Personal loan for medical bills: 5 steps before you borrow

The five-step order

1. Get the itemized bill and compare it with your insurer's explanation of benefits. Billing errors are common enough that checking is always worth an hour.
2. Ask about financial assistance. Nonprofit hospitals must maintain a written financial assistance policy, and patients who qualify cannot be charged more than amounts generally billed to insured patients, according to IRS rules under Section 501(r). Ask the billing office for the application and the deadline.
3. Negotiate. Offer a lump-sum payment for a reduced balance, or ask for a discount for prompt payment.
4. Ask for a payment plan directly from the provider. Many offer monthly plans with little or no interest, which beats most loans.
5. Compare a personal loan if the plan is still too tight or a collection deadline is close.

When a loan makes sense

A loan can fit when the provider will only accept payment in a short window, when you can lock a lower total cost than the provider plan would carry, or when several providers have billed you and you want one payment. Make sure a loan does not replace a no-interest plan with an interest-bearing one.

Watch the clock on collections

If a bill is headed for collections, call the billing office before it does and ask what stops the account from being sent. Keep notes of every call with date, time and name.

What the loan should cover

Borrow the confirmed balance after corrections and assistance, not the original bill, and not a round number above it.

Read the bill like an auditor

Medical bills contain errors often enough that every large one deserves a line-by-line read. Request an itemized bill with billing codes, not a summary statement. Compare it with your explanation of benefits from the insurer. Look for duplicate charges, services you did not receive, an out-of-network charge at an in-network facility and amounts that exceed what your plan says you owe. If something is wrong, ask the billing office in writing to correct it and keep a record of the date, name and what you were told.

Where you may owe less

• Financial assistance. Nonprofit hospitals must have a written financial assistance policy under federal tax rules and must limit what they charge eligible patients. See the IRS guidance on Section 501(r). Ask for the application, which is often free and available online.
• Insurance appeals. If the plan denied a claim, you have the right to appeal, and many denials are reversed on review.
• Prompt-pay or cash discounts. Some providers discount a balance paid in full.
• State protections. Some states have rules on surprise billing or hospital pricing. Ask your state insurance department.

Payment plans before loans

A provider payment plan is often interest-free or low-cost and can be arranged with a phone call. Ask for the terms in writing, whether the account will be sent to collections if a payment is late and whether the plan reports to credit bureaus. Compare it with a personal loan on total dollars repaid. If a medical bill is in collections already, ask the collector for debt validation in writing before you pay anything; also check your rights under federal debt collection rules at the CFPB.

Medical bill triage table

If you do borrow

Match the loan amount to the corrected bill, not the first number you were given. Pick a term that leaves a cushion for next month's deductible, and check whether your employer offers a health savings or flexible spending account that could pay part of the cost with pre-tax money. Avoid medical credit cards that offer a promotional period with deferred interest unless you are certain you can pay the full balance before the period ends; interest charged retroactively can be large.

A sample path

A $4,200 balance arrives. You request an itemized bill, find a duplicate charge, apply for financial assistance and receive a reduction. The remaining balance goes on a provider plan. No loan is needed.