Medical Bill Consolidation

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If you’re sick of medical bills, don’t despair. There are cures for America’s medical debt epidemic, and what a plague it is.

Americans spent $4.3 trillion on medical bills in 2021, or about $12,900 per person. Over 100 million Americans owe medical debt in 2023, and the Consumer Financial Protection Bureau research says that consumer credit records show we owe $88 billion and 17.8% of Americans have seen their medical bills sent to collection agencies.

The report says that 57% of the debt in collections is medical related. Meanwhile, due to increased health insurance coverage and Covid-related debt relief, some 8.2 million fewer Americans had medical debt on their credit reports in 2022 as compared to 2020.

But should you consolidate medical debt? Apply for a government relief program? Get a medical debt loan? File bankruptcy?

Merely exploring medical debt relief options can give you a headache. Just don’t get one if you’re in a hospital, where a single Tylenol capsule can cost you $15.

Here’s a simplified look at how to consolidate debt and get medical debt relief.

What Is Medical Bill Consolidation?

Medical bill consolidation is taking out a single loan and using it to pay off multiple medical bills.

Medical bill consolidation does not eliminate the debt. It merely shifts it from several creditors to one. The end result is one payment to one lender, once a month. It is a way to simplify paying off medical debt.

The best places to look for medical bill consolidation are banks, credit unions and online lenders. Companies in all three categories call this an unsecured personal loan because there is no collateral behind it. If you don’t make payments, there is nothing for the lender to reclaim.

How to Consolidate Medical Bills

If you’ve been hospitalized, you know there’s almost no such thing as a medical “bill.” There are medical “bills” – plural. Keeping track of them can be a hair-pulling experience. Many consumers find it easier to consolidate.

How does it work? Medical debt consolidation means taking one large loan and using it to pay off your combined medical bills. You are still in debt, but it’s simplified: just one creditor and one monthly payment to keep track of.

Medical debt consolidation can involve a personal loan, home equity loan, credit card balance transfer, and some debt management programs allow for it. Those are your best debt consolidation options.

However, there is plenty to consider before taking this step.

Unlike credit card debt or a bank loan, in most cases there is no interest charged to medical debt and more options to repay it or negotiate a lower repayment amount. Consolidating medical debt and taking on a loan to deal with it, adds interest to your monthly payments, so your long-term debt becomes more expensive. You also lose certain credit protections that apply only to medical debt.

There are alternatives to debt consolidation worth exploring.

Medical Debt Consolidation Program Benefits

One monthly debt payment, combining credit card debts with medical debts, will streamline your bill paying process and help you stay organized and save money.

Including medical debt on a debt management program may help you pay it off more consistently and faster than you would on your own. Making consistent, on-time payments, as is required while on a debt management program, can help improve your credit score.

In fact, if you already are in a DMP, it’s possible you could roll the medical bills into the program. That won’t make any difference in terms of what you owe, but it may be more convenient than writing checks to a variety of doctors and hospitals.

Options for Medical Debt Consolidation

There are several sound options for consolidating debt of all kinds, and they apply to medical debt – which often appears in your life without warning and at a time when you’re less able to deal with it. Each option can be used to solve the immediate problem of new, demanding debt payments. Each option also comes with some risks that should be factored into your decision-making process.

Debt Management Program

You may be enrolled in a debt management program by a nonprofit credit counselor, or you may enroll on your own.


  • A debt management program organizes your debts so that you can pay them off over a set period of time.
  • Consolidating debts can mean one monthly payment to cover all your obligations, which is simpler to monitor than multiple monthly payments.


  • Such a program requires discipline. For it to work, you must make sure to make payments on time without falling behind.
  • Debt management plans programs often require an enrollment fee and a monthly maintenance plan.

Credit Counseling

Nonprofit credit counseling can be a good first step in addressing any problems with debt, including medical debt.


  • They do not charge for their services.
  • Accredited counselors are required by law to offer you the best debt-relief option.
  • They are prepared to offer strategies for handling debts that you may not be aware of.
  • Counselors can help you create a budget.
  • They may offer free educational materials and workshops.
  • They may be able to enroll you in a debt management program created to help you repay your debts at an affordable rate over a set period of time.


  • For-profit companies may advertise as debt management counselors, and you can find yourself paying for their services. You can protect yourself by finding an accredited nonprofit counselor at InCharge Debt Solutions or on the U.S. Department of Justice website.

Personal Loan

It may seem as obvious as it is absurd to incur debt to pay debt, but there are good arguments for taking out a personal loan to pay medical bills.


  • A personal loan is paid back in regular monthly installments, which may be lower than the cost of your medical debt.
  • A personal loan is an unsecured debt, so no collateral is required.
  • You can and should shop around for the lowest APR available, which will be determined partly by your debt-to-income ratio and credit score. Once you’ve obtained the loan, your interest rate and payments will remain the same for the life of the loan.


  • Interest rates can be high, and you will pay them for the life of the loan. That adds to the total amount you’re paying for the same medical debt.
  • You could pay fees for the loan, which can be as high as 3% to 8% for an origination fee. Again, these fees add to the total amount you’re paying.

0% APR Balance Transfer Credit Card

This may feel like a shell game, in which you open a new credit card, with a 0% introductory interest rate to pay off your medical bills.


  • By using the card to pay your medical bills, you resolve the more dire situation with a hospital or bill collector by transferring the debt to a more manageable situation.
  • If you can pay off the credit card during the introductory period, you can settle your debts without paying interest.


  • You likely have to pay a balance transfer fee. That could be 3%-5% of the total amount transferred.
  • If you are unable to pay off the card by the end of the introductory period, your interest rate will kick in at upwards of 25% annually. That would make your original debt that much more difficult to pay.

Home Equity Loan

If a personal loan is unsecured, a home equity loan is the opposite. Your home becomes the collateral in such a loan or in a home equity line of credit (HELOC). The home equity loans and HELOCs are tethered to the equity you have in your home. A line of credit gives you access to a set amount of money that you can then use to pay your debts.


  • A loan or HELOC allows you to set up lower payments over more time rather than have the larger debt fall into the hands of collection agents.
  • Your payments are fixed for a home equity loan, so you’ll make the same monthly payments over the life of the loan. HELOCs typically are variable interest that go up and down.
  • Secured loans can be obtained for lower APRs than unsecured personal loans.


  • Your home is being used as collateral, so you can lose it if you are unable to keep up with the payments.
  • You may have to pay fees to apply for and receive a loan. That could mean paying 2%-5% of the amount of the loan.
  • You will pay interest. Most medical providers offer interest-free payment plans.

401(k) Loans

Your home is one place you may have built equity. Your retirement savings, specifically 401(k) accounts, are another. In the right situation, you can tap into the retirement savings to solve a more pressing problem, such as medical debt. As always, there are pros and cons with this approach.


  • It is your money. There is no approval process or credit checks, although you are obligated to pay the amount of the loan within five years.
  • Five years also means more time to pay off your medical debt.
  • The APR is low, often as low as the prime rate plus 1%.


  • If you can’t repay the loan, you must pay income taxes on the amount borrowed, plus a 10% early withdrawal fee if you’re young than 59.5.
  • You lose out on interest earnings on the amount you borrowed. Even once the principal sum is repaid, those lost earnings are gone for good.
  • There are fees and closing costs associated with a 401(k) loan, but whatever interest you pay goes back into your account, not to a bank.
  • If you leave your job before the loan is repaid, you must pay the loan off or face an IRS tax penalty. The payoff must happen before the due date of your next federal tax return.

How Medical Bill Consolidation Affects Your Credit

Consolidating medical bills can boost your credit score if you make on-time monthly payments. Not paying your medical bills will hurt your credit score, regardless of whether those debts are consolidated or not.

Medical debt is handled differently than consumer debt. The three major credit bureaus will not add it to a consumer’s credit report until it is 12 months past due. If the debt is less than $500, it no longer appears on credit reports.

The 12-month grace period provides time for insurance companies to make payments and allows consumers to correct billing errors, negotiate a payment plan with the provider, hire a medical advocate to resolve costs and payment plans, come up with a consolidation plan and payment arrangement and determine whether you qualify for financial assistance from nonprofit organizations or governmental programs.

If none of that happens during the grace period, the debt will likely be turned over to a collection agency, which will report it to the credit bureaus. Once that happens, it shows up on credit reports and stays there for seven years.

However, medical bills still receive special treatment:

  • Credit bureaus will remove medical collection accounts from credit reports if an insurance company is in the process of paying the bill.
  • For military veterans, some medical debts can’t be reported to the bureaus until one year after the procedure. Medical debt that was delinquent, charged off or sent to collection must be removed from credit reports once it’s fully paid or settled.
  • Medical collection accounts may have a lesser effect on credit scores than other types of collections accounts, though this isn’t guaranteed.

Credit Protection May be Lost After Consolidating Medical Bills

The special treatment given to medical debt can be lost if you consolidate your bills into a personal loan or onto a credit card. That means making on-time payments is even more important, since these accounts will report your activity to credit bureaus. If you are responsible with payments, you might even build your credit that way.

What Happens to Unpaid Medical Bills?

You are hardly alone if you have unpaid medical bills. They account for more than half of all bills that are turned over to collection agencies by identifiable creditors, according to the Consumer Financial Protection Bureau.

If you don’t pay up, the hospital or healthcare provider eventually will sell your unpaid bills to a debt collection agency. Then the hassling and credit wreckage begins.

It’s important for you to know your rights with debt collectors. There are limits to how aggressively they can pursue you for payment. Debt collectors can’t threaten you or call you before 8 a.m. or after 9 p.m. They’re not supposed to contact you at work – in some areas, that’s illegal – and you should let them know. There are ways to stop harassing calls from collection agencies, or at least to limit them.

However, they aren’t going away, so ignoring them is not an option. A collection agency will report your non-payment, which damages your credit score and make it harder and more expensive for you to get a loan in the future. Delinquent medical bills are not given as much weight as other debt, but they can stay on your credit report for seven years if they aren’t paid.

Figure out a way to deal with them before that happens.

Other Medical Debt Relief Options

Depending on your medical provider and other circumstances, there are additional options.

  • Medical credit cards: Not all providers offer payment plans, but they may accept medical credit cards that are interest free for 6-12 months. If you can pay off the debt in that period, they’re worth considering, but if not, the interest rate that kicks in will make this much more expensive.
  • Medical bill advocates: Consider hiring a medical bill advocate to negotiate on your behalf, especially after a long hospital stay. Advocates know how to examine health care bills and what are common costs for procedures. They can spot errors or overcharges that reduce how much you owe. Medical Billing Advocates of America can connect you with an advocate.
  • Income-driven hardship plan: Low-income consumers with big medical bills may be eligible for an income-driven hardship plan that breaks the debt into more manageable, regular payments. It could even reduce how much you owe. You may have to apply for Medicaid before being eligible.
  • Debt settlement: This is another form of debt consolidation. The goal is to pay less than what you owe. Either you, or a debt settlement company, negotiate with creditors to arrive at a payment both sides accept. You make a lump-sum payment, and the bill is settled.
  • Bankruptcy: This is a last resort. Bankruptcy won’t help cover future expenses if yours is an ongoing medical condition, and its effect on your credit can be severe and long-lasting – as long as 10 years. Study carefully before choosing this option, but it could be a fresh start for your finances.

Is Medical Debt Consolidation Right for Me?

Don’t assume medical debt consolidation is the right choice when you fall behind on bills. Typically, there is no interest for medical bills and there is interest payment on all other forms of payments. They come with credit protections that can disappear when you consolidate. The convenience of a single payment may not be worth the risk.

On the other hand, if you won’t benefit from these credit protections, then medical debt consolidation may be right for you.

To help decide, ask yourself a few questions:

  • Have you taken out a loan and are paying interest on the debt? Or worse, did you put the debt on a credit card?
  • Can you pay your medical debt and still meet your other monthly financial obligations, like rent, grocery bills and car payments?
  • Would consolidating eventually eliminate your debt, or would it make more sense to just file for bankruptcy and start over?

Get Help Paying Medical Bills

Deciding whether to consolidate your medical bills or not can be a difficult decision, but you don’t have to do it alone. If you need help figuring things out, talk to a professional credit counselor from a nonprofit credit counseling agency like InCharge Debt Solutions.

A free counseling session, which can be done by phone, can help you decide if consolidating your debt is the right approach or if other debt relief options better solve your problem. The counselors at InCharge Debt Solutions  review your expenses and income to help you make a budget.

Some good advice could be just what the doctor ordered.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


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