Medical debt is the leading cause of bankruptcy, data shows: How to reduce your hospital bills

Unpaid medical bills are a costly burden that can leave a longstanding blemish on your credit history and send debt collectors to your doorstep. Medical bills can even be a potential roadblock for patients who become hesitant to seek care.

Nearly 1 in 5 Americans has medical debt in collections, meaning that millions of consumers were unable to pay for often necessary medical care. In fact, medical debt is the largest single cause of bankruptcy in America, according to the National Consumer Law Center (NCLC), and more than half of debtors have medical debt as a part of their bankruptcy filings. 

Declaring bankruptcy can be an effective way to achieve medical debt forgiveness, but it comes with consequences. Chapter 7 bankruptcy can last on your credit report for up to 10 years, according to TransUnion. This could make it more difficult to qualify for credit, like a mortgage or student loans.

Thankfully, there are a few ways you may be able to reduce your medical debt or even have your hospital bills forgiven. Keep reading to learn more about your options for medical debt relief, including financial aid and debt consolidation loans.

If you decide to borrow money to pay off your hospital bills, make sure you're getting the lowest interest rate possible by comparing offers on Credible.

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How to negotiate medical bills

Medical bill negotiation is a tactic that patients can use to reduce the cost of care. You may qualify for a discount on your medical bills even if you don't have a low income. Use these strategies to speak with a health care provider, medical billing advocate or your insurance company:

• Get your documents in order. Ask for an Explanation of Benefits (EOB) and Summary of Benefits and Coverage (SBC) from your health insurer to understand how your coverage works.
• Check your bill for errors. Common errors include double-billing and incorrect coding. You also may have been charged for a service that was supposed to be covered by your health insurance.
• Reach out to the hospital's billing department. You may be able to ask for a discount for paying upfront. Take detailed notes of who you speak with and any agreement you make.
• Do your research about the cost of care. Use a cost comparison tool like Healthcare Bluebook to find comparable rates for the care you received to see if you were overcharged by the health care provider.
• See if you qualify for financial aid. The Affordable Care Act requires nonprofit hospitals to offer financial assistance, such as interest-free payment plans and discounted care for low-income patients, according to the NCLC.

Even after negotiating your medical bills, though, you may still owe debt to a collections agency. If you believe there was an error during the medical billing process that you can't resolve, get in touch with your state's insurance commissioner.

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3 ways to pay off your medical debt

Some patients may be tempted to put their unpaid medical debt on a credit card. But taking out high interest rate credit card debt can be an expensive way to pay off medical bills. Here are a few other ways to get out of medical debt.

1. Enroll in an interest-free payment plan
2. Take out a personal loan for debt consolidation
3. Utilize a cash-out refinance to repay medical debt

1. Enroll in an interest-free payment plan

Nonprofit hospitals are required by federal law to offer financial aid to low-income patients, and often, that help comes in the form of an interest-free payment plan. This is a way to break up your medical debt into monthly payments so you can spread out the cost of care over time.

However, not all medical providers will offer this type of payment plan. For-profit health care centers and elective procedures may not be covered by this law. But before you borrow money to get out of medical debt, ask your health care provider if an interest-free payment plan is an option.

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2. Take out a personal loan for debt consolidation

Taking out a small personal loan can be a way to fund elective medical procedures like dental work and cosmetic surgery. But you can also take out a personal loan to consolidate existing medical debt.

Personal loans offer fast, lump-sum funding that's repaid in fixed monthly payments over a set period of time, typically a few years. You can use a personal loan calculator to estimate your monthly payments. They're also usually unsecured, which means you don't have to put up collateral to get the loan. 

Personal loan interest rates vary widely depending on the loan amount and length of the loan, as well as your credit history. So if you decide to borrow a personal loan, it's important to check your eligibility and compare offers among multiple lenders to make sure you're getting the lowest rate for your situation.

You can get pre-qualified on Credible and compare personal loan rates tailored to you, all without impacting your credit score.

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3. Utilize a cash-out refinance to repay medical debt

Mortgage rates are at historic lows while home equity is at an all-time high, making it a great time to consolidate debt with cash-out mortgage refinancing. 

Cash-out refinancing is when you take out a larger mortgage to repay your current one, tapping into the difference with cash. It's commonly used for debt consolidation, which can include medical expenses.

That said, cash-out mortgage refinancing isn't right for everyone. For example, it may not be wise to take out a new mortgage that's worth more than your home's true value. Plus, mortgage refinancing comes with closing costs that may offset the benefit of a lower rate. 

Get in touch with an experienced loan officer at Credible to see if refinancing for debt consolidation is right for you.

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