By MyPerfectFinancialAdvisor
Medical procedures can be expensive, and for many people, taking out a loan can be a tempting way to pay for the procedure. What can make a loan more appealing is that more and more medical offices offer financing right in their offices tapping into the emotion of ease. If you have gone this route, it may be well worth looking to refinance this debt because usually these are high-interest loans, which can make repayment difficult, leading to financial strain and even default if your financial situation takes a sudden change. Many people do not think of these types of personal loans as being qualified to be refinanced, but these fall into the definition of a personal loan which likely can be replaced with better term debt. While loans for medical purposes can be quite different than other loans, there are some similarities, so its helpful to think of it like refinancing a home mortgage to lower monthly payments. Here are some of the steps:
- Research Lenders
The first step in refinancing a medical procedure loan is to research different lenders. Many traditional banks and credit unions offer refinancing options, but you should also explore online lenders. Make sure to look for lenders that offer competitive interest rates and favorable repayment terms. You may also want to consider lenders that specialize in medical loans as they may have more experience with the unique circumstances of medical debt, however their rates may be higher. In addition, local banks and national banks should be reviewed as well. Some lenders will view these loans as generic personal loans meaning they do not care why you are taking out this loan. Others do care what the use of the funds is for, so the research step is most important.
- Check Your Credit Score
Your credit score is an important factor in determining whether you’ll be approved for refinancing and what interest rate you’ll be offered. Before applying for refinancing, check your credit score and report. You can get a free copy of your credit report once a year from each of the three major credit bureaus. If your credit score has improved since you took out your initial loan, you may be able to get a better interest rate on your new loan.
- Gather and Review Documentation
When applying for refinancing, you’ll need to provide documentation to support your application. This may include proof of income, employment history, and your medical bills. Make sure to gather all necessary documentation before applying to streamline the application process. It is important to re-read (or read for the first time!) your current medical loan terms and be aware if there are any restrictions or penalties on your loan.
- Apply for Refinancing
Once you’ve researched lenders, checked your credit score, and gathered documentation, it’s time to apply for refinancing. Make sure to fill out the application completely and accurately to increase your chances of approval. You’ll also want to compare offers from different lenders to find the best option for you. If you apply with a community bank, you’ll want to meet physically with a banker as especially in smaller communities, they generally want to establish a long-term relationship with you and meeting will be advantageous.
- Use Savings to Pay Down Debt
If you are successful in refinancing this debt, you will be enjoying a lower monthly payment in savings on your monthly payments. To save even more money over time, use these savings to pay down your debt faster and reduce the overall interest you’ll pay over the life of the loan. This will help you become debt-free sooner and improve your overall financial situation.
Like all significant consumer debt, you should involve your financial advisor to help evaluate the rates, terms and conditions of a new loan. If you do not have a financial advisor, consider hiring a financial planner who charges by the hour or project to help you decide the best course of action.
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