In recent years, several lenders have retreated from providing installment loans online for medical debt. But because the medical industry is recession-proof, a growing number of lenders have not only decided to re-invest in the said industry but also lower their interest rates and better their terms to encourage more borrowers who have medical debts.
Installment loans for medical purposes are also offered these days to loans for people with bad credit.
The Game-Changer: Recession
Before the recession hit the US economy, there were a lot of players offering installment loans for the purposes of medical debt. Marketing of their products and services were very aggressive – proof of the stiff competition in the market. In fact, it even came to a point wherein these lenders would offer their services to those who were having a difficult time paying for their medical bills.
Then the recession hit and the big lenders like Capital One, Chase and Humana dropped their healthcare programs. In their place small lending companies popped offering the same installment loans, but with lower interest rates.
“Safer” Installment loans Offered
These days, lenders now offer simpler and more cost-effective alternatives to medical cards that charge high APRs. For example, the Salt Lake City-based American Healthcare Lending offers installment loans for medical purposes at an interest rate of only 5.99%.
Similarly, East Bridge Funding began a health-care program in early 2014. Using the program, the company offers closed-end installment loans that are marketed as “safer compared to the costly medical cards.” Interest rate for East Bridge Funding’s installment loans is at 14.99 percent. The company also offers interest-free financing for a maximum of 18 months.
Both company’s installment loans options for patients are meant for small and repeat transactions. They are not, however, meant for large and more costly elective medical procedures like cosmetic surgeries.
Revolving line of credit is still offered by select companies these days. With a revolving line of credit, APRs are made lower. For instance, Wells Fargo decided to reduce their APR to 9.99% from an original rate of 27.99%.
But regardless of the options offered, all lenders agree on allowing their borrowers to defer their payments for up to 18 months, in recognition of the state of their consumers. However, to protect their business and their borrowers, lenders impose a cap of 30% interest rate until such time that the borrower is able to pay.
High Interest Medical Cards Still in Abundance
Despite the availability of medical cards offering instalment loans with low interest rates, there still exist several high interest medical cards in the market. In particular, the medical cards offered in doctors’ offices are higher in interest rates compared to the ones advertised through any other means.
The most popular healthcare company remains to be CareCredit, which still charges an APR of 26.99% on revolving balances. At present, the said card is accepted at over 175,000 locations all over the country – a 50,000 jump from 2010.
Meanwhile, CareCredit’s primary competitor, Citibank, charges an APR of 28.99% on purchases. It is also widely accepted all over the country.
Both high interest medical card companies have been recipients of widespread criticism because of the hefty interest rates they impose and their over-the-top promotional practices. Because of these, healthcare executives are closely monitoring both companies.
Increased Scrutiny to Help Limit APRs on Installment loans for Medical Purposes
Federal regulators are looking more closely at companies offering installment loans for patients in an attempt to reduce the number of lenders offering the services with high interest rates.
In addition, the demand for alternative low-cost installment loan options in the face of the growing health care costs could result in more options for consumers to choose from in the future.
Some experts believe that the market for low-cost installment loans would dwindle because that means consumers would have to pay out-of-pocket for any procedure that would be in excess of the caps in place. That is another problem that would need to be addressed.