Filing for bankruptcy can discharge your medical debt, but it can leave a lasting negative impact on your creditworthiness. (iStock)
Unpaid medical bills are a costly burden that can leave a longstanding blemish on your credit history and send debt collectors to your doorstep. Medical bills can even be a potential roadblock for patients who become hesitant to seek care.
Nearly 1 in 5 Americans has medical debt in collections, meaning that millions of consumers were unable to pay for often necessary medical care. In fact, medical debt is the largest single cause of bankruptcy in America, according to the National Consumer Law Center (NCLC), and more than half of debtors have medical debt as a part of their bankruptcy filings.
Declaring bankruptcy can be an effective way to achieve medical debt forgiveness, but it comes with consequences. Chapter 7 bankruptcy can last on your credit report for up to 10 years, according to TransUnion. This could make it more difficult to qualify for credit, like a mortgage or student loans.
Thankfully, there are a few ways you may be able to reduce your medical debt or even have your hospital bills forgiven. Keep reading to learn more about your options for medical debt relief, including financial aid and debt consolidation loans.
If you decide to borrow money to pay off your hospital bills, make sure you're getting the lowest interest rate possible by comparing offers on Credible.
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Medical bill negotiation is a tactic that patients can use to reduce the cost of care. You may qualify for a discount on your medical bills even if you don't have a low income. Use these strategies to speak with a health care provider, medical billing advocate or your insurance company:
Even after negotiating your medical bills, though, you may still owe debt to a collections agency. If you believe there was an error during the medical billing process that you can't resolve, get in touch withyour state's insurance commissioner.
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Some patients may be tempted to put their unpaid medical debt on a credit card. But taking out high interest rate credit card debt can be an expensive way to pay off medical bills. Here are a few other ways to get out of medical debt.
Nonprofit hospitals are required by federal law to offer financial aid to low-income patients, and often, that help comes in the form of an interest-free payment plan. This is a way to break up your medical debt into monthly payments so you can spread out the cost of care over time.
However, not all medical providers will offer this type of payment plan. For-profit health care centers and elective procedures may not be covered by this law. But before you borrow money to get out of medical debt, ask your health care provider if an interest-free payment plan is an option.
AVERAGE PERSONAL LOAN INTEREST RATE IS 9.58%, BUT YOU MAY QUALIFY FOR A LOWER RATE
Taking out a small personal loan can be a wayto fund elective medical procedures like dental work and cosmetic surgery. But you can also take out a personal loan to consolidate existing medical debt.
Personal loans offer fast, lump-sum funding that's repaid in fixed monthly payments over a set period of time, typically a few years. You can use a personal loan calculator to estimate your monthly payments. They're also usually unsecured, which means you don't have to put up collateral to get the loan.
Personal loan interest rates vary widely depending on the loan amount and length of the loan, as well as your credit history. So if you decide to borrow a personal loan, it's important to check your eligibility and compare offers among multiple lenders to make sure you're getting the lowest rate for your situation.
You can get pre-qualified on Credible and compare personal loan rates tailored to you, all without impacting your credit score.
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Mortgage rates are at historic lows while home equity is at an all-time high, making it a great time to consolidate debt with cash-out mortgage refinancing.
Cash-out refinancing is when you take out a larger mortgage to repay your current one, tapping into the difference with cash. It's commonly used for debt consolidation, which can include medical expenses.
That said, cash-out mortgage refinancing isn't right for everyone. For example, it may not be wise to take out a new mortgage that's worth more than your home's true value. Plus, mortgage refinancing comes with closing costs that may offset the benefit of a lower rate.
Get in touch with an experienced loan officer at Credible to see if refinancing for debt consolidation is right for you.
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Have a finance-related question, but don't know who to ask? Email The Credible Money Expert firstname.lastname@example.org your question might be answeredby Crediblein our Money Expert column.
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