Do you know that 1 in 5 American families struggle with Medical bills? According to consumerfinance, in 2021, around 43 million people have unpaid medical bills. So, how to deal with this situation? Debt consolidation for medical bill expenses is one of the ways to solve this problem. Learn about this term further through this article!
What is Debt Consolidation?
Debt consolidation is an act of taking one big loan to pay several bills. For example, if someone has three medical bill expenses: $2,500, $3,500, and $4,000, that person needs to borrow $10,000 and pay the three bills.
The loan does not disappear but instead of paying 3 different loans, you just need to pay once a month instead. It is easier to keep track this way and make sure you can slowly pay back everything you own.
How to Consolidate Medical Debt?
There are multiple ways to consolidate your medical debt, each option has its pros and cons. Read further before deciding which one is the best method to consolidate your debt.
1. Personal Loan
You do not need any collateral to borrow money, it is one of the pros. In addition to that, you can try to find a lender that offers the lowest interest rate. Usually, the interest rate will not change until you pay all the debt.
However, to get a personal loan, there are some requirements you need to follow, such as having a good credit score and regular income. The requirement differs according to each lender. There is also a fee that you need to pay before taking the loan.
2. Debt Management Program
Trust your debt to the expert, in this case, a certified credit counselor from a non-profit agency. The counselor will make a monthly plan for you to pay your medical bills. All you need to do is pay once a month according to the price set by the counselor.
There is a fee for the counselor, but it is not too expensive. It requires discipline as you need to pay the debt regularly, following the monthly maintenance plan. This method is one of the best ways to do debt consolidation for medical bill expenses.
3. Home Equity Loan
You can use your home as collateral for borrowing money and cover your medical bill expenses. Since a home equity loan is a secured loan, you can get a low interest rate for the loan. However, if you fail to pay the loan, you might lose your house to the lender.
So, if you want to take this type of loan, make sure you keep up the payment and pay the loan on time. If you pay everything on time, you will keep your house safe.
4. Balance Transfer Credit Card
This plan sounds a bit risky, but basically, you can take advantage of special offers from credit card companies. Find a company with a low interest rate, 0% if possible. Next, you can pay your medical bill expenses within the time the credit card companies offer promotions.
Please remember that if you have not finished paying after the promotion time, you will get charged with the normal interest rate, which is usually higher. Thus, do not use this method if you are unable to pay the loan as soon as possible.
Factors Before Deciding to do Debt Consolidation for Medical Bill Expenses
Since we already discussed the pros and cons of some methods to consolidate medical bills, there are also some factors you should think about beforehand, such as:
1. The Interest Rate
Because you combine multiple loans into one large loan, it means you need to pay for a long time. So, you need to think of the interest rate. Try to find the lowest interest rate you can see, you can even negotiate with the lender and reach the interest rate within your budget.
2. Payment Deadline
Different from medical bills, consolidation debt is recorded in your credit report. So, watch out for the deadline for the payment. If you do not pay on time, it will be bad for your credit score. If you think you cannot pay the loan regularly, think again before consolidating your debt.
How to Consolidate Your Medical Bills?
Now you might wonder, how do you exactly do debt consolidation for medical bill expenses? Worry not, here is a step-by-step guide you can follow.
1. Count Your Medical Expenses
Find your medical bills and check whether you already sent them to your insurance company or not. Some of your bills might get covered by your insurance company. After that, count all the other medical bills left.
2. Find the Best Consolidation Method
Since you already know the amount of your debt, it is now time to find the most suitable consolidation method for your bills. If you choose a personal loan or home equity loan, compare from at least 3 lenders.
What you need to compare is interest rates, fees, and penalties. You should choose which method is the most suitable for your budget. Think of the pros and cons as well.
3. Apply for Medical Consolidation
When you finally find the most suitable consolidation method, you can start applying for it. Some methods might require documents such as bank statements, driver’s licenses or government-issued identification, and 2 years’ worth of tax returns.
4. Repay the Consolidated Debt
When your application is accepted, do not forget to start repaying the debt monthly. You can set an automatic payment from your checking account to make sure you do not forget it.
Debt Consolidation for Medical Bill Expenses: Should I do it?
Before deciding anything, remember that medical bills do not have any interest rate, and late payments will not be recorded in your credit report. However, paying several creditors might get confusing at times, and you need to pay detailed attention to each debt.
To make paying debt easier, you can merge those loans into one large loan instead. With careful consideration to find the lowest interest rate and low risk of penalty, you can enjoy paying a loan once a month without needing to separate the money into several bills. So, yes, you should do debt consolidation for medical bill expenses.