Medical bills are a significant stressor in Americans’ financial lives. About 3 million people — 1% of adults in the U.S. — owe more than $10,000 in medical debt, according to a February 2024 analysis of government data by KFF, a health policy nonprofit. Approximately 14 million people owe over $1,000.
Medical bill consolidation is a strategy that rolls multiple bills into one payment with a clear payoff date. It’s not always your best option, so compare consolidation with no- or low-cost alternatives, like negotiating down your bill, using a provider’s payment plan or reaching out to a nonprofit for help.
What is medical bill consolidation and is it a good idea?
Medical bill consolidation is when you use money from a financing product, like a personal loan or credit card, to pay off your medical bills, so you’re left with one payment only.
This simplifies your debt. Instead of juggling multiple bills from multiple providers, you deliver a financial knockout of sorts — one lump sum applied to all your medical debts at once. Then, you pay back the borrowed money over time.
Depending on the financing you choose, you may also receive a particularly motivating finish line to becoming debt-free. For example, if you consolidate medical debt with a personal loan that has a two-year repayment term, you know you’ll be debt-free in two years as long as you make all the monthly payments on time.
These benefits can be outweighed by the cost of financing, says Bruce McClary, senior vice president of memberships and media relations at the National Foundation for Credit Counseling. Most medical debt doesn’t come with interest, but loans, credit cards and other types of financing do, which means you’ll pay more in the long run.
You also may lose certain protections, McClary says, by moving medical debt onto a different type of debt product, like a credit card. For example, medical debt under $500 isn’t reported to the credit bureaus, so it can’t hurt your credit score. Larger medical debt in collections also won’t show up on your credit reports for a year.
Primary ways to tackle your medical bills
Before deciding whether to consolidate, take a hard look at your medical bills. These bills often contain errors, according to the Consumer Financial Protection Bureau (CFPB), so an important first step is to double-check the charges.
Are the services listed correct? Does the amount you owe look accurate? If you’re unsure, ask for an itemized list of charges or speak to your provider’s accounting or billing department, the CFPB advises. You can also try to negotiate the bill down.
Once you’ve confirmed the amount you owe, ask your provider for a no-interest repayment plan. These plans are common and may give you up to two to three years to pay off your debt without incurring additional costs.
If your bill is already in collections, you may be able to negotiate a lower payment with the debt collections agency.
If you’re feeling stuck, there are likely nonprofits in your state dedicated to helping people navigate the cost of health care; ask your provider for information on charitable assistance. You can also reach out to a reputable credit counseling agency. A credit counselor can review your budget and help you decide what you can pay.
How to consolidate medical bills
The best consolidation option will depend on your credit score, debt amount and any existing financial resources you can pull from, like equity in your home or savings in your retirement account.
If you have good or excellent credit (690 score or higher), a 0% APR credit card may be an option for consolidating your medical debts, as long as you pay it off during the promotional period — usually a year or more — when you’re charged no interest. After that, the ongoing interest rate kicks in, which could be high.
A debt consolidation loan may be an option regardless of your credit score. You can pre-qualify for some debt consolidation loans with a soft credit check and compare loan options online. Repayment terms typically range from two to seven years, so a loan may be a better fit for those with significant debt, but make sure the monthly payment is affordable for the entire life of the loan. Interest rates are fixed and can be high.
You may also qualify for a home equity loan or line of credit or a 401(k) loan. Both of these loans tend to have lower interest rates that other options, but they are risky and should be a last resort for medical debt. If you default on a home equity loan or line of credit, you could lose your house. And if you lose your job or fail to repay a 401(k) loan, you may need to back the loan quickly or incur a penalty.
