Is Financing Your Healthcare Worth the Cost? What to Know About Medical Loans and Credit Cards Before You Sign

Most people don’t expect to need a loan to visit the doctor. But across the U.S., with out-of-pocket costs soaring and insurance often covering less than patients anticipate, a growing number of Americans are turning to financial products like medical loans and medical credit cards to bridge the gap between treatment and payment. These tools offer immediate relief in times of crisis—but not without risk. They may come with sky-high interest rates, deferred charges, and even long-term consequences for your credit.

The topic has gained renewed relevance in light of a recent court decision backing the Trump-era approach to medical debt and credit reporting. A rule once removed certain kinds of medical debt from credit scores, offering some relief for patients in collections. Now that protection may be rolled back, meaning medical debts could again impact your credit history—even more so if those debts are managed through third-party lenders rather than hospitals. Understanding the distinction between traditional medical debt and debt from a medical-specific financial product is crucial.

More and more consumers are leaning on these financial instruments. According to data from the Consumer Financial Protection Bureau (CFPB), Americans used medical credit cards and medical loans to finance nearly $23 billion in healthcare costs between 2018 and 2020 alone. The surge in usage shows no signs of slowing, especially as providers increasingly offer financing options in-office or during consultations. So what exactly are you getting into when you swipe a card or sign a loan agreement to cover your medical bills?

In essence, both medical loans and medical credit cards are targeted financial products designed for healthcare-related expenses. They allow you to spread the cost of care over time. But while they can offer short-term relief, they can also open the door to long-term financial strain, especially if interest rates are high or if you miss a payment. As is often the case with specialized credit products, the devil is in the details.

Medical credit cards are typically issued by financial institutions like Synchrony Financial, Comenity Capital Bank, or Wells Fargo. They function similarly to store credit cards in that they can only be used for specific types of purchases—in this case, medical services. Whether it’s dental work, dermatology, vision correction, or even veterinary expenses, these cards promise quick access to funds and often come with an initial promotional interest rate, such as 0% financing for 6 to 12 months. But those low-interest windows are often deferred-interest offers, which come with hidden landmines. If the balance isn’t paid in full by the end of the promotional period, all the interest that’s been accumulating in the background gets added to your bill at once.

What’s worse, medical credit cards often come with interest rates that are significantly higher than regular credit cards. While a general-purpose credit card might have an APR around 20%, medical cards can hit 26.99% or more. That’s not far off from some of the worst retail credit card rates on the market. And unlike other forms of financing, these cards are often pushed on consumers at the moment of vulnerability—when they’re sitting in a dentist’s chair or preparing for surgery.

Medical loans, on the other hand, tend to be more structured. These are installment loans, usually taken out in advance of a procedure and used for a specific treatment. The funds are typically sent directly to the provider, and repayment starts according to the schedule set by the lender. Banks, credit unions, and fintech platforms like SoFi, LightStream, and LendingClub all offer versions of medical loans. Loan amounts can vary widely, from as little as $1,000 to more than $200,000, depending on your credit and the type of procedure being financed.

Interest rates on medical loans also span a wide range. Some are relatively reasonable, starting at around 6.99% if your credit is strong and the lender is reputable. Others can climb well above 35%, especially if you're working with a lender that caters to high-risk borrowers. Many loans are packaged with terms ranging from six months to two years, although some stretch much longer. Monthly payments are fixed, which can help with budgeting—but only if you’ve accurately accounted for the full cost of the procedure and all follow-up care.

The appeal of these products is easy to understand. Healthcare costs are unpredictable and, in many cases, unaffordable upfront. A root canal might cost $1,500. A knee surgery could cost tens of thousands. Even with insurance, deductibles and copays can be financially crushing. Medical credit cards and loans step into that void with the promise of simplicity, speed, and sometimes even a smile from the receptionist offering you the financing paperwork. But that speed can come at a steep cost if you don’t fully understand what you're signing up for.

One of the most misunderstood aspects of both medical loans and credit cards is the “deferred interest” feature. While a promotional 0% rate may sound like a blessing, it often comes with a trapdoor: if you miss a single payment or fail to pay off the full balance by the end of the promotional period, all the interest that would have accrued from Day One gets added to your bill. Suddenly, that $3,000 hospital visit could balloon with hundreds in retroactive interest.

Christine Benz, Morningstar’s director of personal finance and retirement planning, cautions against leaning on these products without a repayment strategy. “These types of financing may look like a convenient way to cover medical bills,” she says, “but with interest rates that are generally worse than credit cards’, it’s hard to see a case for them. The only reasonable use case would be if special terms are on offer and you know that you can use them to your advantage, paying off the debt before the high interest kicks in.”

Another complication arises from how these products are classified. Debt taken on via a hospital or doctor’s billing department is considered medical debt, and recent rules (though now potentially overturned) attempted to remove small medical debts from credit score calculations. But loans and credit cards issued by financial institutions—even when used for medical services—are classified as consumer debt. That means they’re treated the same as credit card balances or personal loans. A missed payment can hit your credit report, be sent to collections, and damage your score—sometimes more than traditional medical debt would.

Sheryl Rowling, editorial director for financial advice at Morningstar, advises consumers to look elsewhere before turning to high-interest financing. “Getting a loan like that is like getting any other type of high-cost consumer debt. Overcoming the interest is going to be the biggest hurdle,” she notes. “And if there are other ways around it, those ways should be explored.”

So what are the alternatives?

Start with the provider. Many hospitals and clinics offer payment plans directly, often at zero or very low interest. Unlike commercial lenders, healthcare providers typically don’t profit from financing. Their main goal is to recoup costs in a way that works for both parties. In many cases, you can negotiate the total bill or set up monthly payments that don’t carry any additional fees. Even a simple phone call to the billing department can result in significant flexibility.

Rowling emphasizes the importance of negotiation. “Frequently, medical facilities will accept a lower amount if you’re able to pay it all at once,” she says. “And many times, you can make payments over time, as opposed to having to pay in a lump sum.”

Another underused option is saving in advance. For elective procedures or surgeries that are not urgent, a wait-and-save strategy could be your best friend. Contributions to an HSA (Health Savings Account) or FSA (Flexible Spending Account) allow you to save tax-free funds for medical expenses. If you know you’ll need an expensive procedure in six months or a year, these tools can help you avoid borrowing altogether. Benz adds: “In the case of an elective procedure that can wait and is HSA- or FSA-eligible, another idea is to save in those accounts in advance of the planned procedure.”

There are also nonprofit organizations and local assistance programs that can help cover specific medical bills, especially for serious illnesses like cancer, diabetes, or chronic conditions. Exploring those options, though time-consuming, could save thousands in the long run.

Ultimately, medical loans and credit cards are financial products, not lifelines. They are marketed with urgency but require deliberation. If you do decide to go this route, go in with eyes wide open. Make sure to read the fine print, understand the terms, and plan for repayment in advance. Know what triggers interest charges. Avoid minimum payments that merely extend your debt. And most importantly, explore other solutions first—ones that don’t come with a double-digit APR attached.

Healthcare in America is already stressful enough. Don’t let the way you pay for it become a second emergency.