Medical Loans: A Temporary Lifeline, Not A Long-Term Solution

An increasing number of Indians are resorting to medical loans to meet emergency medical expenses, and that is a worrying trend. 

The reliance on medical loans is ultimately a short-term measure and not a feasible long-term financial choice for uninsured families. Medical loans provide immediate access to the money needed, allowing families to fulfill urgent healthcare requirements on time, particularly in the case of emergencies. 

Medical Loans Can Cause Financial Stress 

“Medical loans come with interest payments and repayment, however, which may cause long-term financial instability and significant stress. Debt or interest payments in the long term may lead to financial weakness. Data show that healthcare expenditure in India is experiencing a high growth rate, and medical inflation reached 14 per cent in 2023, thus further aggravating the situation of families paying without support,” says Sahil Lakshmanan, Chief Business Officer, Carepal Money. 

On the other hand, estimates show that the Indian medical loan market will expand at a compound annual growth rate of 15 per cent over the next five years, indicating increasing reliance on loans to bridge healthcare financing gaps.

“In the long run, the families must try to get good insurance or build an emergency fund and short-term loans as a quick fix. Medical loans are effective in an emergency situation but not as a substitute for good planning,” says Lakshmanan. 

Medical costs are rising at a higher rate than average costs, so people must choose full insurance instead of depending on medical loans. Insurance alleviates the money burden due to increasing medical costs by spreading the risk among more people, making it easier to plan and protect one from huge bills. Medical costs are very high in India at 14 per cent, while general costs are lower, so insurance is required to cover these costs.

Further, only 37 per cent of Indians have health insurance, which means a majority of people may have to pay high out-of-pocket costs. Insurance is a wise, long-term solution to covering these rising costs.

“Medical loans can be helpful in an emergency, but only if insurance is found to be insufficient. They are helpful in the short run but are not as secure or economical as insurance. Insurance taken first is more financially secure, with loans left for unexpected requirements,” says Lakshmanan. 

Resort To A Medical Loan Only If Insurance Is Falling Short 

Yes, it is a suitable option when enough is not covered by insurance. It provides easy access to cash with easy-to-payback repayment options, thus proving to be helpful for out-of-pocket medical expenses or unforeseen medical expenses. The typical limit of a medical loan is roughly Rs 2 lakh, and rates of interest tend to be around 10-15 per cent.

However, people have to borrow loans responsibly so that it will not lead to long-term financial problems.

Key Considerations

Interest Charges And Fees: Pay special attention to ensure the interest, charges, and fees are reasonable and transparent. Loan charges can quickly mount up, so look at no-fee lending such as that offered by CarePal Money.

Repayment Terms: Choose a loan with terms of repayment terms you can afford, and never choose a longer term or a very high fee.

Credit Impact: Understand how the loan will impact your credit score and future borrowing capacity.