Medical loan vs. personal loan: What’s the right option for your health care financing?

In case of a sudden medical expenditure, Indians take a loan generally to bridge the gap. However, between a medical loan and a personal loan, do you opt for one over the other?

Read ahead for both of them to choose wisely:

Medical loans: They are meant for medical expenses

Medical loans are tailored to finance the cost of healthcare, with additional benefits like reduced interest rates and convenient payment terms. They can be applied for surgery, medical procedures, dental work, fertility treatment, etc.

The one best thing about medical loans is that they are specific to the medical field. They offer delayed payment schemes so that patients may focus on healing prior to making a repayment for the amount. Lenders or financial institutions dealing with medical loans are also sensitive towards the situation to treat someone and therefore advance such loans early enough so that the money remains available in due time.

For instance: Kotak Bank provides medical loans of ₹35 lakh at competitive rates of interest with low documentation. However, the borrower has to shop around for terms from different lenders to get the best offer.

Similarly ICICI Bank offers competitive rates for medical loans that hover around 10.85% onwards. There is also immense flexibility of 12 to 72 months provided by ICICI Bank for borrowers to provide them with a hassle free experience in repayment. Most of the other leading banks offer similar terms and conditions.

Personal Loans: Easy and flexible

Personal loans are easier in terms of use, however. The borrowers may avail themselves of the money not only for medical purposes but for any other financial requirements. These unsecured loans are also easily available with banks such as HDFC and IndusInd, for ₹30,000 to ₹5 lakh or even more.

Personal loans have relatively low interest rates of about 10%, and they offer a low-cost source of funding for medical expenses compared to credit cards. The loan application is instant and paperless, and payment occurs within days. Personal loans might not have the medical-related advantages of medical loans like delayed repayments or customised payment schedules.

Further, the rate of interest charged by these banks from you depends on several factors such as: your credit profile, credit score, repayment capacity, past personal loans repayment history, monthly salary, credit card usage history etc.,

Difference between personal loans and medical loans

Whereas both personal and medical loans can be employed for medical bills, the two are of different types. There are also associated hidden charges with these loans. Medical loans are specifically for medical needs and come with easy repayment structures and occasional lower interest. Medical loans are meant to cover a variety of medical fees such as surgeries and post-surgery treatment.

Personal loans are less defined, and the funds are borrowed for anything, including non-medical. Personal loans are best for paying incidental expenses due to illness, for example, transport or childcare. Personal loans can also have stricter terms and conditions, requirements and higher interest rates compared to some medical loans, which can provide introductory interest rates of as low as 10%.

ICICI Bank, for instance, provides medical loans at competitive interest rates like 10.85%. Few also offer repayment term flexibility like 12 to 72 months. It is convenient and easy to carry around too. Therefore how to decide between a medical loan and personal loan for your needs?

The decision between a medical loan and a personal loan is yours based on your own requirements:

• Select a medical loan if all your expenses are medical in nature and you would prefer low interest rates along with delayed and flexible repayment terms.
• Select a personal loan if you want flexibility in using funds or you have other financial obligations apart from medical expenses.
• And in certain instances, carefully deliberate on issues like: the loan interest rate, conditions, terms and repayment period before applying for a specific loan product.
• In case of doubt, always contact your respective bank or financial institution and its customer care centre for proper comprehension of the terms, conditions and the attributes of various types of loan products they deal with.

Hence, both kinds of loans finally offer useful financial assistance in medical emergencies. One needs to compare interest rates, repayment periods, and credibility of lenders in order to determine the best for your situation.

(Note: Raising a loan comes with its own risks. So, due caution is advised)