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What is a Medical Loan?

Medical emergencies arrive without warning and if you don’t have a health insurance plan or an emergency fund, you’re in deep trouble. This is when you look at a medical loan.

A medical loan is an unsecured loan just like a personal loan. It can be used for emergency hospitalization like an operation, surgery, day care procedures or a therapy.

With a medical loan you don’t need to liquidate FDs, break investments or sell a property.

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Concepts & FAQ's Medical Loan

Concepts & FAQ's

Things to know on medical loan

  • The loan amount is disbursed directly to the hospital when you present the surgery bill.

  • Banks and NBFCs may approve the medical loan within 3 days.

  • Medical loan can be a no cost EMI Loan. In a medical loan, the hospital pays the lender, interest on the loan called upfront subvention fee. This means the hospital bears the interest cost on patient’s medical loan.

  • Interest on medical loans depend on income, the Company you work for and the city of residence.

  • Banks offer medical loans under the unsecured category of personal loans.

  • A medical loan can be availed for emergency hospitalization ranging from Rs 15,000 to Rs 15 Lakhs. This covers most medical emergencies.

  • A medical loan can have tenure of around 1-5 years.

  • Banks charge interest of around 12-20% a year. The processing fees are around 1-2% of the loan amount.

  • A medical loan does not have hidden charges.

  • A medical loan can be used for doctors fees, hospital bills or a surgery.

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Eligibility criteria for a medical loan

  • A salaried, self-employed or even a pensioner who has taken VRS can avail a medical loan provided he/she is an Indian citizen.

  • This is an unsecured loan with no need of a collateral or deposit.

  • Salaried/Self-employed must be between 21-60 years to avail a medical loan.

  • You must have work experience of at least 2 years and must be residing in the city for at least a year.

  • Banks would look for a minimum salary of Rs 20,000 a month.

  • Banks demand a CIBIL score of at least 650 before sanctioning the medical loan. Some NBFCs check creditworthiness through a psychometric test.

Documents required for a medical loan

Salaried

  • Identity proof like Passport, PAN Card, Aadhaar or a driving license.

  • Address Proof like Passport, Voter ID or a Ration Card.

  • Your birth certificate.

  • The last 3 months salary slips.

  • Passport sized photographs.

  • Form 16.

  • Latest 3 months bank statements.

  • Appointment letter from the Company where you work.

Self-employed

  • Proof of qualification like mark sheets and certificates.

  • Self employed citizens require office address proof like electricity or a water bill/rent agreement.

  • Identity proof like Passport, PAN Card, Aadhaar or a driving license.

  • Address Proof like Passport, Voter ID or a Ration Card

  • Your birth certificate.

  • Latest 3 months bank statements.

  • Audited balance sheet and ITR of last 3 years.

Benefits of Medical loans

  • You enjoy affordable medical treatment.

  • Loans are disbursed real fast within 2-3 days.

  • There’s no collateral or deposit required.

  • Loans can be repaid in EMIs.

  • Minimum documentation and rapid sanctioning of loans.

  • Medical loans can be availed online.

  • Health insurance plans may not cover all diseases/medical procedures. Medical loans can be availed to cover any medical procedures.

  • Health insurance plans have a waiting period before diseases are covered. With medical loans diseases are covered with no waiting period.

Frequently Asked Questions

How does medical loan from NBFC work?

A medical loan from an NBFC is a no cost EMI Loan. The hospital will bear your interest costs on the medical loan in the form of an upfront subvention fee.

If your hospital bill is Rs 1.8 Lakhs and the tenure of the loan is 12 months, the EMI will be Rs 15,000. Processing fees and other costs will be around 2-3% of the loan amount.

So how does this work? You (applicant) will have to deposit 2 months of EMI upfront. The balance must be paid in 10 installments. The hospital pays the lender 7-8% of loan amount as a subvention fee.

Hospitals generally offer discounts to patients paying out of pocket. If you opt for no cost EMI Loan you will lose this benefit. This is because hospitals incur subvention fees and will not offer discounts.

What interest rate do banks charge on medical loans?

Banks offer competitive interest rates on loans to entice you and other customers. Interest is around 12-20% a year.

  • Fixed Interest Rates: The interest rate remains constant and does not change over loan tenure. Apply for loans of fixed interest rate if you avail medical loans of a short tenure.

  • Floating Interest Rates:  The interest rates fluctuate in-line with market conditions. Apply for floating interest rate loans if you avail medical loans of a longer tenure.

How to apply for medical loans from banks?

  • Learn about the medical loan and then select the bank which best suits your needs.

  • Apply for the medical loan either online/offline at the bank.

  • The bank checks your eligibility and processes the application.

  • Submit documents for verification.

  • If your loan is approved, you will have to sign on the promissory note which contains banks terms and conditions.

  • The loan amount is disbursed in 2-3 days.

What are the fees banks charge on medical loans?

Banks charge a non-refundable processing fee, which is around 1-2% of the loan amount. Prepayment fees could be 2-4% of the loan outstanding amount if you pay back the loan before the tenure. Late payment fees could be 2-3% of the EMIs on delayed payments. Banks also charge a documentation fee to verify documents.

Does the bank decide type of medical treatment?

No, the bank doesn’t decide the type of medical treatment provided. You can use the medical loan to fund any kind of medical treatment. Medical loans do not have a waiting period.

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