MomsGetReal Guest Contributor Cary Leibowitz
Medical emergencies are an inevitable part of life because accidents, sickness and other health concerns occur when it is not expected. The problem many Americans face is the high cost of medical bills. Even after insurance pays for part of the cost, you are still faced with covering the rest of the payment. If you are struggling with your finances, then the burden of medical bills might tip the delicate balance into an uncomfortable position. Understanding your options is the first step in getting your finances under control.
Consolidation and Loans
When looking for a solution to your debts, particularly after unexpected medical costs drive the payments higher, it is tempting to look into new loans or a consolidation as a potential solution. While consolidation and loans are available, in most situations it is better to avoid this possibility because it will cause more stressful challenges.
The problem with consolidation loans or personal loans is the high interest rate. If you are already struggling with your bills, then a traditional lender will deny the funds or require a very high interest payment. The cost of the interest, which might range from 20 to 30 percent based on your current credit and debts, can end up higher than the other debts you are already struggling to pay.
Seeking a consolidation through a lender is not advisable to most individuals. In general, you would need a credit score that was higher than 700 or 750 to get an interest rate that is lower than your current payments for the medical bills and other debts. A loan would only make your situation worse because the interest charges will increase, and you will face higher payments than it is possible to manage.
Filing for bankruptcy is a tempting solution when you are struggling with unsecured debts and medical bills. Since bankruptcy will clear your debts, including the medical bills, it seems like a simple way to start over.
While bankruptcy can clear the slate when your financial struggles relate to unsecured debts and medical bills, it is best used as a last resort. Bankruptcy will remain on your credit report for ten years, which shows up every time you want to apply for a new loan or have a basic background check for a new job.
You should only apply for bankruptcy if you have no other options to manage that medical cost. Since you can negotiate with the hospital and work out a plan to repay the debt or settle the amount for less than the initial bill, bankruptcy is a poor choice when you are struggling with medical bills.
The only time you should consider a bankruptcy is if you have already tried every other option available and are still struggling to manage your debts. This is never a good choice because it can prevent you from getting employment in the future, it stays on your credit history for ten years, and it can result in few financial options to start rebuilding your credit after the paperwork goes through.
The best solution when you are struggling with medical bills and other high cost debts is working out a settlement with the creditor. If you are struggling, then your creditors will allow professional negotiators to work out a plan to pay a portion of the debt instead of the full amount.
Medical bills are considered an unsecured debt, so it is possible to work out a settlement plan. Negotiators will offer to pay a lump sum of a smaller amount in return for forgiving the remaining amount on the bill. The hospital may come back with a counter-offer or might accept the amount. You then pay the lump sum after saving the full amount and the bill is considered paid. In most cases, it will take about 24 to 48 months to settle the account.
The benefit of settling the medical bill is that the impact on your credit is temporary. You can start working on rebuilding the credit history immediately after your unsecured debts are settled.
If you do not have money to pay for medical bills, then you will want to consider settling the account. Hospitals and clinics are willing to work with patients to reach a solution that will clear the debt through a settlement.
Cary Leibowitz is an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis’ facing consumers.