Medical loans: An alternative healthcare financing model

Nivesh Khandelwal  

Rising medical treatment costs and the widespread proliferation of lifestyle diseases has the potential to throw household health budgets out of gear. The need for creating a viable healthcare financing model has led to the emergence of medical loans, which are unsecured loans. Medical loans can be availed on submission of a credible income proof and are presently utilized for elective surgeries.

In a country where there is under-penetration of medical insurance and where a majority of poor and middle class households do not have a safety net for tackling health expenses, there is a tendency to apply for personal loans from banks. These loan products are characterized by exorbitant interest costs and can prove to be detrimental to the financial health of individuals/households.

Medical loans, which normally come in the ticket size of Rs 20,000 to Rs 5 lakh and have a tenure of six months to one year, can be availed at 0 percent interest rate and are increasingly affordable. While personal loans are credited to the bank account of the applicant and can be misused, a medical loan is paid directly to a hospital after it generates a bill for a medical procedure.

NBFCs and fintech firms originate medical loans in a shorter time-frame of 2-3 days. Banks take a longer origination schedule of 2 weeks to 1 month for personal loans. The normal practice calls for the applicant to deposit 2 EMIs in an upfront manner and the balance payment needs to be repaid in 10 instalments while the hospital pays 7-9 percent of the loan amount as subvention fee.

To take an instance if the hospital bill is Rs.1.5 lakh and the repayment tenure is 12 months, an EMI of Rs.15,000 will have to be repaid. The interest component of a medical loan is borne by a hospital by paying an upfront subvention fee.  There are chances that hospitals may overcharge on the medical treatment cost to cover up for the subvention fee. However, certain NBFCs ensure that due diligence protocols are followed by hospitals and bills are not hiked by inclusion of subvention fees.

A salaried person who wants to avail a medical loan should be earning more than Rs. 20,000 and should be drawing the same through cheque or RTGS. Provision of details like Pan Card, ID proof, address proof, bank statements and salary slip are mandatory while applying for medical loans.

A self-employed applicant, whose business venture should be a Pvt. Ltd company will need to furnish details like ITR and bank statements along with information such as address proof, office address proof, business existence proof and house ownership proof while applying for a medical loan. The CIBIL score of an individual can be a key factor in determining the loan eligibility apart from the scrutiny of standard income documents.

A salaried person who wants to apply for a medical loan should be drawing a salary higher than INR 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 Pvt. Ltd 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.

Author is CEO & Founder, LetsMD.com

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