Secured Medical Loans - Pros, Cons & How to Apply

Secured medical loans are loans from a bank or credit union that you back with some form of collateral. If you default on the loan (don’t pay it back), the financial institution has a right to take ownership of whatever collateral you used.

This page will help you determine whether it’s right for you…

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Comparison
Secured Medical Loans vs. Unsecured Medical Loans
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Comparison: Secured Medical Loans vs. Unsecured Medical Loans

The glaring difference between secured and unsecured medical loans is the use of collateral, which is required for secured loans. With unsecured loans, you provide no collateral.

Before moving forward with any kind of loan, understand all of your financing options and the fine print.

Whether or not your loan is secured, the lender will come after your assets if you default on your loan.

The collateral makes loans less risky for the lender. If you default, the lender will have a much easier time getting some or all of its money back since it can take ownership of your property to offset their losses.

There are also several other important differences resulting from the risk offset by your collateral (we’ll get into the various forms of collateral in the next section):

  • Secured loans generally have a lower interest rate than unsecured loans (all else being equal). However, your interest rate will still be based on your credit score, income and loan terms.
  • Secured loans typically allow much longer terms up to 10 years or more, while unsecured loans usually have terms of 5 years or less. Choosing a longer-term secured loan will reduce your monthly payment, but it will also erode the cost-saving benefits of the lower secured loan interest rate.
  • Secured loans may allow you to obtain larger loan amounts depending on the value of your collateral (most commonly your home). Unsecured loans typically cap out around $25,000, while secured loans can be obtained for much larger amounts.
  • Secured loans may be easier to obtain if you have a poor credit score.

However, secured loans have a two main potential downsides…

  • Your home or other valuable property could be taken from you if you can’t pay off your loan.
  • There’s lots of paperwork since secured loans usually involve refinancing your home.
  • They can take longer to arrange and fund given the complexity of the contracts. Unsecured loans typically take about 1 week to fund while secured loans can take as long as 30 days or more.

So which is right for you?

Generally speaking, patients seeking medical loans of a smaller amount (under $15,000) go for the simplicity of unsecured medical loans.

If you own a home, have equity and are looking for a loan greater than $15,000 you may want to consider a secured loan…

Collateral for Secured Medical Lons
The 5 Most Common
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Collateral for Secured Medical Lons: The 5 Most Common

Common Forms of Collateral for Secured Medical Loans

By far the most commonly accepted form of collateral for secured medical loans is your home (also called a mortgage loan).

If you own your home and have equity built up, a home equity line of credit (HELOC) can sometimes be taken out for up to 90% of your home’s value. It is usually only possible if you have at least 10 to 20% equity built up.

While many banks won’t accept other forms of collateral for unsecured medical loans, it may be worth asking. Other forms could include:

  • Land
  • Car, motorcycle or other automobile
  • Boat
  • Certificates of Deposit (CD’s)
  • Cash investments

If you don’t have home equity, see our Unsecured Medical Loans page for more information about that kind of loan.

If you do have home equity, you can apply for a secured loan in one of the following ways…

Applying for Secured Medical Loans
Directly Through the Lender/Bank vs. a Broker
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Applying for Secured Medical Loans: Directly Through the Lender/Bank vs. a Broker

First, note that your credit report and score will affect both the types of loans available to you and the rate you are charged. Learning what your credit score is before applying for a loan and which factors (if any) are bringing down your score can help you figure out:

  • How likely you are to get approved (a score of 620 is typically the lowest score allowed in order to get approved for a regular loan)
  • How competitive your rate is likely to be (the higher your credit, the lower your rate)
  • Whether any items on your credit report are inaccurate or could be removed to improve your score (i.e. contact an old lender to dispute late payments or request their removal of a late payment – some lenders will allow a "goodwill" removal of a late payment on a one-time basis)

Click here to go to freecreditscore.com to obtain your updated credit score and report and to determine which factors are affecting your score.

As with unsecured medical loans, there are two primary ways that you can apply for a secured medical loan:

  1. Directly through a lender/bank
  2. Through a broker who shops multiple lenders/banks on your behalf

Following are the advantages and disadvantages of each…

Pros
Pros
Cons
Cons
 
Directly through lenders/banks
Pros
No additional fees of a “middle man” which could be anywhere from $100 to $3,000 or more over the term of your contract.
Cons
There is no competition, so you’re stuck with whatever terms and options that particular lender offers.
 
Broker
Pros

May have access to more competitive lenders/banks than you do. The savings they find may offset their fees.

Save you time by doing thelegwork and research for you.
If you have credit problems, they may be able to still find financing for you.
Cons
They could be receiving incentives to recommend one lender over another (to help avoid this, ask them to confirm in writing the number of lenders they went to along with the deals they found from each).

So which is better, using a broker or going direct to a lender?

It depends.

You’re only going to know that you’re getting the best deal if you work with a broker AND take the time to work through individual lenders.

And don’t be afraid to negotiate. Sharing the deal you secured elsewhere may lead to more favorable loan terms. At a minimum, contact your local bank to see what kind of deals they can offer.

If you don’t want to take the time to contact multiple lenders or if you’re uncomfortable with all of the financial ins and outs of comparing offers, use a broker. 

Broker Comparison
Secured Medical Loans
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Broker Comparison: Secured Medical Loans

myMedicalLoan.com and Medical Financing Solutions are two of the most popular medical loan brokers, and each offers competitive financing for both secured and unsecured medical loans.

Following are their differences…

Company
Company
Minimum Credit Score
Minimum Credit Score
Co-signer allowed for unsecured loan?
Co-signer allowed for unsecured loan?
Available Credit
Available Credit
Total Number of Lenders Used
Total Number of Lenders Used
Broker Fee
Broker Fee
Broker Fee Payment Method
Broker Fee Payment Method
Response to: “Why should a patient choose you over another option?”
Response to: “Why should a patient choose you over another option?”
Links to applications
Links to applications
Minimum Credit Score
None – If patient does not meet their lender partners’ minimum credit requirements, patient can be enrolled in myMedicalLoan’s proprietary No Patient Left Behind program.*
Co-signer allowed for unsecured loan?
Yes
Available Credit

Unsecured loan: $1,500 to $25,000

Secured loan: depends on home equity
Total Number of Lenders Used
10
Broker Fee
Between $300 and $1,200 – depends on loan amount and credit score.
Broker Fee Payment Method

Fees are built into the interest rate charged (wrapped into monthly payments).

Remember: brokers’ negotiated savings could offset their fees, so don’t make your decision solely on this factor.
Response to: “Why should a patient choose you over another option?”

“Because no patient is left behind. We’re in the business to find patients a loan no matter what.

A normal lender is just a single source company and patients must fit their criteria. With us, we’ll run your credit once and shop 10 lenders. If we can’t find a loan, patients are enrolled in our ‘No Patient Left Behind’ program (assuming your surgeon agrees to the terms*).”
Links to applications
Minimum Credit Score
620
Co-signer allowed for unsecured loan?
Yes
Available Credit

Unsecured loan: $500 to $25,000 for credit scores over 680

$500 to $5,500 loan maximum for credit scores between 620 and 680

Secured loan: depends on home equity
Total Number of Lenders Used
2
Broker Fee
$199
Broker Fee Payment Method

Fees are built into the interest rate charged (wrapped into monthly payments).

Remember: brokers’ negotiated savings could offset their fees, so don’t make your decision solely on this factor.
Response to: “Why should a patient choose you over another option?”
“We charge lower fees than our competition and work with two competitive banks – a local Kansas City Bank and a national bank.”

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[ Last editorial review/modification of this page : 12/31/2016]

* Disclaimer: The information contained in this website is provided for general information purposes and your specific results may vary depending on a variety of circumstances. It is not intended as nor should be relied upon as medical advice. Rather, it is designed to support, not replace, the relationship that exists between a patient/site visitor and his/her existing physician(s). Before you use any of the information provided in the site, you should seek the advice of a qualified medical, dietary, fitness or other appropriate professional. Read More