Loan Issues and Stress Can Keep You and Your Health Down

By Staff Report
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Updated: March 25, 2019

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If you have too many debts that you find difficult to manage it will not only affect your physical health but will also keep your mental health down. The best way is to take on only that much of loans that you will be able to afford paying every month on time till the end of the loan term or tenure.

This is very important to ensure that you do not jeopardize your health as well as your finance because, despite the fact that these loans do offer you with a safety net during financial as well as medical emergencies, all of these loans will typically come with its characteristic share of risks and additional costs as well.

If you consider medical emergency alone, it can be stressful and can come at any time, most commonly at times when you least expect them to occur. That is the nature of emergencies. The situation will seem even worse if you find that the health insurance that you have does not cover all of the medical procedures and is not enough to cover your medical bill.

In such situations you will need some fund to fall back on to come out from the tight spot you find yourself currently. Most of the families do not have a safety net for such unplanned medical exigencies and expenses and often end up taking on a medical loan impulsively without considering the pros and cons of financing medical care. However, a prudent person will know a few facts such as:

These special types of personal loans are offered by the banks as well as some other sources such as com/and others especially to cover the medical costs. However, offered at a high rate of 18 to 24% interest, these personal loans are typically if not prohibitively expensive.
Therefore, with such high demand and scope to earn so much profit there is a high chance that the fintech players will enter this specific segment of the financing market and offer alternative options to finance health care.
There is also a chance of these fintech players to offer you something very alluring by the name of ‘no cost EMI loans’ in the health care space just as you will find these in the consumer electronic financing sector. Most of the middle-class families are attracted to these alluring offers.
Different non-banking financial institutions also offer loans for medical treatments under their life care product segment. The ticket size of such medical loans may vary according to the need and eligibility of the borrower just as the loan terms would, depending on the creditworthiness of the borrower.

There are a few significant differences between medical loans and personal loans as well. These are:

Medical loans are meant to cover medical costs only while personal loan amount can be used for any purpose, no questions asked.
You can get a medical loan very fast sometimes as quickly as within 3 days while a typical personal loan will take about 2 to 3 weeks for processing and other origination methods.
Medical loans are more affordable as far as the rate of interest and the loan tenure is compared with a typical personal loan.

However, when you come across the phrase ‘no cost EMI loan’ you must be wary whether or not it is really interest free. The features of these specific types of medical loans are:

Typically, the hospital that will provide you with the medical treatment will bear the interest cost on behalf of you. This is done in an arrangement of a subvention fee upfront.
There will be a processing fee charged along with other related one-time costs that will be about 2 to 3% of your loan amount and added to it.
In a no cost EMI loan you will usually have to deposit an upfront EMI for at least 2 months while you can pay the remaining amount in 10 equated installments.
The hospital on the other hand will pay off the lender a subvention fee which is typically within the range of 7 to 9% of the entire loan amount.
However, there is a high chance that the hospital will hike the cost of your medical treatment so that they can cover up the subvention fee though they will do due diligence to you just to make sure that you are not overcharged exorbitantly for your treatment.

On the other hand, there is a loss, though insignificant, suffered by the hospitals when they offer discounts to patients who are paying out of their own pockets. These discounts are however not provided to those patients who avail a ‘no cost EMI loan’ arrangement. This is because the hospital itself incurs the subvention fee which is considered to be equivalent to the discounts offered by them to others.

The concept of fringe loans

Here, you must also know a little bit about the fringe loan services. There are a lot of social policy implications regarding these loans that are considered to be the safety nets that are re-engineered for the low income populations. These fringe loans are normally obtained by people to pay off their medical care bills as well as for their basic necessities such as rent.

However, it is found that these fringe loan services can potentially cost the working class as well as the poor Americans. Study led by the researchers at the Evans School of Public Policy and Governance as well as the University Of Washington School Of Public Health and their reports published in the Health Affairs shows that:

These loans can not only affect their finances but will also affect their physical as well as mental health
According to the study, it is found that 38% of Americans use fringe loan services
17% of people having no access to a bank account also use these loan services.

However, in all circumstances all these people who avail such loan services face poor health as compared to those who do not use these services or have admittance to a bank account.