Emergencies require one to know more about availing medical loans

In a day and age when the proliferation of lifestyle diseases and critical illnesses are throwing domestic healthcare budgets out of control, there is a need for a specific financial product to take care of medical treatment expenses. Medical loans, which are unsecured loans, have been designed as a special product which people can avail to undergo medical treatments. Presently, medical loans are targeted towards elective surgeries, also known as planned surgeries. Any person is eligible to apply for these loans on the submission of a credible proof of income.

In times of a medical emergency, people take recourse to personal loans which are characterised by a high rate of interest as compared with conventional loan products.
Medical loans on the other hand have interest rates starting at 0%. They are paid directly to a hospital following the generation of a surgery bill and are processed faster.

Medical loans are originated after assessing medical conditions on the basis of certain metrics. To state an instance, a loan may need a guarantor if the surgery is critical in nature or has a longer post-surgery convalescence period.

A salaried person who wants to apply for a medical loan should be drawing a salary higher than Rs 20,000, and should be getting it through cheque or RTGS. A salaried person will also have to provide details like PAN Card, ID proof, address proof, bank statements and salary slip. If the applicant is self-employed, his business venture should be a Private Limited company, and he should furnish proof of income like ITR and bank statements along with ID proof, address proof, house ownership proof, office address proof and business existence proof.

Besides the standard income documents, the CIBIL score of an individual can also determine his eligibility to apply for a loan.

Banks do not offer a medical loan as part of their loan portfolio and only have a personal loan products on which the applicant has to pay an interest. NBFCs and fintech firms have a dedicated 0% interest medical loan product which is originated much faster as compared to personal loan origination schedules of banks which normally take anywhere between two weeks and one month.

There is a general perception that hospitals who pay an upfront subvention fee on the loan amount will hike treatment costs to include the subvention expenses. Though NBFCs working in this space normally do not possess the bandwidth to influence the bill raised by the hospital, certain NBFCs ensure that hospitals display their pricing on their online platforms and accountability is maintained. In this scenario, if a hospital bills the patient by including the subvention fee in their pricing, they will appear to be higher priced than their competitors.

A medical loan can suitably termed as a 0% interest loan as the hospital treating a patient bears the interest cost by paying an upfront subvention fee. For instance, if the bill is Rs 1,29,000 and the loan tenure is 12 months, the EMI of the patient is Rs 12,000. The patient has to deposit two EMIs upfront and the balance payment in 10 instalments while 7-9% of the loan amount is paid by the hospital as subvention fee. The charges for processing the loan are 1% to 2% of the total loan amount.

(The writer is CEO and Founder of LetsMD.com)