Paying medical bills can be a significant financial challenge for many Americans.
Even with insurance, healthcare costs can escalate quickly, leaving families struggling to cover necessary treatments.
For homeowners facing large medical expenses, tapping into their home equity via a Home Equity Line of Credit (HELOC) can be a viable solution.
In this article, we’ll explore how you can use a HELOC to pay medical bills, the benefits of doing so, and the challenges Americans face with overwhelming medical debt.
The growing problem of paying medical bills in America
Medical debt is a widespread issue. In 2022, reports found that about 41% of U.S. adults have difficulty paying their medical bills.
Rising healthcare costs, high deductibles, and unexpected medical emergencies often leave families with bills they can’t pay. Even insured individuals often find themselves responsible for significant out-of-pocket expenses.
These costs aren’t limited to major surgeries or treatments. Routine care—such as ER visits and diagnostic tests—can cost thousands of dollars.
As healthcare expenses rise, many households struggle to manage their payments without sacrificing other financial needs.
Why medical bills are difficult to pay
- High deductibles: Many insurance plans require patients to meet high deductibles before coverage starts, leaving them responsible for large upfront costs.
- Unexpected emergencies: Sudden medical emergencies such as accidents or illnesses result in substantial bills that families are unprepared for.
- Out-of-network care: Patients may face high bills if they receive care from out-of-network providers, with insurance offering minimal coverage.
The negative effects of medical debt
Unpaid medical bills have far-reaching consequences beyond financial stress, affecting individuals and their families in various ways.
Credit score damage
Unpaid medical bills often go to collections, severely lowering your credit score. Once in collections, the debt can remain on your credit report for up to seven years—making it harder to qualify for loans or credit.
Stress and anxiety
Medical debt can create significant stress for families, causing anxiety about how to manage payments and affecting mental health. Financial strain can lead to restless nights and relationship issues as families face difficult resource allocation decisions.
Delayed medical care
The fear of incurring more medical debt often leads people to avoid necessary treatments, follow-up visits, or preventative care. This can result in worsening health conditions and more costly emergencies.
Strain on family relationships
Financial stress from medical debt can strain family relationships, leading to conflict and tension. Constant worry about managing debt can negatively affect everyone in the household.
How to use a HELOC to pay medical bills
If you own a home, tapping into your equity through a HELOC can provide the financial relief needed to cover medical bills.
How a HELOC works:
- Borrow from your home’s equity in a revolving line of credit.
- Draw from the credit line as needed, in the needed amounts.
- During the initial draw period, you only pay interest on the amount borrowed.
- Repayment periods can last 10-20 years, offering plenty of time to repay.
Flexibility of this sort can be very helpful for covering ongoing medical expenses.
Benefits of using a HELOC for paying medical bills
Lower interest rates
HELOCs typically feature lower interest rates than credit cards or personal loans, reducing the overall cost of paying your medical bills. In particular, paying medical bills with credit cards will often result in onerous interest payments.
Flexible borrowing
A HELOC allows you to borrow only what you need when needed, making it ideal for managing unpredictable medical expenses. This flexibility can be invaluable if you have recurring bills or are uncertain about future healthcare costs.
Interest-only payments
Many HELOCs offer interest-only payments during the initial draw period, lasting 5 to 10 years. This feature can reduce your monthly payment obligations in the short term, helping you manage your financial situation while you address your medical needs.
Debt consolidation
Using a HELOC allows you to consolidate multiple medical bills into one payment. Instead of juggling several due dates and providers, you’ll have one simple, predictable monthly payment.
Steps to use a HELOC for medical bills
- Assess your home equity: The first step in using a HELOC is determining how much equity you have in your home. Lenders typically offer an option to borrow up to 85% of your home’s value minus any remaining mortgage balance.
- Apply for a HELOC: Once you’ve assessed your home equity, apply for a HELOC through a bank or credit union or by using HomeEQ’s fully digital application. We’ll evaluate:
- Your credit score
- The income you earn
- The amount of equity available in your home
- Use the HELOC to pay medical bills: After securing your HELOC, you can draw from the line of credit as needed to pay off medical bills. You’ll only pay interest on the amount borrowed, and the flexibility of the credit line allows you to manage expenses as they arise.
- Manage your payments: As with any loan, making timely payments on your HELOC is essential. Failure to repay the loan could place your home at risk, as your house is the collateral for the HELOC.
Paying medical bills with a HELOC—A viable solution for homeowners in medical debt
Medical bills can create immense financial and emotional stress for individuals and families. If you’re a homeowner, using a HELOC to pay medical bills offers a practical, flexible way to manage these expenses.
With lower interest rates, flexible repayment options, and the ability to consolidate multiple bills, a HELOC can provide the relief needed to handle medical debt.
By tapping into your home equity, you can reduce financial stress and focus on what truly matters—your health and well-being.
Discover your HELOC solution to paying healthcare bills
Access cash to pay your medical bills by using your investment with HomeEQ.
Get approved in minutes with our simple, fully digital HELOC application.
If a HELOC is right for you, you can receive funding in days with HomeEQ.