Medical debt consolidation

By Rebecca Lake

Reviewed by Keith Osmun

Aug 28, 2023

Read time: 6 min

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Key takeaways:

  • Medical debt consolidation could help you get a handle on doctor bills.

  • Personal loans and home equity loans are two ways to consolidate medical debt. 

  • It’s possible to get some medical debt forgiven.

When it comes to your health or the well-being of someone close to you, the answer to most questions is "yes" – yes to treatment, yes to medicine, yes to a healthier life with more opportunities to enjoy the people and things we love. 

Those yesses can cost us. According to a Kaiser Permanente analysis of Census Bureau data, an estimated 23 million people in the U.S. owe significant medical debt. At least 16 million Americans owe more than $1,000 in medical bills, and 3 million owe more than $10,000.

When you feel overwhelmed, it's time to look at solutions. Here's a closer look at how medical debt consolidation works. 

What is medical debt consolidation?

Medical debt consolidation means combining multiple debts into one. Here's how consolidating medical debt works. 

  • You apply for a debt consolidation loan.

  • If approved, you use the loan proceeds to pay your medical bills.

  • Going forward, you make one monthly loan payment. 

Consolidating medical debts is no different from consolidating credit card debts. The idea is to replace several debt payments with a single monthly payment, at terms you can afford. 

Reasons to consider consolidating medical debt

Medical debt consolidation can help you out in several ways. Here are some of the main advantages that may be possible with medical debt consolidation.

  • Simplify your finances and reduce the number of monthly debt payments you make

  • Bring accounts current if you use the loan to pay them off

  • Get a more manageable monthly payment

  • Lower the cost of your debt if you get a lower interest rate 

  • Customize your payment plan, which can relieve stress

Potential drawbacks to medical debt consolidation

Medical debt consolidation isn't the best path forward in every situation. 

When the alternative is interest-free. In some cases, it's possible to work out an interest-free payment plan with your care provider. If you can, then it wouldn't make sense to pay a lender fee and ongoing interest charges for a debt consolidation loan.

When you're considering bankruptcy. You might want to avoid a new loan if you're seriously considering Chapter 7 or Chapter 13 bankruptcy. Medical debt can be included in bankruptcy, but it gets complicated when the debt is tied to an asset like your home (if you used a home equity loan to pay off your debt). If bankruptcy is on the table, the best person to advise you is a bankruptcy attorney.

When changing the type of debt could hurt your credit standing. When it comes to your credit profile, you have some protection if you have outstanding medical debt. In 2023, all of the major credit bureaus removed paid medical debts and new medical debts (less than a year old) from consumer credit reports. Medical collections under $500 were removed as well. If you use a loan or a credit card to pay medical debts, those accounts won't get special treatment on your credit report.

Options for medical debt consolidation

If you think medical debt consolidation might be right for you, the next step is deciding how to do it. There are three main ways to consolidate medical debt:

A personal loan is a loan you take out for personal reasons (including debt consolidation). Most personal loans are unsecured. That means you don't need any collateral (property you use to guarantee that you'll repay the loan) to get approved. You can borrow anywhere from $5,000 to $50,000 with a personal loan for medical debt consolidation. (Some lenders offer smaller or bigger loans.) And you could take up to five years to pay it off. A personal loan for medical debt is often called a medical loan.

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Home equity loans let you borrow against your equity, using your home as collateral. Equity is the difference between what you owe on your home and what it's worth. You might choose a home equity loan if you have a lot of medical debt to consolidate. Home equity loans range from $15,000 to over one million dollars. And because it's a larger loan, the repayment term can last up to 30 years. At Achieve, if you have enough equity to borrow against, you can apply for a loan for up to $150,000 with a 10- or 15-year repayment term.  

Homeowners, get help with your high-interest debt

Use the equity in your home to consolidate debt, lower your monthly payments, and reduce your stress.

How medical debt consolidation can affect your credit

Consolidating medical debt can impact your credit score in a few ways. 

First, there's the impact when you apply for any loan. When a lender does a credit check, it's usually considered a hard inquiry, so it'll appear on your credit report. Hard credit inquiries have a small, temporary, negative effect on your credit profile. Before you apply, talk to a lender that does a soft credit check first to let you know if there's a good chance you'll qualify.

There's an upside. Making on-time payments on a medical debt consolidation loan can help you build strong credit. Payment history affects your credit standing more than any other factor.  

Alternatives to medical debt consolidation

Consolidating medical debt isn't the only way to manage it. There are a few other possibilities for getting back on track when you have unpaid medical bills. 

  • Negotiate. It might be worth contacting your doctor or hospital to try to negotiate your bills down. Many providers offer a discount for patients who ‌self-pay and use cash.

  • Set up a payment plan. Healthcare providers sometimes offer payment plans that allow you to pay down your medical debt in monthly installments. You may be able to choose a payment term and amount that fits your budget. 

  • Hardship relief. Hardship plans and charity care programs can provide medical debt forgiveness if you are struggling financially. Your doctor's or hospital's billing department should know what hardship options are available and how to apply.

  • Credit counseling. Credit counselors can help with budgeting and setting up a debt repayment plan. For instance, you may be able to enroll in a debt management plan (DMP) to pay off medical bills in monthly installments over a certain number of months or years. 

  • Bankruptcy. Chapter 7 bankruptcy can erase medical debts if you can't pay. But you might have to give up some of the things you own. 

Debt resolution for medical debt

If you're buried in medical bills, debt resolution is a way to resolve medical debt for less than you owe.

When you resolve debt, you ask your creditors to let you pay it off for less than what you owe. So, if you have a $5,000 doctor bill, you might ask your healthcare provider to accept $3,500 instead. The rest of the debt would be canceled or forgiven. 

How does debt resolution compare to debt consolidation? Here are a few key points:

Debt consolidation

Debt resolution

A loan

A payment plan to get rid of debt

Make one monthly payment

Make one monthly payment

Does not reduce your total balance

Could help you get rid of debt for less than you owe

For people who can afford to pay off the debts in full

For people with serious debt that is genuinely  more than they can manage 

Debt consolidation loans would generally not be available to someone with a history of late or missed payments.  

Most people who enter a debt resolution program are already behind or choose to stop making their payments because they are experiencing hardship.

If you're interested in resolving your debt, it can help to talk to a certified debt consultant who can look at your medical debt situation and help you decide the best approach.

Rebecca Lake - Author

Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.

Keith Osmun

Keith is an editor and fact-checker for Achieve. He makes sure the content is accessible by ensuring that each piece has impeccable grammar, an approachable tone, and accurate details.

Frequently asked questions

Medical debt can be forgiven if your healthcare provider lets you resolve your debt, and they might if they believe you can't afford to repay it in full. Forgiveness is usually partial (not the entire debt). But doctors and hospitals aren't obligated to agree to resolution.

Every lender has its own requirements. A history of paying your debts back on time and keeping your credit card balances low will put you in the best position to get approved for a new loan. When you apply for a debt consolidation loan, the lender will look at your credit standing, your income, and your other financial obligations before deciding whether to approve you. If you're using the loan to directly pay off other creditors, you might be able to apply with a lower credit score. At Achieve, you can apply for a home equity loan to consolidate debt if your credit score is at least 600. The best way to find out what you'll qualify for is to apply and talk to a debt consultant.

Debt consolidation loans show up on your credit reports like other installment loans. Positive account history can stay on your credit reports indefinitely. Negative items like late payments can linger on your credit reports for up to seven years, so it's important to keep up with your payments. 

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