Medical Debt Consolidation: Your Options for Unpaid Bills

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While many people think of debt as things like credit cards or student loans, medical debt is one of the largest forms of debt in the United States. In fact, according to Debt.org, healthcare spending in the U.S. accounts for almost 18 percent of the country’s gross domestic product.

All those healthcare expenses add up to big trouble for many Americans. Over a quarter of U.S. citizens between the ages of 18 and 64 say they can’t pay their medical bills.

If you are struggling with medical debt, you may be able to consolidate it to save on interest costs and make repayment more manageable. Read on to learn about your options.


On this page:

Medical Debt Collections

If your medical debt goes to collections, you might receive calls at your home or work from the collection agency. You could also see the collection company take out a garnishment against your paycheck, or even sue for a judgment against you.

That judgment will show as a black mark on your credit score and credit report as well, which can be an obstacle if you need credit, want to get a mortgage, rent an apartment, or even get a job. It’s also just stressful to have debt collectors contacting you constantly and it can diminish your quality of life. 


If you find yourself in collections for an unpaid medical balance, you should be aware of—and familiar with—the Fair Debt Collection Practices Act. It’s a law that dictates how collectors can contact you and what they’re allowed to do or say in an effort to get your payment. If you tell them they cannot contact you at work, for instance, they aren’t allowed to call you there. They also can’t call you before 8 a.m. or after 9 p.m., or harass you repeatedly by phone, email, or text.

If this all sounds like more hassle than you’d like to deal with, you’re not the only one who feels that way. Thankfully, there are other options to help handle your unpaid medical bills; one popular option is called medical debt consolidation.

What is Medical Debt Consolidation?

Most people think of debt consolidation as a personal loan or a credit card they can use to pay off their debts. With medical debt, however, it’s not that simple. Medical bills don’t accrue interest, so using a loan, credit card, or other credit product to consolidate them will end up costing you more money in the long run. With that new credit card, you could pay high interest rates, and with a personal loan, you’ll start paying interest immediately.

Credit Counseling

One step in the medical debt consolidation process is seeing a credit counselor. Credit counseling companies offer advice on how to best structure your debt, how to budget for expenses properly, and how to get back on track toward financial health.


When choosing a credit counseling organization, the FTC recommends checking with your State Attorney General’s office and local consumer protection agency to see what organizations they can recommend as being reputable. They can also point out any customer complaints the organization may have received, which can warn you about a less-than-honest counseling company.

How Does Debt Consolidation Work?

One option you may have with a credit counseling agency is a debt consolidation plan. You and your counselor will devise a plan to pay off your bills, but instead of paying your creditors, you’ll pay the debt management company.

Your credit counselor will pay the bills for you according to the plan you designed together, and that means no more nasty calls from your creditors. Keep in mind, however, that a debt management plan isn’t a quick fix; depending on how much you owe, you could be on this plan for as long as four years or more.

In order to set up a debt management plan, you’ll need to be completely honest with your counselor about what you owe and to whom, and what you can afford to pay. Your counselor will contact your creditors, and once your creditors find out you are taking steps to be responsible and get your debt paid, they may waive some fees or lower the amount of your outstanding balance.


Debt management plans aren’t the right idea for every customer. If your debt is more than 50 percent of your annual income, for instance, you’ll want to explore other options, such as a consolidation loan.

Medical Bill Consolidation Options

A consolidation loan designed to help with medical bills will mean you’ll pay interest on a previously interest-free debt, but it will also keep that debt from becoming a black mark on your credit. Several lenders have loans designed specifically for consolidation; some offer lower interest rates than others.

>> Read More: Does Debt Consolidation Hurt Your Credit?

Don’t just settle for a personal loan because the interest rates on those type of loans are typically much higher than you’ll be able to afford. Instead, look for a product with a low interest rate that’s billed as a consolidation product geared for people who might need help getting their debt under control, but historically have a good credit rating and want to keep it that way. Those products will have the best interest rates.

Alternatives to Medical Debt Consolidation

If the idea of getting a loan of any kind to pay your medical debt isn’t something you want to do, there are a few other options, which can vary depending on your financial situation. 

Settling Medical Debt


Sometimes creditors are willing to offer debt settlement for 50-80 percent of your current balance. The bill will show as paid in full, but you didn’t have to pay the whole amount. The catch with this is you’ll need to pay the settlement amount in one lump sum. If you have the money in savings or can borrow from friends and family, this option can save you a lot of money. If you aren’t able to pay a lump sum, you may be able to negotiate a payment plan and make a monthly payment that’s agreeable for both parties. 

Medical Bill Forgiveness

There are certain non-profit organizations whose goal is to use donor funds to “forgive” medical debt and provide debt relief by purchasing portfolios of debt from both medical providers and collection agencies. Other organizations forgive specific types of medical problems; with a little research, you could find a group willing to pay off your debt for you. Depending on how it’s done, however, you may need to pay taxes on the forgiven amount.

No-Interest Credit Card

While using a credit card isn’t the best option, if your debt amount is fairly low and you qualify for a card with a zero percent introductory APR, it may help get the original debt paid off and buy you some time to get the card paid off without racking up interest charges. Be careful with this method, if you don’t pay it off before the introductory APR runs out, you’ll start accruing a lot of additional charges.

Summing Up

Unlike many other types of debt, most people don’t choose to take on medical debt to cover medical expenses, but it can still ruin their finances. If your total owed amount is less than 50 percent of your annual income, you may be better off with credit counseling or other options. If you’re drowning in medical debt you can’t pay off, look into consolidation.

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