During times of unexpected medical emergencies, medical loans, and health insurance offer great help to lessen your financial stress. Even though the two seem to function the same, these two loans are completely different from each other. Knowing the difference between them is paramount, so you can make informed financial decisions concerning your healthcare needs.
What are the core differences between the two?
Proactive vs. Reactive. Health insurance is something you pay for regularly until you accumulate a safety net against possible medical expenses. This makes it a proactive measure, whereas medical loans are something you avail yourself of after the medical event has occurred or when you’re currently facing unexpected costs, making it a reactive choice.
Coverage vs. debt. Because you pay for premiums regularly in health insurance, they provide coverage for certain specific medical expenses. These often come with deductibles, out-of-pocket maximums, and co-pays. On the contrary, medical loans are debt that you need to pay for with interest over time.
Premiums vs. Interest. As mentioned earlier, you’re required to pay for your premiums regularly in health insurance; it doesn’t matter if you’re using it for any medical services or not. Medical loans accumulate interest over time, which increases the overall cost.
Lastly, the two have different eligibility. Health insurance is based on a couple of factors like medical history, age, and coverage. For medical loans, your eligibility to avail yourself of it weighs heavily on your income and creditworthiness.
When should I consider availing myself of a medical loan?
Medical loans in Australiacan be obtained through different sources: banks, financial institutions, and even healthcare providers. When it comes to availing them, most people do so during several instances like the following:
Unexpected emergencies. Given how medical emergencies can happen out of the blue, their sudden occurrence can throw off your finances, regardless of how much you’ve saved. What’s more, there’s a high possibility that your health insurance cannot cover the whole medical bill, which is why medical loans offer a way to pay for these out-of-pocket costs.
Cosmetic procedures. If you’ve been planning to avail yourself of rhinoplasty or other cosmetic procedures, medical loans can help you avail yourself of those, most especially since a lot of cosmetic procedures are not covered by health insurance.
Is health insurance a better option than medical loans?
When comparing the two side by side, most people would prefer health insurance since it’s something you already paid for and continue to pay for, compared to taking a medical loan, which is like a debt. Some other instances that make health insurance more ideal include the following:
Preventive care. Many health insurance plans’ coverage includes preventive care procedures like checkups, vaccinations, screenings, and other medical procedures to help your overall well-being in good condition and to prevent costly health issues.
Predictable healthcare needs. If you’re suffering from a chronic ailment and are already expecting certain healthcare expenses to come up, having health insurance offers you an affordable means to manage these upcoming costs.
Long-term care. For people who are worrying about needing long-term care, like in nursing homes or in-home assistance, having long-term care insurance may be a better option for you rather than taking out a medical loan.
What are the key factors I need to consider when taking out a medical loan?
Although health insurance is more ideal and practical compared to medical loans, sometimes, we have no choice but to avail ourselves of the latter, especially if we’ve run short on finances. Given many institutions are offering medical loans, make sure you comb through their offers thoroughly and consider the following:
Interest rates and fees. Shop around for banks, healthcare providers, or financial institutions with the best rates. While you’re at it, consider the comparison rate, which includes the fees. Under fees, they usually include establishment, ongoing, early, or late repayment fees.
Loan amount and term. When taking out a medical loan, you should only loan what you need. For short-term loans, they usually require higher monthly payments, while longer-term have lower monthly payments. However, for the latter, it also means that more interest is paid. Whichever you choose, select the one that aligns best with your budget and your repayment capacity.
Repayment options. Speaking of repayment, look for institutions that offer flexible payment options, allowing weekly, fortnightly, or even monthly repayment. Some lenders imbue penalties for early payment, so make sure that the lender of your choosing does not imbue penalties for early payment.
Your financial situation. It’s also crucial to step back and assess your financial situation as well: do you think you can pay the monthly repayment terms comfortably? If not, you might want to explore other options like government assistance programs or private health insurance.
