is never a good idea – unless it is your only option.
Below is a quick recap of the major programs.
The Wells Fargo Health Advantage card provides patient financing programs for providers in selected industries only. For example, the Wells Fargo entry will not support cosmetic surgery but will fund these four categories. Source
- Hearing Care/Hearing Aids
- Eye Surgery
The Comenity Capital Bank issues the HealthiPlan credit card, which is another patient financing alternative. The HealthiPlan card promotes four main benefits. Source
- Payment plans on a variety of procedures that fit your budget
- Credit Limits to get the services you need
- No down payment required; no prepayment penalties
- No hidden costs or application fees
The CareCredit Healthcare credit card is the industry leader. CareCredit pioneered the deferred interest promotional period concept noted above. Also, providers in the widest set of specialties accept this form of patient financing. Source
The Citibank Medical Credit Card no longer exists as a competitive option for patients. Care Credit purchased the portfolio and marketing rights from Citibank in February of 2017. Source