Using a home equity loan or HELOC for medical expenses

If you’re facing healthcare costs that insurance won't fully cover, your home equity could help bridge that gap. A home equity loan for medical expenses is a way to borrow against your home equity to help cover healthcare costs you’re responsible for paying out of pocket.

A home equity loan or home equity line of credit (HELOC), another borrowing option, uses your home as collateral. The equity in your home (the difference between what your home is worth and what you still owe) determines how much you could borrow. Those funds could go toward medical costs while you focus on recovery.

Here’s how this type of loan works and what to consider before moving forward.

Can you use home equity to pay medical expenses?

Yes, you can typically use funds from a home equity loan or HELOC for a variety of medical bills, as well as day-to-day costs while you deal with your health.

A home equity loan is a lump-sum loan, typically with a fixed interest rate. They usually have a repayment period ranging from five to 30 years. This loan structure could work well if you have a large, one-time medical expense. With a fixed-rate home equity loan, you get predictable monthly payments and can pay off medical costs over time.

A HELOC is similar to a reusable home equity loan. It allows you to borrow, repay, and borrow again up to your credit limit during a draw period. Draw periods are generally between five and 10 years. After that, there’s a repayment period when you can’t make any more withdrawals. Repayment periods normally range from 10 to 20 years.

Since a HELOC is a revolving line of credit, it could be useful if you have ongoing medical expenses and may need to borrow money multiple times. Most HELOCs have variable interest rates, but Achieve Loans offers a fixed-rate HELOC.

Which medical costs can a loan for medical expenses cover?

A home equity loan for medical expenses could help cover just about any healthcare costs, including when insurance doesn’t pay the full amount or doesn’t cover certain services.

Common uses include:

• Deductibles, copays, or coinsurance

• Surgery, specialist care, or other major treatments

• Prescription medications

• Home healthcare costs, including in-home nursing, hospice support, and mobility equipment

• Travel costs for treatment at distant hospitals or specialists

• Dental work

• Cosmetic procedures

• Fertility treatment/IVF

Interest rates, fees, and repayment terms for a home equity loan or HELOC for medical expenses

Interest rates on a home equity loan for medical expenses are typically fixed, which means your rate and monthly payment stay the same over time. Most HELOCs carry variable interest rates that move with the market, though Achieve Loans offers a fixed-rate option, which adds interest rate stability over the life of the loan.

Home equity loan and HELOC rates are often lower than rates for unsecured debt, such as personal loans and credit cards. Your specific rate depends on your credit profile, home equity, and overall financial situation.

Repayment periods typically range from five to 30 years, depending on your lender and the term you choose. Fixed monthly payments make long-term budgeting more predictable, especially when managing ongoing healthcare costs.

Home equity loans and HELOCs normally have closing costs that could run 0% to 5% of the loan amount. Closing costs include origination fees, appraisal expenses, and other costs associated with underwriting the loan. Funding timelines vary by lender.

Can you get a home equity loan with medical collections?

Yes, it’s possible to get a home equity loan with medical collections. Approval depends on the lender’s requirements and your overall financial profile, and medical collections don’t always end up on your credit report.

The three major credit bureaus (Equifax, Experian, and TransUnion) wait one year before including medical collections on your credit report. They exclude medical collections under $500 and paid medical collections. 

Many states also have laws prohibiting reporting of medical debt, so check your state’s current rules to see if medical debt can be reported. So, if a medical bill went to collections in the last year or is under $500, it most likely isn’t on your credit report. 

Paid-off medical collections also shouldn’t be there, but removal isn’t always automatic, so it’s worth double-checking. It’s good to pull your credit reports anyways before applying for a loan, and you can get yours for free at AnnualCreditReport.com. This allows you to check your reports for accuracy and dispute any errors.

Even if you have medical collections on your credit history, lenders usually consider more than a single item and focus on the full picture: your income, home equity, credit history, and overall debt-to-income ratio (DTI).

Risks of using home equity to pay medical bills

Using home equity to pay healthcare expenses means trading unsecured debt for secured debt. Medical debt is unsecured. It isn’t backed by collateral or anything of value, which is important if you think you might file bankruptcy. If you declare bankruptcy, you may be able to have eligible unsecured debt discharged, including medical debt.

Secured debt is tied to an asset—your home, in the case of a home equity loan or HELOC. If you don’t repay the loan, the lender could foreclose on your home, even if you’ve declared bankruptcy. If you pay off medical debt with a home equity loan or HELOC, you’re giving up the option to possibly walk away from the debt through the bankruptcy process.

You’re also giving up payment assistance options, such as interest-free payment plans, medical debt settlement, and eligibility for medical bill charity programs. Options like these are sometimes available to people with unpaid medical bills, but you generally won’t qualify if you’ve paid those medical bills with home equity.

Additionally, home equity loans and HELOCs could result in paying more for your debt overall than some other options. Closing costs and fees may apply, and long repayment terms could increase the total interest you pay over time.

Alternatives to a home equity loan for medical expenses

If a home equity loan for medical expenses doesn’t feel like the right fit, there are other ways to manage healthcare costs depending on your situation and eligibility.

Here are more details on each of these alternatives.

Personal/medical loan

A personal loan is typically an unsecured loan that you could use for a wide variety of purposes, including medical expenses. This type of loan normally has a fixed rate and monthly payment, providing predictability and stability. 

A medical loan is a personal loan used for medical bills. Some lenders offer a product called a medical loan, but this is just a naming choice, as it’s still a personal loan.

Promotional 0% APR medical credit card

Medical credit cards often have a promotional interest-free period, typically ranging from six to 24 months. If you pay off your full balance within the promotional period, you avoid interest charges entirely. 

However, these cards usually have deferred interest, which has a catch: If you don’t pay off your card’s entire balance before the end of the promotional period, you’re charged retroactive interest on the original amount you borrowed from the beginning. This type of card only makes sense if you can pay off everything during the promotional period.

Hospital payment plan

Hospitals are often open to letting patients pay off bills over time, and some offer interest-free plans. You may need to ask about a payment plan option, as hospitals don’t always offer this upfront. 

Make sure to check the terms, including fees or interest charges, and confirm that you can make the monthly payment. If not, see if you can get a longer plan with a smaller payment amount or qualify for partial forgiveness.

Provider financing

Medical providers, including dental offices, fertility treatment centers, and elective surgery practices, may have in-house financing or financing through a third-party lender. Provider financing could be a convenient option. Like with hospital payment plans, make sure to check the terms and additional costs involved.

Medicaid

Medicaid is a government health insurance program for individuals with low incomes or limited resources. It’s a joint federal and state program, with the federal government setting general rules and each state determining its own eligibility requirements and benefits. If you qualify for Medicaid, you could receive free or low-cost medical coverage.

Medical bill negotiation

In some cases, you may be able to negotiate a lower rate on medical expenses. Start by requesting an itemized bill, and then look for any duplicate charges or billing errors. Even if your bill doesn’t have any mistakes, you could still ask for a price reduction. The billing department might work with you, especially if it means getting a prompt payment.

Medical debt forgiveness programs

Medical debt forgiveness programs could reduce or eliminate what you owe, provided you meet eligibility requirements. Forgiveness options include hospital financial assistance, medical charities and nonprofits, and state-sponsored medical debt relief programs.

A home equity loan for medical expenses often offers lower interest rates than credit cards and longer repayment terms, typically 10 to 30 years. For homeowners with sufficient equity, it could be a practical way to spread out healthcare costs while keeping monthly payments predictable.