Which is Better - Medical loans or Health Insurance?

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Choosing whether to buy a health insurance plan well in advance or take a medical loan when it comes to it can be tricky. Many of us assume that we are in perfect shape being at peak of our lives, which is true for most. Buying a health insurance plan in this situation and paying premiums every year seems like a waste. While medical loans are great during urgent times, they may not be the best choice for all. Let’s draw a comparison between our two saviours – health insurance plans and medical loans – figure out which is best, and for whom. 

Medical Loans – An Introduction

A medical loan is a special type of personal loan that is used only to pay for the medical care of the patient. A medical loan may be typically taken from a bank or other kinds of financial institutions. Medical loans might specifically come in handy if the payout for treatment costs comes out to be quite substantial. Medical loans can make a significant impact on the quality of hospitalization that you can access.

Medical loans are usually unsecured loans. This means they are given out based on the credit history of the owner, requiring no collateral in exchange. Of course, the implication is that the individual should have a good credit score and history. Given the fact that there is no collateral involved, there will be no seizure in case the loan defaults. This makes medical loans one of the safest financial products for consumers. 

Pros of Taking Medical Loans

  • The first pro of opting for a medical loan is that no collateral is required, the funds can be easily mobilized in case of emergency requirements.
  • It can be put to use for a wide range of purposes, including elective purposes. 
  • The application process of getting a medical loan is quite easy.
  • There is likely to be faster approval as well as quick disbursal for treatment.

Limitations of Taking Medical Loans

  • The first limitation of going for a medical loan is that it might be more expensive as compared to the other options.
  • Medical loans are generally not given without an excellent credit record on the part of the applicant. Showing creditworthiness is of utmost importance here.

Health insurance – An Introduction

Health insurance policy is extremely crucial for covering the rising costs of hospitalization, doctor’s fees, diagnosis and medicines. It is a coverage plan assuring financial support to the customer in the case of any emergency medical expenses. Health insurance includes various types of plans that can be opted for as per your unique needs.

Advantages of a Health Insurance Plan

Immediate Medical Assistance

Medical insurance gives you quick access to hospital facilities. Health insurance coverages can be readily availed at the hospitals. The patient can get admission on an urgent basis without having to worry about the cash sums that might have to be mobilized in order to access the appropriate treatment.

Cashless Treatment

It can often become a major hindrance if you do not have the necessary liquid cash to manage an emergency. Having a health insurance policy keeps the option of cashless payment ready, where the insurance company deals directly with the hospital for managing the payout of the insured patient.

Having Network Hospitals

One of the advantages that a health insurance policy entitles you to have is access to the network hospitals. Network hospitals are the ones with a tie-up with the concerned insurance company in the local area. Every insurance company appoints a network of hospitals and medical professionals, who agree to provide their services at a lower cost for the company’s policyholders. In exchange, hospitals are able to reach a greater number of patients in the vicinity, who will be routed to them through the network of the insurance company. 

Unaffected Credit Scores

Health insurance makes little to no impact on the credit score of the insured. In the case of a medical loan, failure to repay the loan on time will affect their credit score. Therefore, for a person who is not confident about their capability to return a substantial loan amount, having health insurance in advance makes much more sense.


It is generally considered that paying the premiums of a health insurance policy is likely to be less expensive as compared to bearing loan repayments and interest. Additionally, if the insured is in a healthy state, and does not have pre-existing diseases, they may also avail of discounts on the premiums of the health insurance plan.

Comparative Framework – Health Insurance vs Medical Loans

Discussed below is a comparison chart based on which you can make an informed choice between health insurance and medical loan:

Medical Loan

Health Insurance

A medical loan might be taken for all sorts of procedures, whether they are strictly medical or not. This might be taken to fund cosmetic or beautifying procedures as well. For instance, dental implants, bariatric procedures for people who need work on their obesity, beautifying plastic surgeries, etc. might be considered eligible for a medical loan.

Health insurance will be applicable for only strictly medical or medically necessary procedures or treatments. These should be included in the medically accepted list of routine procedures, treatments or surgeries. Procedures that are considered to be non-essential, or trivial, are beyond the scope of the health insurance plan.

The loan amount can be extended to pay for dues that are beyond the immediate medical expenses. For instance, payments for travelling to the clinic or the hospital, staying at the hospital.

A health insurance plan will strictly cover only the medical as well as procedural costs that are incurred as a part of the treatment. No trivial costs shall be entertained. These are to be handled personally by the patient.

Health conditions or credit history does not make a difference when you are applying for your medical loan. Anyone can apply for a medical loan, without being afraid of restrictions or questioning related to their medical history.

Insurance will be provided only after routine check-ups by the company. It may be denied if the patient has a compromised medical history. For instance, if the patient declares that they are a cancer patient, they may be denied insurance based on the inference that they are high-risk candidates.

A medical loan can be taken only as an emergency measure. It cannot be used as a reserve fund for backup purposes.

The biggest feature of health insurance is that it is an investment against insecurities in the future.

Given the emergency in which a medical loan is taken, it is inevitable that the entirety of the loan will end up being used.

There is a high chance that you purchase health insurance to never actually capitalize on them. In such circumstances, the whole investment might be considered to have ended up wasted.

A medical loan can be availed as and when required. If one loan has been taken from the bank, a different situation can be handled with a different loan.

A health insurance policy can be exercised only once in an emergency. In case a different emergency befalls in the same year, the original policy will be useless.


A medical loan is a much more contingent decision that will come in handy in case you need to handle emergencies. No deposit or down payment will be required to avail of a medical loan. Hence it does not require a protracted process as in the case of health insurance. Moreover, a medical loan might be used to fund any sort of medical care, unlike an insurance policy which would come with its own set of conditions. On the other hand, health insurance is a long-term investment option. It is a protracted decision that you take since you are paying the premiums over a longer period. The bottom line of choosing one from these two options finally comes to your immediate requirements. If a medical emergency is at hand, taking a medical loan should be the right choice. This even applies if your health insurance coverage falls short in covering all incurred medical expenses at the moment. However, being prepared with an insurance plan never disappoints. So, evaluate your current needs, do some research, ask the experts and then take your pick.

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