Personal Loan for Medical Emergencies vs Health Insurance: Know the Difference
5 min read | 4 months ago
When unexpected medical expenses arise, having a financial backup can offer some peace of mind. Health insurance and personal loans are two options that can help you cover these costs. Each serves a unique role in managing medical expenses. It is important to understand the differences between them to make a smart choice in a crisis. Let’s dive into what sets a personal loan apart from health insurance when it comes to handling medical emergencies.
What is a personal loan?
A personal loan for medical emergencies is a quick way to secure funds when sudden health-related costs arise. It’s an unsecured loan, meaning you don’t need collateral to access it. You can use the loan for various expenses, from hospital bills and surgeries to medications and follow-up care. Here are the key features of a personal loan:
Immediate Funds: Personal loans can be disbursed quickly, sometimes within hours, making them ideal for urgent situations.
Repayment Flexibility: You repay the loan over a set term through Equated Monthly Instalments (EMIs), which you can adjust based on your financial capacity.
Interest Rates: These loans usually come with interest rates that vary depending on your credit profile, loan amount and lender policies.
No Restrictions on Usage: Unlike health insurance, a personal loan offers flexibility in how you spend the funds, allowing you to cover anything related to your medical care.
What is health insurance?
Health insurance is a long-term financial tool that covers specific medical expenses under a policy you purchase. By paying regular premiums, you’re entitled to financial assistance with medical costs up to a pre-determined limit. Health insurance works through two primary types of plans:
Cashless Treatment: In-network hospitals offer cashless services where the insurer directly settles eligible expenses.
Reimbursement: For out-of-network treatments, you can claim reimbursement from the insurance provider after settling the bill yourself.
Health insurance policies vary, but most cover hospitalisation, surgeries and some outpatient treatments. However, they don’t usually cover every possible expense. For example, elective procedures or costs beyond the policy limit might not be covered.
Personal Loan vs Health Insurance
Below are the differences between a personal loan and health insurance and how they assist when a medical emergency arises:
| Criteria | Personal Loan | Health Insurance |
|---|---|---|
| Purpose | Emergency fund for any medical expense | Covers specific costs like hospitalisation and surgery |
| Access to Funds | Lump sum disbursed, repayable in EMIs | Direct payment to hospitals or reimbursement |
| Usage Flexibility | No restrictions—funds can cover any need | Limited to conditions and services specified in policy |
| Repayment Structure | Requires monthly payments with interest | No repayment, expenses covered through premiums |
| Coverage Limit | Based on approved loan amount | Determined by policy’s sum insured |
| Approval Process | Quick approval, often within a day | Must be purchased beforehand and involves waiting periods |
| Cost Structure | Interest on loan amount | Regular premium payments |
| Eligibility | Based on credit score and income | Pre-existing conditions might limit coverage |
Making the Right Choice
Personal loans and health insurance cater to different needs. If you have a comprehensive health insurance policy, it can cover major medical expenses without affecting your cash flow. However, personal loans can be a good option for costs that fall outside your policy’s coverage or if you’re uninsured.
While health insurance offers a preventive financial shield, personal loans provide flexibility and immediate funds. It’s wise to consider your current health coverage, possible out-of-pocket costs and financial situation when deciding which option suits you best during a medical emergency. Both tools can play complementary roles in your financial planning, but understanding their differences ensures you’re prepared for any situation.
Endnote
At Unity Small Finance Bank, personal loans are designed to provide swift, flexible financial support during medical emergencies. With a straightforward application process, quick approval times and repayment options tailored to your needs, a personal loan can help cover urgent medical expenses when they arise. They help you manage unforeseen costs with ease and confidence, whether you need funds for hospitalisation, treatments or post-care. So, you can apply for a personal loan with Unity Small Finance Bank to handle medical expenses.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
