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Medical Loan vs. Health Insurance


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An emergency can befall on us anytime. Generally, to avoid emergencies, we stash some money somewhere so that we can be prepared. After all, it’s better we stay prepared instead of grasping at straws at the end moment.

If this emergency stash of yours has a good amount of money saved, then you have an idea as to what needs to be done. This becomes extremely helpful, especially during medical emergencies.

However, if you do not have this money, you would end up draining your savings. This is generally not a great idea as your savings has been kept for a special purpose – your child’s higher education, to buy your dream house, or for your children’s marriage – so why eat into it?

A good way to handle medical emergencies is to take a medical loan. Banks and financial institutions such as Tata Capital offer personal loan for a medical emergency with which you can pay your unplanned medical expenses without having to beg or borrow from anywhere else and without straining on your savings.

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Wondering how does it work? Well, the medical loan is nothing but a personal loan that banks and Non-Banking Finance Companies (NBFCs) offer to salaried and self-employed individuals against an interest. Personal loan interest rates in institutions such as Tata Capital start from as low as 12% and varies depending upon your personal loan eligibility. You can repay this personal loan in easy EMIs over several years, and the amount of each EMI will depend upon the personal loan interest rates and your loan tenure.

There is also another way to fund medical emergencies, and that is through medical insurance or health insurance. Let’s take a look at the differences between medical loan and health insurance, and try to find out which is a better option. This will help you to take an informed decision:

1.      Health insurance is given to healthy individuals, who have a clean medical history. If you are a cancer survivor, or if you have had a bypass surgery, there are high chances that you wouldn’t be given a health insurance at all as you fall under the high-risk category. But such factors do not come into play in case of a medical loan. A medical loan is for everybody.

2.      A medical loan is availed after someone is hit by an unexpected illness to help meet the expenses, whereas health insurance is bought as a precautionary measure in case an emergency strikes. There may be a situation that you pay health insurance premium all your life but you never need it ultimately. In such cases, the entire premium goes waste. But for a medical loan, you opt for it only when you need it, not otherwise.

3.      The cost of health insurance shoots up if you have illnesses such as high blood pressure or diabetes. As discussed above, it may even be denied altogether. Health insurance premium also increases with age. The premium that you pay when you are 25 will almost double by the time you are 35, and so on. And if it’s a joint insurance with your parents, then even as they age, the total cost of premium will keep increasing every year. With a medical loan, the EMI is fixed as it is accounted on the basis of a particular personal loan interest rate. If you take a medical loan for five years at a fixed interest rate, your EMI will remain the same over the five years. It will not increase with age or time, so your expenses will be under control as you will have a fixed idea of how much you need to pay every month and every year as total EMI.

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4.      In case of health insurance, if the sum assured is extinguished in a particular year, you cannot avail the insurance benefits once again if another medical emergency happens by chance in your family or with you. At a given year, you will be able to reap the benefits of a health insurance only once. But in case of a medical loan, you can, in fact, take more than one personal loan for a medical emergency in a year, if need be. This is one of the biggest benefits of a medical loan.

5.      Sometimes, health insurance can only be availed when your health insurance company has a tie-up with the hospital you are admitted in. If there is no tie up, then you may not be able to avail the cashless facility. And then you will anyway have to arrange for cash. You have to bear all the expenses, and later get a reimbursement from the insurance company. Following up with the insurance company may be a tedious task altogether. And then there are some other health insurance policies that come with some terms and conditions such as insurance will only cover hospitalization charges, and not cover costs of medicines. With medical loans, there are no such restrictions, and you can utilize the money in whatever way you want to. It is, after all, a kind of personal loan, so the lender will not come and ask for an explanation about how you spend the money.

A medical loan can be used any time a medical emergency strikes. NBFC’s like Tata Capital ensure that you get the best medical help when you need. No matter what the emergency or medical issue be, your medical loan will always come through.

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