Loan Basics. Options beyond medical insurance

Medical expenses, either for emergencies or for planned procedures and treatments, can rake up large bills that burn a hole in your pocket.

Typically, if there is no coverage of a medical expense under insurance or if the cover is not adequate, credit cards and personal loans have been the common ways used to fund them.

But these options can be quite expensive. Here are some of the other choices you can consider.

Hospital tie-ups for funding For pre-planned medical treatment, you can check with the hospitals/clinics on tie-ups with non-bank lenders. For example, Tata Capital offers loans for non-life threatening illnesses.

This includes bariatric surgery, infertility treatment, ENT, ophthalmology and cosmetic procedures such as hair implant. The loan amount is ₹1-3 lakh and the tenure is three to four years. Interest rate varies between 13 per cent and 17 per cent, depending on the credit rating of the borrower. The loan is repaid in monthly instalments. Processing fee is 0.5-1 per cent of the loan amount.

The advantage of these loans is that unlike personal loans, the purpose of the loan is known to the lender.

“Often, the partners may also give some deals to the customers such as paying a part of the interest,” says Govind Sankaranarayanan, Chief Operating Officer of Retail Business & Housing Finance, Tata Capital.

The scheme has a network of 20-25 providers in six cities. These include hospitals and specialised clinics.

Arogya Finance offers loans for medical emergencies as well as planned procedures.

For emergency loans, the borrower is evaluated through an online psychometric test and a decision is taken within 72 hours, says Jose Peter, Chief Executive Officer, Arogya Finance.

This can be helpful for those without a credit history. The loan is disbursed directly to the hospital to ensure proper use.

Arogya partners with medical device manufacturers such as J&J, Medtronic and Dr Reddy’s Laboratories. Say, you are borrowing to get a medical implant done. These tie-ups can help reduce your interest payments as partners may allow patients to make deferred payments or give longer tenures for repayment.

With the advent of peer-to-peer lending platforms, these can also be options to consider for medical loans.

Providers such as Rupaiyaexchange and World of Lending list many cases of borrowers getting medical loans.

Other options You can also consider collateralised loans such as gold loans or loan against financial instruments such as shares or mutual fund holdings, insurance and fixed deposits.

The maximum loan given may be 50-70 per cent of the collateral value. Another low-cost option is to take a 25 per cent top-up on your existing home loan.

Withdrawing from your EPF for medical treatment is another option. There is no requirement on the number of years of service to use this facility, though there are eligibility restrictions on illnesses.

There is also no limit on the number of times you can use this benefit during your life time. The maximum withdrawal amount is limited to your six months salary. The NPS and PPF too have been tweaked to allow withdrawals/premature closure to fund medical expenses.

Points to remember Lenders may adopt their own criteria to assess an individual’s borrowing behaviour, but your credit score is a crucial determinant in loan eligibility.

Two, it helps to give your lender a doctor’s certificate stating the kind of procedure needed, the necessity level and the amount of expenditure that would be incurred, says Ranjit Punja, CEO, CreditMantri.

Three, rather than shop around on your own, aggregators and other agents may be able to help you save time by guiding you to the right lenders. However, you must check if you are getting the best terms.

For instance, you must ensure that you are allowed to close the loan quickly if you so wish and the prepayment charges should not be too high.

Also, you must check with your employer about the income you will receive if you are going to be on extended leave or if have to go through long-term treatment. This will ensure that you do not take on EMIs that will be difficult to meet if the income is reduced.

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