What Do You Need To Know About Medical Debt Consolidation?
A 2019 CNBC report shows that almost 137 million people in our country are struggling with medical debt. Can you imagine?
If you are slogging to pay off your medical debt, you might be looking for a way out of this grave situation. You might be trying hard to reduce your expenses to stash money for repaying your medical debt.
But trust me, if you have a huge amount of medical debt, it won’t help you that much. You need a strategic way to get rid of medical debt and lead a debt-free life ahead. And therein lies the importance of medical bill consolidation!
How to consolidate medical bills
If you are overwhelmed with multiple medical bills, you might feel exhausted in managing them. You can consolidate your multiple medical bills into single monthly payments to make your repayment process much easier.
Here are some of the best possible ways to consolidate your medical bills!
1. Debt Consolidation Loan
You can take out a personal loan to consolidate your multiple medical bills into single monthly payments. However, you need to have a decent credit score to take out a personal loan at a preferable interest rate.
Also, remember that you always need to make payments for your consolidation loan on time. Otherwise, you may end up racking up more debt in your life.
2. Home equity loan
You can tap into your home equity to consolidate your multiple medical bills into single monthly payments. Home equity loans usually have much lower interest rates as your home serves as collateral. A home equity loan can help you get rid of managing multiple medical bills and repaying them with much lower interest rates.
Read: How much your home equity is useful to consolidate debt
3. Balance transfer card
You can look for a balance transfer card that offers a 0% interest rate for an introductory period. This period usually ranges from about 15 to 24 months. After that, the credit card companies will levy a variable APR (Annual percentage rate) ranging from about 13.99% to 25.49%.
You can consolidate your multiple medical bills by transferring them to a new credit card. I would suggest you try to repay your new outstanding balance amount within the introductory period. By doing so, you won’t have to shell out any money on interest payments.
However, you may have to pay a balance transfer fee on the amount you will transfer. Also, make sure that you aren’t using the new card for any other purchases as it will make your debt amount more expensive.
Can you opt for professional help to consolidate your medical bills?
Yes, of course!
If you are thinking about whether you should hire a professional to clear debts or do it yourself, I would say that things could be a bit easier for you if you opt for professional help to repay your bills.
Because managing multiple medical bills is a cumbersome task. And opting for professional help can help you to repay your medical bills strategically. They also chalk out a budget to help you make affordable payments on time.
You can opt for a debt management plan (DMP) by approaching a genuine debt relief company. The financial experts of the company will negotiate with your healthcare creditors on your behalf to reduce the money you owe. Besides, they will find out if there are any errors or any overcharged amount so that your outstanding bill amount can be reduced.
Once your healthcare creditors agree, you can start making single monthly payments to the company. And they, in turn, will distribute the amount among your creditors. However, you will have to pay a charge to the debt relief company for opting for their services.
What is the statute of limitations (SOL) on medical bills?
Well, the SOL means the amount of time your creditors can sue you for your unpaid debts (if any). Once your debt becomes time-barred or crosses the SOL period, your creditors or collectors won’t be able to sue you. SOL depends on the type of debt you owe like oral contracts, written contracts, promissory notes, open-ended contracts, etc.
Your medical debt comes under written contracts as you sign the documents with terms and conditions to pay expenses for receiving medical care. Also, SOL varies from state to state. For example, in Alabama, the SOL for written contracts is 6 years, but in California, it is 4 years.
However, if you are a resident of New York, there might be good news for you. On April 3, 2020, the governor of the state signed the State’s 2021 Executive Budget into law that includes a proposal to reduce the SOL on medical debts to 3 years. So, find out the SOL on medical bills in your state and if the debt has crossed the SOL, you aren’t legally bound to pay it off.
What are the consequences of not paying off medical bills?
If you fail to repay your medical bills, you will have to pay a hefty late fee or interest. However, some states like New York, California, Illinois, etc. have banned the late fees or interests charged by the medical providers.
If your state doesn’t have any such provision, your medical bills can become incessantly high due to levying of late fees or interests, once the due date is over.
And once it’s 3 months past due, your healthcare provider will sell off the debt to a collection agency. They will start contacting you to get payment. At the same time, your credit score will be affected from the time the collection agency gets involved.
However, major credit reporting bureaus like Experian, TransUnion, and Equifax have recently implemented a waiting period of 180 days before reporting medical debts in your credit history. You can take advantage of this grace period to settle debts, chalk out a payment plan, or correct any errors in your medical bills.
Can your wages be garnished for nonpayment of medical debt?
Well, wage garnishment is not an easy task. Your healthcare creditors or collectors will have to file a lawsuit against you for nonpayment of debts.
If the judgment goes against you, the court may order wage garnishment to recover the unpaid debts. So, without a valid court order, it’s impossible to garnish your wages for unpaid medical debts!
Is there any other way to get rid of medical bills?
No doubt, debt consolidation is one of the best possible ways to get rid of medical bills. But if you are looking for other ways to repay your medical bills, you can try any one of the following:
1. Negotiating with your healthcare providers
If you can’t afford to pay your medical bills in full, try to negotiate with your healthcare providers to reduce the amount. Explain your financial situation to the billing office and inform them how much you can afford to pay.
Also, go through your hospital bills carefully as you may come across some incorrect billing information. Trust me, incorrect diagnosis, duplicate charges, payment for services that you haven’t received, etc. are quite common. If you find any errors, inform the billing department to reduce your bill amount.
2. Set up a payment plan
It’s one of the most common and easiest ways to pay off your medical bills. Many healthcare providers offer to set up a payment plan if you can’t afford to pay your bills in one payment. They will break your total outstanding bill amount into monthly payments so that it becomes easier for you to pay.
So, talk to your medical provider about whether or not they offer payment plans. Also, find out if there are any extra charges for opting for a payment plan.
3. Opt for a medical credit card
You can apply for a medical credit card at your doctor’s office. Usually, dentists, eye doctors, cosmetic surgeons, offer medical credit cards.
I would suggest you read the terms and conditions carefully while taking out a medical credit card. Many medical credit cards offer an interest-free period ranging from about 6 to 18 months. If you fail to repay within that time, you will have to pay a deferred interest rate.
For example, the CareCredit credit card offers a variable interest rate of about 26.99% and has a deferred interest for 6, 12, 18, or 24 months.
4. File bankruptcy
Filing bankruptcy is considered as the last resort to get rid of debts. Still, a 2019 CNBC report has revealed that almost 66.5% of all bankruptcies filed were due to medical debts.
However, if you don’t have any other option, you can file for bankruptcy to get rid of your medical debts and start your financial life afresh. But remember, it can have a serious impact on your credit score.
Read: Bankruptcy or debt settlement: Which one should you hug?
So, the bottom line is, medical bills can burn a hole in your pocket if you don’t make payments on time. And debt consolidation is the best option to revive your financial life as it can help you repay your medical bills with ease! Lastly, I would advise you to plan your finances accordingly so that you don’t fall prey to any debt trap easily.