It is true that if you have medical debts it will not add up to the outstanding debt because it will not accrue interest. However, there are some people who still opt to pay off their medical debts using their credit cards for several reasons. There are even some people who use their credit card knowing the fact well that they will not be able to repay this high interest carrying debt easily and within the interest free time limit, if any.
This is a costly mistake that people make as they end up finding it hard to meet their credit card bills. Once they fail, the credit card issuing company starts adding all sorts of fees and penalties along with the customary interest which by itself is very high.
Therefore, it is unwise to use your credit card to pay off your medical debts as you will change the interest free debt into an interest bearing debt in the process. Unless you have all the corners covered and have enough confidence in you and resources to pay off your credit card balance by the end of the billing cycle this is one approach you should categorically and strictly avoid.
People with medical debts also make another common mistake which is to inform their medical provider when they expect a problem in paying the bill. As a result, when they fail to pay their medical bills, the health care provider is likely to turn your account to a collection agency. This is when the problem starts.
This collection agency will make your life miserable in many ways such as:
- They will make frequent calls, mails and visits to your home and/or workplace
- They will meet your friends and family
- They may not accept your request to negotiate with you to lower the payment and
- They may even seek a judgment if you stop making payments.
However, if you unfortunately face such a situation and want to get rid of your debts soon, you must be proficient and prudent enough and contemplate on consolidating your medical credit card debt with others for a larger, longer and low-interest loan. However, you are requested to check out the debt consolidation reviews before you take on such a loan and also consult with a debt counselor to know the right ways to go about it.
The benefits of it
Just like any other forms of debt consolidation, medical debt consolidation program benefits are also almost similar such as:
- This will result in only one monthly debt payment as it will combine all your credit card debts with medical debts
- It will help you to streamline your bill paying process and stay more organized
- Since including medical debt with such debt management program will help you to pay it off faster and more consistently than you will on your own, you will save a lot of money and stress in the long run and
- You will be making consistent and on-time payments with this debt management program and therefore will be able to improve your credit score significantly.
Therefore, if medical bills are weighing you down it is best to avail this option.
Avoid other options
There are also other options to avoid your medical debts or any other debts for that matter but each will have its own significant consequences making them a poor alternative to medical debt consolidation.
- Filing for bankruptcy may seem the best option but it will have serious negative consequences to your credit damaging it for ten long years.
- You can also choose to use a HELOC or a personal loan from a bank to pay off the medical debts but these strategies will buy time as well as may have other unwanted consequences. The HELOC may lead to foreclosure and a personal will carry very high rate of interest thereby making your financial condition and health even poorer.
- A few people also use their retirement savings and borrow money from their employer-sponsored 401(k) plans to pay off a medical debt. However, you will face an early withdrawal penalty for it if you do not fill out an application for such borrowing and if you are younger than 59 ½ years. If you do not repay the money with interest you will face stiff penalties and even additional problems if you leave the company before you repay the loan in full.
You must keep an open mind and also consult with a nonprofit credit counseling agency to help you with the other options and to determine the best course of action to eliminate your debt. The debt counselor will review your income, budget and other factors and then negotiate with your creditors for an affordable payment plan as well if necessary.
Reason for consolidating debts
There are lots of reasons you should prefer debt consolidation that having it settled. In a medical debt consolidation you may expect a few things such as it will not affect your credit score as it will not reduce the loan amount but only the number of debts.
- A debt settlement on the other hand will appear on your credit report and will lower your credit score. However, you can build it up again by making payments on time and this drop due to debt settlement is surely far better than the impact your credit score and report would have if you go into default. Eventually it may even result in a bankruptcy filing.
- Moreover, most of the nonprofit credit counselors may not routinely negotiate with the medical providers for settlements. In most of the cases they will first negotiate a settlement with the credit card issuers and then contact the medical providers with a proposal for payment that will be included in your debt management plan.
- The medical providers may not agree to these terms or your request to be a part of the payment agreement.
Therefore, a debt consolidation plan seems to be the best option to combine all you unsecured debts into one single payment.