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    Medical Debt Relief: How Can You Consolidate Your Bills?

    Medical bills are a major source of stress for many people and fortunately debt consolidation is one way to pay them down for good.

    If you have doctor’s bills or unpaid expenses from a hospital visit you may want to consolidate these debts using a loan. Still, there are several things to consider before you do.

    Let’s take a closer look at medical debt consolidation in more detail.

    Should I Consolidate My Medical Bills?

    Debt consolidation is the process of taking several debts and pooling them together in a single loan with a single, preferably lower APR.

    Consolidating medical debt is a good way to bring your doctor’s bills together in one place and pay them down once and for all. Yet, is it the best approach?

    • Medical bills are quite unique compared to other types of debt because they usually don’t incur interest charges.
    • If you consolidate medical debts using a credit card or a loan you’ll end up paying interest on debt that was interest-free to begin with.
    • You may want to negotiate a repayment plan with your healthcare provider before you consider consolidating your medical debt.

    Consolidation may not make that much sense if you have surplus cash available to repay your medical loans.

    However, if you’re struggling to make all your debt repayments it could mean the difference between a good credit score and bankruptcy.

    1. Credit Cards

    • Credit cards are one of the most common types of credit and are easy to apply for.
    • You will stand a good chance of being approved for one if your credit score is reasonably high (above 650) and your monthly debt repayments don’t exceed 50% of your income before taxes.
    • Medical credit cards are meant to be used for small to medium-sized medical expenses and may offer benefits like an interest-free period.
    • The major drawback of paying for medical expenses using a credit card is the annual APR which can exceed 20% in some cases.
    • The interest can add up very quickly and grow the size of your medical debt if you don’t pay it back quickly.

    Find: Best Medical Credit Cards

    2. Personal Debt Consolidation (Home Equity Loan)

    Your mortgage can be a useful source of funds for medical debt consolidation.

    If you have paid down a portion of your mortgage equity (the amount you borrowed to purchase your home, not the interest) it’s possible to borrow against that amount using a HELOC (home equity line of credit).

    • The APR you’ll pay on a HELOC is likely to be lower than you’d pay on a credit card.
    • Your mortgage is an existing credit account which eliminates the need for a lengthy application process.
    • The risky aspect of borrowing against a HELOC is that your home is used as collateral meaning if you can’t keep up with your payments you could end up in foreclosure.

    Read More: How to pay off debt with Home Equity Loan

    3. Debt Management Programs

    There are times when borrowers find it difficult to meet their debt repayment obligations. If you find yourself in a similar situation you may want to consider a debt management program.

    • Debt management is a professional service that aims to reduce your debts gradually.
    • Your debt manager will negotiate with creditors on your behalf to reduce the monthly payment and APR on each of your debts.
    • Your debts will be restructured and give you 3-5 years to repay them before becoming debt-free.
    • You will make monthly payments to the debt management company - they will then pay the debts on your behalf.
    • You may be prevented from applying for other types of credit while you complete your debt management program.

    Read More: What is Debt Management

    4. Non-Profit Credit Counselling Agency

    Credit counseling is a more hands-on approach than debt management although some credit counsellors also offer debt management services.

    • Credit counseling is a service that lets you regain control of your debt and your personal finances.
    • You will work with a not-for-profit counselor who will help you to analyze your income and expenses to uncover ways to budget better and repay your debts.
    • Your credit counsellor will also advise you about the various types of credit you currently use and how to manage each one best.
    • Credit counseling may involve consolidation of medical debts as your counselor works with you to reduce your debt burden.
    • In certain cases, you may be advised about your options regarding bankruptcy or referred to a debt management program.
    • By carefully managing your credit you will be able to repay debt while still having access to loans and credit card accounts during your repayment period.

    Best Companies for Medical Debt Consolidation 2020

    Lender
    Features
    • Financial planning
    • Low interest rates
    • Career coaching
    • No prepayment fee
    • Cashback checking
    • Building credit history
    • No Origination fee
    • Late payment fee is $15 or 5% of payment after 15-grace period
    • Credit score is not effected when checking your rate
    • Fast application

    Medical Debt Collections

    Medical debts that are not repaid or consolidated will naturally fall into arrears. Once this happens the next step is usually collection which can have a very negative effect on your credit score.

    • Medical debts that are more than 120 days overdue will be noted on your credit history.
    • Once the debts are handed over for collection they will be listed as such on your credit report.
    • This can cause your credit score to fall substantially due to delinquent payments.
    • Debt collectors often try to stretch the boundaries of the law. Knowing your rights is essential when dealing with collectors.

    If you have received a medical bill that you simply can’t afford to pay right now, the best advice is not to ignore it.

    You will either need to negotiate a repayment plan or consolidate your medical debt to avoid damaging your credit score. It’s best to pay your newest medical bills first given that medical debts that are more than seven years old don’t appear on your credit record.

    Read More:

    >>How to dispute medical bills

    >>How to get rid of medical debt 

    Bottom Line

    Medical bills are an unavoidable aspect of life but fortunately there are ways of settling them. If you are unable to meet your payments or negotiate a repayment plan you can always explore debt consolidation as an alternative.

    Credit cards, home equity loans, credit counselling and debt management are all effective strategies for consolidating your medical debt.

    The option you choose will depend on your financial situation, the amount of medical debt you have, and the APR you can ultimately secure.