What are the best options for medical debt consolidation?

The best options for medical debt consolidation include personal loans, home equity loans, home equity lines of credit, and balance transfer credit cards. When you use any of these methods to consolidate medical bills, the issuer of the new loan or credit card pays off the existing debts, which are then combined and owed to that new lender, ideally at a lower APR.

Another way to consolidate is to join a medical debt consolidation program. With this method, you don’t borrow money but rather make one payment a month to a company that distributes the money to your medical providers, your insurer or the collections agency that owns your debt. In addition to the simplicity of a single payment, the benefit of this type of program is that the company may negotiate on your behalf to either reduce your payments/interest charges or help you settle for a lower amount. You will have to pay a fee to the company, though.

Consolidating medical debt is necessary for many families, even those with health insurance, due to the rising cost of medical bills. The average American now spends nearly $5,000 per year on healthcare, according to the Bureau of Labor Statistics. And Americans racked up $88 billion in medical debt in 2018, according to Gallup. But consolidation isn’t the only option. Other ways to handle debt include trying to work out a payment plan, employing a medical bill advocate, or pursuing debt settlement.

Medical Debt Consolidation Options

• Personal loan. You can use the funds from a personal loan for anything you want, including paying off medical debt. Personal loan APRs can range from around 6% to 36%, depending on your creditworthiness. Some of the best personal loan providers for consolidating medical debt include LightStream, SoFi, and Marcus by Goldman Sachs.
• Home equity loan. A home equity loan lets you borrow money for any purpose, but the catch is that the debt is secured by your house. If you can’t pay the money back, the lender can foreclose on your house. Home equity loans often let you borrow more than personal loans do because the maximum amount is based on how much your house is worth minus the mortgage balance. Home equity loan APRs range from 4% to 8%, usually.
• Home equity line of credit (HELOC). A HELOC is halfway between a home equity loan and a credit card. It’s secured by your house, but lets you borrow up to a certain credit limit as needed instead of giving a lump sum. HELOC funds can be used for anything.
• Balance transfer credit card. You can move medical debt to your credit card through a balance transfer, as long as the credit card issuer allows it. Many credit cards offer introductory 0% APRs on balance transfers, giving new cardholders 6 to 20+ months to pay off debt interest-free, depending on the card. Many charge a balance transfer fee of 3% - 5%, though.
• Medical debt consolidation program: A debt consolidation program is different from a debt consolidation loan. You don’t borrow money in order to pay medical bills off. Instead, a company negotiates with your medical billers on your behalf in order to lower your costs as much as possible. Then, you make one payment a month to the program, which distributes it among your creditors. These programs often charge setup fees and monthly fees, so you should only pursue one if it saves you money compared to taking out a loan.

At this point, it’s important to reiterate that you don’t necessarily have to consolidate your medical debt in order to pay it off faster. There are several alternatives to medical debt consolidation that you should at least consider, too.

Alternatives to Medical Debt Consolidation

Many medical providers will offer payment plans to make it easier to afford their services. It might even be possible to get 0% financing. According to Experian, providers often have special “hardship” plans for people in difficult financial situations, with payments tailored to the patient’s income level.

Or, you could see if the medical provider, your insurance company or the collections agency that holds the debt will take a lump sum payment for part of the balance and forgive the rest. This is called “debt settlement.” The creditor may agree to such an arrangement if there’s a chance you will default on the full amount owed.

Alternatively, you could pay for the services of a medical bill advocate – someone who is extremely knowledgeable about medical billing and who will work to negotiate with your healthcare provider on your behalf. They may be able to get your costs reduced – by finding an error in the billing, getting fees waived, arguing that the charges are too high for certain procedures, or other tactics. You can find a reputable advocate by looking at the list of people certified by the Patient Advocate Certification Board.