Should I use a personal loan to pay off medical bills?

Why medical debt is different from other debt: Hospitals are required by federal law (IRS Form 990 requirements for nonprofits) to offer financial assistance programs. Most large hospitals have charity care programs for uninsured or underinsured patients. You can apply retroactively even after receiving a bill. Nonprofit hospitals that fail to offer this risk losing their tax-exempt status.

Negotiation: Medical bills are among the most negotiable of all debts. Strategies: (1) Request an itemized bill and dispute errors (billing errors are extremely common). (2) Request a charity care application from the billing department. (3) Ask for the 'self-pay rate' - hospitals often have lower rates for patients paying cash vs insurance negotiated rates. (4) Offer a lump sum settlement at 40%-60% of the bill amount - hospitals often accept this to avoid the cost of pursuing collections. (5) Ask for a 0% interest payment plan. Most hospital systems will set up $50-$200/month payment plans with no interest charge.

Credit reporting changes: As of 2023, medical debt under $500 no longer appears on credit reports. Paid medical collections are removed immediately from credit reports. Medical debt in collections has reduced weight in newer FICO and VantageScore models.

When a personal loan makes sense: After exhausting financial assistance and negotiation. The negotiated amount is large ($10,000+) and the hospital's payment plan term is shorter than you can afford. A personal loan at 10%-15% APR is better than accruing late fees or going to collections. The personal loan consolidates multiple hospital bills into one payment.