Medical Loan

As the saying goes, health is wealth.

The world can come crashing down but as long as you and your loved ones are healthy and safe, that is all that matters.

However, when a medical emergency happens to either you or your loved ones, it’s not only the mental and emotional aspects of your life that take a toll, but also your finances. Hospital visits, medication, procedures can set you back by a few hundred thousand dollars. This isn’t money that people have just lying around, which is definitely another cause of concern.

You’ll most probably have some sort of medical coverage with your insurance company but depending on the coverage, an emergency medical situation could easily sweep away all your savings. You might then seek out the option of borrowing from your friends and family, but what if it’s never enough? You’ve exhausted all your options and you’re still unable to raise enough. This is where a medical loan comes in handy.

As morbid as this may sound, there is only so much that MediSave and your medical insurance can help you with, which is why taking out a medical loan to cover your medical expenses is a viable solution.

Before you rack your brains and go ‘What is MediSave and what does it do?’, we’ve made it simpler for you by breaking it down for easier consumption.

But first, we must understand what the term Central Provident Fund (CPF) entails.

Central Provident Fund (CPF)

The Central Provident Fund (CPF) is a compulsory savings account and is opened for every Singapore Citizen and Permanent Resident. Once you have started working, each month, 20% of your salary automatically gets transferred into your CPF account. These savings are further divided into three accounts:

  • Ordinary Account: Used for housing, education, investments and CPF insurance. This money will ultimately be used for retirement savings.
  • Special Account: For retirement and investment in retirement related products.
  • MediSave account: Used for hospitalisation and healthcare related issues. Can also be used to pay premiums (the amount that an individual has to pay for an insurance policy) for insurance like private medical insurance.

    In addition to the 20% that you contribute monthly to your CPF account, your employer also contributes another 17%, meaning that you’re actually getting 37% of your salary into your CPF account. That being said, this total of 37% is not split equally amongst all 3 accounts: 23% for ordinary, 6% for special and the remaining 8% goes into your Medisave account.

    To illustrate, take this example:

    Jessica is 29 this year and has an officially salary of $4,000. Out of this $4,000, $800 (20% of her pay) will go into her CPF account. Hence, her take home pay is $3,200 ($4000 – $800). In addition to the $800 that she has contributed, her employer will contribute another $680 (17% of her pay). Thus, she gets $1,480 ($800 + $680) deposited into her CPF account each month.

Here’s a breakdown of how her money gets split amongst the 3 accounts:

  • Ordinary account: $920 (23% of $4000)
  • Special Account: $240 (6% of $4000)
  • MediSave Account: $320 (8% of $4000)

What Is MediSave?

As aforementioned, MediSave is a national savings scheme initiated by the government to ensure that we have a sum of money for any medical emergencies in the future. Your MediSave account is used for your personal or immediate family’s hospitalisation, day surgery and certain outpatient expenses.

MediSave Interest Rates

All CPF accounts earn interest rates but your MediSave earns a very attractive interest rate of 4% per annum compared to banks who only offer less than slightly less than 2% per annum. You might jump at this thought and think ‘Shouldn’t I then make use of the attractive interest rate and deposit more money?’ Hold your horses. This is where you’re wrong.

With a MediSave account, why do I still have to take a Medical Loan?

The coverage will most likely not be enough. As of 2018, MediSave accounts have a Basic Health Care Sum (BHS) which is capped at $54,500. This means that any additional money will either go into your ordinary or special account. There you have it.

Isn’t $54,500 quite a lot of money?

Yes, $54,500 may seem like a lot of money but when it comes to using it for medical procedures, it really isn’t a lot. To put things into perspective, here’s a rough estimate of how much it will cost for the following procedures at the Singapore General Hospital (SGH) for a median bill size. We’ve listed down some treatments which require at least an overnight stay. Cost of day surgeries are not included. If you are looking at private hospitals, be prepared to fork up to at least eight times the price.

ProcedureWhat It Is ForWard TypeCost

Abdomen/Groin, Hernia RepairSurgery to repair weakness in the abdominalB1$5,965
Appendix SurgerySurgery to remove the appendixB2$2,535
Ear, Nose & Throat (ENT) SurgerySurgery for ENT related problemsB2$1,965
Hand SurgerySurgery to hand, wrist or fingersB2$1,908
Heart, Insertion Of PacemakerSurgery to insert a dual chamber pacemaker$3,424
Hip Replacement SurgerySurgery to replace hip joint with implantB1$22,235
Jaw, Realignment SurgerySurgery for realignment and fixation (keep bones in a particular position) of jawB2$4,214

Credit Card Loan vs. Personal Medical Loan

Since a medical loan for students falls under the category of personal loans, it tends to be unsecured. This means that you don’t have to worry about getting security to back the loan. All you have to do is ensure that you have good credit and that your credit history tells a story of a good and responsible borrower. If you find yourself in a situation where there is no other way to pay for a necessary medical procedure, or one that is not covered by your health insurance provider, then this is the best way to pay for it. 

There are those who may want to pay for it with a credit card, but since most medical procedures are expensive, it means that he or she may not be able to pay it off by the end of the month. By leaving a balance on the card, one is inviting hefty interest rates that can make it difficult to pay off the debt. 

A personal loan comes with a fixed term, which means that it will have an end date. Additionally, the interest rate is often fixed, unlike a credit card that has varying interest rates. The fact that you are aware of how much money you pay every month on the medical loan is also an advantage over a credit card. A credit card’s varying interest rate and revolving balance mean that one has to wait and see what the minimum repayment is before they can repay. This makes it difficult to budget in those payments.

Whereas the revolving balance of a credit card may seem nice in the beginning, it simply means that one may never get out of debt unless he or she becomes very deliberate about it. However, with a medical loan, you will know that the tenure is so many years, and every payment you make will bring you closer to finishing repaying your debt. 

There are personal loans that are secured, but since most students may not have much to put up in the form of collateral, these may not be ideal. To their credit, they tend to have a lower interest rate than unsecured personal loans. However, the higher interest rates charged on unsecured loans are low compared to the interest rates paid on credit cards.

How Can A Medical Loan Benefit Me?

With the costs reflected above, it is important to note that this may not necessarily reflect the true total healthcare cost that the patient is going to incur: follow-up check-ups, any complications which may result in a longer hospital stay, medication, etc. In addition, some medical problems can’t just be fixed with a single surgery. The surgery may alleviate the situation but the patient might have to be on medication for the rest of his/her life, schedule another surgery a few years down the road or possibly require some additional form of care hereafter.

All these means additional costs, which is where Student Loan Guru is able to step in and help. We want to ensure that your finances are well taken care of so that you can focus on what matters most: your health. With our personalised medical loan, we will assess your medical situation and provide you with the loan that best fits your needs. We understand that medical emergencies can really set one back in terms of his/her finances which is why we are here to provide assistance. Speak to us today to find out more about our personalised medical loan.