Medical personal loans: what are your options?

Unexpected dental and medical bills can easily throw your budget off track. If you’re facing costs that Medicare or your private health insurance won’t cover, and you can’t afford to pay upfront, a medical loan could help cover the gap and ensure you receive the timely care you need.

That said, borrowing for essential treatment is different from taking out a loan for elective procedures like cosmetic surgery. Since medical loans come with interest and fees, it’s important to understand the full cost and explore other options before applying.

What is a medical loan?

A medical loan is a type of personal loan that can help cover the costs of a surgery or urgent medical expenses when you don’t have enough money to pay upfront. Sometimes, the costs aren’t covered by the public health system or private health insurance. Taking out a personal loan to cover your medical expenses could help you receive treatment when it’s needed, and pay for any other associated costs.

How do medical loans work?

As with standard personal loans, each lender has its own eligibility criteria, and the interest rate you’re offered will depend on factors such as your credit history, income, and overall financial situation.

Loan amounts generally range from $2,000 up to $50,000–$55,000 for unsecured loans. Some lenders may offer higher amounts, particularly if the loan is secured. Loan terms can range from one to seven years, with repayments made in regular instalments. Fees may apply depending on the lender.

It’s important to review the terms and conditions carefully, including interest rates, fees and repayment options, to ensure the loan aligns with your financial needs and ability to repay.

Why would somebody apply for a medical loan?

If the treatment you need isn’t covered by Medicare, and you don’t have private health insurance to help with the costs, a medical loan could help you cover the expense.

Medicare usually doesn’t cover dental work, ambulance services and elective cosmetic procedures. Additionally, it may not always cover the full cost of seeing a doctor. If you’re left with a large out-of-pocket bill and don’t have enough savings, a medical loan may offer a way to pay for care when you need it.

Private health insurance can help cover some of the gaps, but policies often have exclusions or limits in place. You may not be insured at all, or your current cover might not include the treatment.

Even when treatment is partially or fully covered, extra costs like travel, accommodation or recovery expenses can still add up. A medical loan can help cover these, but it’s important to check the total cost of borrowing, including interest rates and fees, and compare your options before deciding.

What can a medical loan be used for?

A medical loan can typically be used towards:

• dental procedures

• specialist appointments

• post-accident or injury surgery

• medicine and medical equipment

• IVF treatment

• elective cosmetic surgeries, such as liposuction and laser eye surgery

• private hospital expenses or some types of home care

• veterinary bills for your pet

While the public health system or private healthcare insurance may cover some of these expenses, others may not be covered and you may at times find yourself with a gap to pay. Potentially, you might even find some lenders provide medical personal loans that include travel costs for overseas procedures.

What to consider before applying for a medical loan

Taking out a medical loan to pay for emergency dental surgery is one thing, but borrowing thousands of dollars for elective cosmetic surgery is another entirely.

Borrowing money comes with risk, and you’ll end up paying more than the initial amount due to interest and fees. That’s why it’s important to assess whether you need to borrow money, or if you can delay the expense and build an emergency fund first. You might also be eligible for alternative options, such as a No Interest Loans Scheme (NILS) loan, which could help cover essential costs without the added expense of interest.

If you decide a medical loan is the right option for you, there are several key factors to consider before choosing a loan that suits your needs.

Interest rate

The interest rate that your are charged depends on various factors, including your credit history and the amount you plan to borrow. Borrowers with higher credit scores are typically offered more competitive interest rates than borrowers with lower scores.

When comparing personal loans, remember to check the comparison rate, in addition to the interest rate.The comparison rate includes most fees and charges, giving you a clearer picture of the true cost of the loan.

You’ll also need to decide between a fixed or variable interest rates.There are pros and cons to both, depending on your specific needs.

Secured or unsecured

Personal loans can be secured or unsecured. Medical loans are often unsecured personal loans but some lenders may allow you to secure against an asset like your house or car. As you’re offering your asset as security for the loan, lenders tend to offer a more competitive interest rate. However, be mindful that if you default on your repayments, you risk losing the secured asset.

Loan term

Personal loan terms generally range between one and seven years. The total amount of interest you’ll pay, and therefore the total cost of your loan, will depend on how long your loan term is.

Fees and charges

Interest isn’t the only way lenders make money. They can also charge a fair bit in fees. Take into account any upfront application fees, monthly service fees and missed payment fees, as well as potential break fees, should you decide to pay off the loan early.

Eligibility for medical loans

Medical personal loans are subject to credit approval, so it’s important to check that you meet the basic eligibility criteria before applying. While requirements may vary between lenders, you’ll generally need to be:

• Over the age of 18

• An Australian citizen or permanent resident

• Employed or have a regular source of income

Some lenders may also require you to meet minimum income thresholds. However, the exact criteria differ from lender to lender. If you’re unsure about your options or need help understanding what you qualify for, you may consider speaking to a personal loan broker.

Before applying, it’s also a good idea to check your credit score and see if there are any steps you can take to help improve it if needed. How good you look on paper could affect the interest rate and maximum loan amount offered, or even if you are approved for a loan with a lender at all.

Can you get a medical loan with bad credit?

According to Moneysmart, lenders will use your credit score to decide whether to lend you money, and a low score may affect your ability to get a loan or credit. Potentially, a low score could restrict your access to favourable interest rates, terms and conditions. There are specific ‘bad credit loans’ available, but these often come with considerably higher interest rates. Separately, payday loans might seem to offer fast access to cash, but typically have very high fees attached that aren’t always obvious upfront to borrowers.

It could be wise to consider alternative low-cost finance options before applying for a medical loan. If you are experiencing financial difficulty or receive Centrelink payments, you may have other borrowing options available to you, such as the Home Equity Access Scheme or a NILS loan, if you meet eligibility requirements. For free financial advice, you can contact the National Debt Helpline on 1800 007 007.

How to get a personal loan for medical expenses

The more research you do, the better you’ll understand which loan (if any) is right for you. You could start with our personal loan repayment calculator to determine your ability to comfortably meet repayments, then you could compare personal loans with Canstar to determine if one meets your needs.

Once you decide a personal loan is right for you, the application process is usually simple. Most major lenders will let you apply online, over the phone, or in person.. You may need to nominate what the money will be used for on the application form; however, medical expenses are often listed as an option by lenders.

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