Before You Take Out a Personal Loan to Cover Medical Bills, Do These 3 Things

You may have other options.

Sometimes, even people with good or great health insurance end up on the hook for thousands of dollars in medical bills. After all, a single illness or accident could result in a world of unavoidable healthcare expenses.

If that's happened to you, and you don't have the money in your savings account to cover those costs, you may be getting worried. And you may be ready to take out a personal loan to pay those bills off.

A personal loan is an unsecured loan that lets you borrow money for any purpose. You can use a personal loan to renovate your home, start a business, or fix an ailing car.

One benefit of borrowing money with a personal loan is that you'll generally pay less interest than you will with, say, a credit card. This especially holds true if you're a borrower with great credit.

But is a personal loan your best bet for tackling medical bills? Before you take one out, it pays to make these three moves.

1. Make sure you owe as much as you think you do

It's not unheard of for medical providers to make mistakes in the course of their billing. You may be sitting on larger bills than you're responsible for due to a billing code error. Before you take out a loan to cover those bills, make sure they're actually correct. And also, if you're looking at bills because your health insurer has denied a claim, it could be worth appealing that denial before borrowing money.

2. See if you can negotiate a payment plan with your providers

Falling behind on medical bills could cause eventual credit score damage. And you don't want to let that happen.

But many medical offices are sympathetic to patients who can't pay a massive bill in one fell swoop. So it's worth putting in a call to your providers and seeing if they're willing to put you on a payment plan. You may find that's an easier, more affordable route to take.

3. See if you have leftover funds in an FSA or HSA

Maybe you didn't use up your FSA funds in 2022, and your plan allows you to carry a portion of your balance into the next calendar year (some plans do). Or maybe you have money in a health savings account you forgot about. HSA funds actually never expire, so there's no deadline for using up your money.

Granted, in either scenario, you may not have enough money to cover your medical debt in full. After all, if you owe $5,000 but have that much cash in your HSA, that's a sum you're unlikely to forget about. But if you have, say, $300 in your HSA, that's $300 less you'll have to borrow if you end up taking out a loan.

Even if you do your best to budget for medical costs, you may find that large bills throw your finances for a loop. In that scenario, a personal loan could end up being an affordable borrowing option. But it still pays to make these key moves before submitting your application.