Lending Resource

Paying Off Medical Bills

If you are carrying large balances on unpaid medical bills, you are not alone. You can accumulate medical bills rather quickly from life events such as having a baby. Other common causes are either being uninsured or under insured, or facing a serious illness. Even the best of insurance will only pay for so many of your medical expenses, and the rest of the charges will be sent to you. It is not uncommon for these accounts to go into collections, damaging your credit rating. High medical debt is one of the leading causes of personal bankruptcy. Clearly, you do want to find a way to pay down your high debt. So what are your options?

Contact Your Creditors

If your unpaid medical bills have not yet reached the point of going to collections, call your creditors to set up a payment plan. In most cases, a medical facility such as a doctor’s office, hospital, and so forth will establish a payment plan that can work with your own budget. Their goal is to get paid, and so often they are helpful in this regard.

Installment Loans

You can also consider contacting your local bank and requesting an installment loan to pay off your unpaid bills. When your loan request is approved, you generally will be provided with a check in the amount of the loan, and through these funds, you can pay off your creditors directly. The loan terms you obtain through your local bank can be negotiated, and often this is a great way to set up a payment plan that pays off your high debt in three, five, or seven years.

Bankruptcy For Medical Bills

This is an option to discharge high amounts of debt, but it should only be considered as a last resort. The above options for paying off your debt will not damage your credit rating, and they do make it easier for many people to make repayment of those debts more manageable. However, there are times when even in the best of cases the medical debt is just too much to cope with. This is something that will show up on your credit report for all who view your report to see, and it lowers your credit scores. More and more often now, a credit report is not only used by creditors but also by landlords and even potential employers, too. While this option should be viewed as a last resort, you should bear in mind that it can provide you with that clean financial start that those with high amounts of unpaid bills may need.

Explore these options further, and you may find that you can find a way to pay down your medical bills and reduce the stress of this financial burden.

Using Your House As Collateral

Bank loans for those with bad credit can be hard to come by, especially if you are looking for large sum loans. The worse your credit situation is, the more resistance you will encounter when trying to secure personal loans. The good news is that if you are a home owner, you have an advantage that non-home owners do not.

A home is an expensive asset that can be seized and sold for a large sum of money. This gives you leverage if you need large sum loans. Instead of relying on just your credit, you can put your house as collateral for a personal loan or the money that you want to borrow. This is sometimes called a secured loan because the loan is “backed up” by your collateral.

This is not an option available to newer home owners or those who have refinanced recently, as you need to have some equity in your home to offer as collateral. This means that you need to owe less on your home than it is currently worth.

Getting Equity From Your Home

For those who do have equity in their home, the bank knows that you will want to keep your home, even if you have had credit problems in the past. Putting your home up as collateral will show the bank that you are serious about repaying the debt. It is a win-win situation for the bank. If you pay off your loan, then they make money. If you do not pay off your loan, they seize your home and get their money back by selling it.

The bottom line is that banks may be willing to loan money to people with bad credit, if they have a high value asset, like a home, to put up as collateral. As a home owner with bad credit, this can benefit you because the payments on your new loan will be reported to the credit bureaus and will help raise your credit score as you continue to prove your credit worthiness.

Be sure to get a loan that is in the amounts that you want, not some higher loan amounts where you might have a tougher time repaying back. Make sure you can repay the monthly payments on time. Pay attention to the interest rates and other fees. Find out if the interest rates are fixed or variable. If you have a home and you need a large sum loan, using your home to back-up the loan will help you get approved but remember, only borrow what you need or else you might lose your home and your money.