How can I consolidate medical bills?

Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.



In the wake of economic upheaval and rising healthcare costs, countless Americans find themselves grappling with overwhelming medical bills. With medical debt becoming an all-too-common burden, many are seeking strategies to manage their finances without sacrificing their health or financial stability.

Among these strategies, medical debt consolidation offers a beacon of hope, providing a pathway to simplify payments and potentially ease the financial strain.

In this comprehensive guide, we’ll explore how consolidating your medical bills can be a strategic move towards financial relief, offering insights into the process and how to determine if it’s the right choice for you.

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Medical debt collection agencies

Did you know that collections agencies have to obey federal laws protecting consumers against unfair collection practices? Many states have these regulations as well. If you have a debt collector who is making threats or contacting or family, they may be harassing you. If you feel harassed, you may want to talk to a lawyer about stopping these illegal acts.

If you've been sent to a debt collection agency, before you agree to pay, there is some information you need. Make certain that it is your debt, that the debt does not exceed the statutes of limitations in the state of services, and that the amount is correct.  It's crucial to determine whether consolidating your debt into a single loan is the right move for you. Explore if a debt consolidation loan is right for you before making any decisions.

Errors happen and an overzealous debt collector may be trying something illegal. We have several blogs that deal with how to verify the debt is yours and how to handle medical collection accounts.

Always request debt validation in writing before paying collections agencies or agreeing to a payment plan. This ensures the debt is legitimate and prevents paying for debts that are not actually owed.

Learn more by reading How To Deal With Debt Collectors When You Can’t Pay

Can medical debt consolidation affect your credit?

Medical debt consolidation means that you get a personal loan for the total amount of your medical debt and then pay off the medical bills in full resulting in medical debt relief. When you pay off the bills in full, this is reported to the credit reporting agencies. Eliminating the medical bills helps your credit.For a thorough understanding, read about what debt consolidation is and how it works.

However, consolidating medical debt can hurt your credit score. The next step to keep medical debt consolidation from hurting your credit is to pay your bank loan on time and in full. This single action will prevent additional damage to your credit. Having debt management plans can help you maintain your credit score. Even with recent changes, unpaid medical debt has an impact on your credit score for years.

Staying current on any consolidation payments is critical to avoiding further damage. Consolidating medical bills is one of the strategies to manage your debts and improve your financial situation. Debt consolidation loans can be a viable solution to manage your debts. Learn more about  debt consolidation loans and how they work.

Should you consolidate medical bills?

Medical debt consolidation options can be helpful in certain situations, so you'll need to understand your medical bills.

• Any bill with a 0% interest should not be paid off with a debt consolidation loan
• Any bill with lower interest rates than your potential consolidation loan interest rate should not be consolidated
• You must be able to make the full monthly payments on your consolidation loan
• Medical bills older than the statute of limitations should not be consolidated
• Can you qualify for unsecured loans?

As you can tell from this list, you need to take a look at each bill and decide whether or not you should include them in a medical debt consolidation loan.

Let's take a look at how to consolidate debt.

How to consolidate medical debt?

Your first step in working toward medical consolidation is to gather all the bills in one place.

• Write down each medical bill, the current debt holder, the original debt holder, the original and current amounts, last date of payment, and interest rate
• Verify that all the amounts are correct
• Check on your state's statute of limitations. In general, you are looking at 6 to 10 years but each state is different. DO NOT promise to make a payment on an old bill. That action restarts the statute clock
• Set aside any bills over the statute of limitations
• Set aside any bills with a 0% interest rates as you do not want to increase your interest payments and add to interest charges
• Look for a low or no interest medical debt consolidation loan. These could include a 0% balance transfer credit card, a personal loan, or a home equity loan. Since interest rates are dependent on your credit report, you may not be able to get a low-interest personal loan
• Set aside any bills with interest rates less than the rate you can get on your consolidation loan to keep interest charges down
• Add up the remaining bills and apply for a personal loan in that amount
• As soon as you get the loan, immediately pay off each bill
• Make one monthly payment on the consolidation loan

Next steps in consolidating medical debt

Now take a look at the other bills. You may be able to set up payment plans or negotiate a reduced payment on these bills. If you have old "zombie" debt or discharged debt, write a letter to the collection agency to ask for proof that you owe the money.

If you have a discharge letter, send a copy to the collections agency. Keep everything in writing and do not promise to make a payment!

Loans for consolidating medical debt

If you choose a 0% balance transfer credit card, READ THE FINE PRINT. The 0% interest only lasts for a set period of time and the interest rate that then kicks in can be astronomically higher.

If you can not pay off the bill within the time limit, do not do a 0% balance transfer credit card. In addition, credit card balance transfer fees can be very high.

Taking out a home equity loan is a possibility. However, keep in mind that defaulting on a home equity loan can result in losing your home. Secured loans like home equity loans have lower interest rates than unsecured personal loans, but be careful!

Do not use your high-interest credit card to pay zero interest bills. Credit card companies are offering medical credit cards. These are usually a bad option. Avoid a medical credit card. Credit card debts are just that - high-interest debt. As you can see, there are a number of important steps to consolidate debt and interest charges are very important.

Beware of Medical Credit Cards

Medical credit cards that are marketed specifically for paying healthcare expenses often have alarmingly high-interest rates, sometimes 25% APR or even higher. They may offer an initial 0% introductory rate, but interest will kick in after the promotional period ends, retroactively accruing on the entire transferred balance. While these cards are advertised as assisting with medical costs, think twice before using them. 

Consolidate medical debt:

• The exorbitantly high ongoing interest rates can quickly multiply your debt, making it far more difficult to pay off.
• You would lose the credit protections given to unpaid medical debt that has not been consolidated.
• Missed payments on the credit card are likely to hurt your credit scores.
• If you can't pay off the card in full when the intro 0% APR period ends, you'll owe a lot more in interest charges.

The only instance where using a medical credit card to consolidate debt may make sense is if you can pay off the entire transferred balance during the introductory 0% APR period.

Otherwise, avoid medical credit cards for consolidation purposes and explore alternatives that won't dramatically escalate your interest costs. The risks and downsides usually far outweigh any temporary benefit.

What happens if you don't repay your medical debt?

If you do not repay medical debt, there are several repercussions. A hospital can not legally refuse to treat you if you have medical debt with them. A hospital is legally required to provide stabilizing care. Once you are stabilized, the hospital may transfer you to a different hospital.

Doctors or medical providers can terminate the doctor-patient relationship and refuse to treat you if you owe them money.

What can happen to credit reports?

You also run the risk of ruining your credit history and credit report. A medical care facility can and will send unpaid bills to collections. Unpaid bills are reported to the credit reporting agencies as are medical debt sent to collections. Medical debt can stay on your credit history for seven years, even if it is paid in full.

Get help paying health care bills

If you need help in deciding how to handle your unpaid medical bills, you may want to talk with a nonprofit credit counseling agency. These professionals will take a look at your medical debts and your income and help you develop a budget and a monthly payment plan to help you pay medical bills. They sometimes offer debt management programs to help you pay off debt. A debt management program can incorporate debt consolidation and debt settlement.

A medical bill advocate or your insurance company may be willing to help you argue down a medical bill. These medical bill advocates can bring a lot of public pressure to bear on hospitals. Consider a medical advocate for hospital bills.

Credit card companies will sometimes negotiate on your medical debt.

If you need more help, you may want to contact a debt consolidation company or a debt settlement company like Pacific Debt. These companies will help you get medical debt relief by paying off your unpaid medical bills through monthly payments.

The credit score impact of medical debt collections

Currently, 52% of all debt on credit reports is for medical costs and the impact on credit scores is extreme. Approximately 15 million people in America have medical bills that they are unable to pay. This amounts to $195 billion in medical debt and the credit bureaus are attempting to help.

The three major credit bureaus: Experian, Transunion, and Equifax, announced that they:

• will remove medical collection accounts when paid in full and paid late medical debt from credit reports
• will not put medical debts less than $500 on the consumer's credit report
• will not include medical debt in credit histories until the debt is 180 days overdue

These actions by the credit bureaus have the potential to immediately help a credit score. However, medical debt will still affect your credit score in the long run. If you need help in paying medical bills, contact a certified debt counselor for information.

Your Equifax credit score may be lower than your TransUnion score, and it's important to know why. Learn more about  why your Equifax credit score is lower than TransUnion.

Paying off medical debt can seem impossible.

If you've suffered even a minor illness, paying off medical debt can seem like an impossible task. Before you are sent to medical debt collectors, talk with the financial departments at the hospital or doctor's office. They may be willing to consolidate medical debt from their institutions and set up a payment plan that fits your budget. Just get the details in writing and make payments on time. Hospitals may also have financial assistance programs.

Talking to medical billing advocates may be a way to lower excessive hospital bills.

Talk to a debt specialist

If there is no way you can afford to pay off the medical bill, talk to a debt relief specialist and find out your options on medical bill consolidation and see if a debt management program will work for you. And remember, bankruptcy should be your last option!

Consolidating debt can be an excellent way to pay off your medical debt if you follow the guideline set above. Otherwise, you are trading 0% interest to pay interest and losing money in the venture.

Benefits of Medical Debt Consolidation Program

If you have examined each medical bill and interest rate and found a lower interest rate consolidation loan, there are benefits to a medical debt consolidation program. First, any medical bill to your health care provider are paid.Second, you only have one payment to make.

Third, it can improve credit reports and repaying the personal loan on time definitely will improve your credit score. Have a debt management program to help you pay your medical bills. When considering debt consolidation, it's essential to research and compare options from some of the best debt consolidation companies to find the right fit for your financial needs.

Alternatives to Consolidation

Before pursuing debt consolidation, carefully consider other options for managing medical debt.

Payment Plans with Providers

• Contact your healthcare providers directly to inquire about setting up a monthly payment plan. Many may be willing to work with you, especially if you proactively reach out.
• Payment plans allow you to pay off the debt over time without accruing interest or fees like with a loan. This avoids increasing the amount owed.
• Get any agreed-upon payment plan with a provider in writing to protect yourself and have clarity on the terms.

Medical Bill Negotiation Services

• Specialized negotiators can advocate on your behalf to try to lower the overall amount owed to healthcare providers.
• Reputable services are offered by nonprofits like Medical Billing Advocates of America and Patient Advocate Foundation.
• Negotiators analyze your bills to spot excessive or unfair charges to dispute. Their expertise can help lower balances.

Debt Settlement

• Debt settlement involves negotiating with creditors to pay a lump-sum amount that is less than the total debt owed.
• This can eliminate debt, but often has high fees amounting to 15-25% of enrolled debt. The fees come out of savings set aside for settlement.
• Any forgiven debt may be taxable income. Consult a tax professional if considering this route.

Bankruptcy

• Filing for bankruptcy should be a very last resort option when you've exhausted all others.
• Bankruptcy can eliminate medical debt entirely but severely damages credit scores for up to 10 years.
• Consult an attorney specializing in bankruptcy to understand the process and if it's right for your situation.

Create a Budget

Before deciding how to handle medical debt, create a budget to gain clarity on your financial situation.

You Should:

• Document your monthly income from all sources after taxes. Be realistic.
• Track all expenses for a month, including bills, groceries, gas, etc. Categorize them.
• Compare income to expenses. If expenses exceed income, look for areas to cut back.
• Determine how much can reasonably go toward debt repayment each month. Do not overextend.
• Use your budget to inform whether consolidation payments will realistically work for you.
• Revisit your budget frequently and adjust as needed. Budgeting is an ongoing process.

Deciding If Consolidation Is Right

Carefully consider these key questions:

• Will interest rate savings on a consolidation loan offset any fees to obtain it?
• Based on your budget, will the consolidated payment realistically fit each month?
• Have you attempted negotiating with providers first to lower or extend payments?
• Are you consolidating just to simplify payments even if it costs more overall?
• Will consolidating motivate you to pay off debt faster by simplifying payments?
• Would an organized payment plan produce the same benefits without fees or interest?
• How might consolidation loans impact your credit score positively or negatively?

FAQs