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What are medical loans?
A medical loan is a personal loan that helps cover the cost of medical treatment, such as surgery. A lot of lenders advertise medical loans as a separate product, but what they’re offering is generally the same as any other kind of personal loan.
You see, personal loans can be used for more or less any purpose.
This means they can be used for medical procedures - covering clinical and administrative costs.
Here’s how a medical loan in Australia typically works:
Why do people take out medical loans?
By international standards, Australia has an advanced public health system. And private health insurance is there to fill in a lot of the gaps.
But people can still end up with large medical bills.
This is why medical loans are available.
Here are five common reasons why Australians use medical loans:
If the procedure you're having isn't covered by Medicare (and you’re also not covered by private health insurance), a medical loan could help finance it.
For example, Medicare generally does not cover:
This could simply be because you don’t have private health insurance, or your policy doesn’t cover a particular treatment. Even a very high level of private health insurance will have its limits.
Medicare and private health insurance generally won’t cover you if you choose to travel overseas to have the procedure.
What if the procedure you need is covered in the public system but there’s a long waiting list. Taking out a medical loan and paying for private medical care could be an alternative.
The medical cost itself is just one aspect of funding a medical procedure. A medical loan could cover that plus the related costs, like travel, lost income and aftercare costs.
Understandably, getting the best medical treatment you can will be your priority. But taking the time to find an appropriate medical loan that offers good value could make the finance process easier and less expensive.
Here’s what you should look at:
It’s worth confirming up front whether the lenders place any restrictions on what you can use your medical loan for.
Likewise, make sure the lenders you’re considering offer loans of the right size for what you need.
This will be the biggest cost of the finance. Try to get the lowest interest rate you’re eligible for. Your interest will depend on various factors like your credit score, the loan amount, loan term and your overall financial position.
Ideally look for a short repayment term. This will keep your interest costs down. The average personal loan term is just under three years.
Based on the loan amount, interest rate and loan term, you’ll be able to calculate your regular loan repayments. Can you afford these comfortably?
Another way to reduce costs is making extra repayments on your medical loan if you can afford to. Look for loans that allow you to do this without penalty and don’t charge a fee if you repay the loan in full early. This can also make life easier if you want to do a personal loan refinance down the track.
Like most loans, medical loans also come with fees to be aware of (that will add to the cost of your loan)
Shaun McGowan, Loans Expert
“Medical loans in Australia provide crucial financial support for healthcare expenses, but understanding the terms and repayment obligations is important. Ensure you're well-informed about interest rates, repayment schedules, potential fees and the overall cost of the loan to make the most informed decision for your health and financial wellbeing.”
Shaun McGowan, Loans Expert
5 medical loan fees to look out for
Are you eligible for a medical loan?
Qualifying for a medical loan is generally less about what the loan is being used for and more about who you are.
Typically you must be:
Although these are the basic requirements, each lender will have its own way of assessing personal loan applications.
This boils down to establishing whether you are going to be able to repay the medical loan comfortably for the full term.
To do this lenders generally look at factors including:
Lenders typically also use these factors to determine your interest rate.
Essentially, the more risk a lender sees in your application, the higher your rate is likely to be.
Applying for a medical loan in Australia
Okay, so you’ve compared your options. And you’re confident you meet the eligibility criteria. What now?
Here’s what’s usually involved in making an application for a medical loan:
It may be possible to have a medical loan approved with the funds in your bank account in 1-2 business days.
For more complicated applications, like bad credit personal loans or low doc personal loans for self-employed borrowers the process will likely take a bit longer.
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What are the interest rates on medical loans?
Interest rates on medical loans generally start at around 6%. But they can be as high as 20% or even higher for some borrowers. Your interest rate will be tailored to you based on your credit history and financial situation, including your income, expenses and other debts.
Are there interest free medical loans?
Some clinics offer interest-free medical finance to patients through a partner finance company. This can seem appealing but there are some major potential drawbacks to be mindful of.
The no-interest offer may only be for a short part of the loan term, after which high rates may apply. Instead of interest, there could be very high fees. With some no-interest finance, the term of the finance is quite short. This can mean very high repayments, and potentially late repayment fees if you can’t keep up with them.
Can I get a medical loan if I have bad credit?
You may be able to get a medical loan if you have bad credit. But it’s important to know which lenders to consider and which ones to avoid. For example, the major banks and credit unions generally only lend to borrowers with a good credit score.
Applying through a specialist bad credit lender may give you the best chance of approval. Just bear in mind that the interest rate you will be charged will likely be higher than the rates advertised by traditional lenders.
If you need help finding a loan you’re eligible for, you could speak to a personal loan broker.
Can I borrow for medical care performed overseas?
Yes, most borrowers will lend to you even if your medical procedure is to be performed outside of Australia.
How much can I borrow with a medical loan?
Medical loans have limits from $2,000 to $100,000. The amount that you can borrow will depend on the lender, your credit history and overall debt servicing ability.
Can I use a medical loan to cover costs while I recover?
Yes, a medical loan can generally be used for most costs related to your medical procedure. That includes paying for your expenses while you recover.
Should I get a fixed or variable rate medical loan?
If you want the certainty of having the same repayment for the entire loan term, a fixed rate medical loan may be suitable. But if you are looking for more freedom to repay the loan early without penalty fees, variable rate loans generally offer greater flexibility.
Which option is better will ultimately come down to your preferences.
A lot of borrowers simply opt for the lowest rate medical loan they can find, whether it’s fixed or variable. And there is nothing wrong with that approach if that is your priority.
Can I get a secured medical loan?
Medical loans are usually unsecured personal loans. That means the borrower doesn't need to put up an asset as collateral to secure the loan. But some lenders offer secured personal loans that could be used to cover medical costs.
If you own an asset that could be suitable (a vehicle, shares, cash savings, house) you could use it as security to get a lower interest rate. The downside of doing that is the lender can repossess the asset to cover its costs if you can’t repay your medical loan.
Sean Callery is the Editor of Money.com.au. He has over 15 years of international experience. He is qualified with a Certificate IV in Finance and Mortgage Broking (FNS40821) and is compliant to provide general advice in Tier 1 General Insurance (RG 146) products.
Shaun McGowan is the founder of Money.com.au. He's determined to help people and businesses pay as little as possible for financial products, through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
^Comparison rate warning
Unless otherwise stated, personal loan comparison rates are calculated based on a loan amount of $30,000 repaid over a 5-year term. The comparison rates only apply to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you.
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