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Medical bills represent a major financial challenge for many families. You can’t always prevent or foresee medical bills, even if you have insurance. By understanding how to check your medical bills for possible errors, you may be able to avoid being overcharged and making unnecessary payments.

How Common Are Medical Billing Errors?

It’s difficult to know what a medical procedure will cost before it’s performed. So, without being sure of the cost, it’s also difficult to know if there is an error on your medical bill. It doesn’t help that the language used on medical bills is not easily understood. It can be hard to spot mistakes when you aren’t clear about what you’re looking for.

The Centers for Medicare and Medicaid Services last year found a 7.46% improper billing rate for Medicare providers last year, which accounted for $31.46 billion in overpayments. And according to a survey conducted by the Kaiser Family Foundation (KFF), 53% of adults who have health care debt — and 43% of all adults — say they’ve received a medical bill they believe contained an error.

With medical bills so complicated and medical errors so prevalent, it’s no wonder that the amount of medical debt in the U.S. is so high. According to KFF, in June 2022 an estimated 17% of Americans had medical debt in collections. Medical debt is the largest source of debt in collections and has increased to $140 billion since 2009.

What Are Some Common Medical Billing Errors?

When medical billing inaccuracies emerge, they can either be purposeful or genuinely accidental. Either way, there are some frequent errors you may want to keep an eye out for.

Was the Bill Sent to Your Insurance Company?

If you have insurance, making sure your provider submitted a timely claim to the insurance company can be a good first step to take. Occasionally, providers may neglect to send the bill to your insurance company at all and charge you for the entire amount.

Your claim could also be denied if the provider didn’t have the right insurance information for you — even if the ID is off by just one digit. You’re already paying an insurance premium, so paying for the entire procedure out-of-pocket could boost your overall medical costs.

Were You Charged for Services You Didn’t Receive?

You may have to ask for an itemized list of all the charges in your bill, but verifying that you are only being billed for services or treatments that you actually received may be wise.

You may also want to confirm that the quantities are also correct — so you’re not being billed for two MRI scans when you only got one. The itemized bill should include prices, so checking that no extra zeros were added by mistake may be a good step in this process.

Was the Wrong Billing Code Used?

If your insurer denies coverage for a procedure or medication, you may be able to identify the correct billing code and request that the provider refile the claim. If you have questions about the codes used, checking with the medical provider and insurer may save you some research time.

One type of billing code error is known as upcoding. This is when the provider bills for a longer session than was provided (for example, being billed for a 60-minute session when you were only seen for 15 minutes). Another common error is known as unbundling, which refers to using codes for each component part of a procedure rather than a single code that covers them all.

Appealing an Insurance Denial

If you find an error during your hospital bill review, you may be able to file an appeal with your insurer if the charge was denied and you were billed for it. Appeal instructions can usually be found on the explanation of benefits received from your insurance company. Documentation to back up your appeal, such as medical records, can often help strengthen your case. The Patient Advocate Foundation offers a detailed guide to the insurance appeal process , including a sample letter.

There is usually a time limit to submit an appeal to an insurer, which can range from just 10 days to 180 days, depending on the insurer. Insurers may provide a decision within 60 days. If you disagree with the decision, you can ask for an independent review — your insurer should provide you with information on how to do this.

If your appeals aren’t successful, you may wish to turn to one of several advocacy groups. For example, the Patient Advocate Foundation offers one-on-one assistance at no charge, and its website also lists organizations that provide help for people with specific conditions. People with Medicare can access free counseling through the State Health Insurance Assistance Program.

If you’re still stuck, hiring a medical billing advocate to represent you may be helpful. These professionals typically charge an hourly rate or take a percentage of the money they save you.


💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

What Are Some Options for Paying Off Medical Bills?

Even if you find errors in your medical bills and are able to resolve them, chances are this won’t eliminate what you owe entirely. Here are some ways you can approach paying off medical debt:

Negotiating a Reduced Bill or Payment Plan

Even if your bills don’t include any mistakes, they aren’t necessarily set in stone. If you’re having trouble making a payment, calling your provider’s billing department and explaining your situation may be the best first step to take.

Some may be willing to negotiate your medical bills, possibly lowering your fees if you make the payment in cash or in a lump sum.

You may be able to gain additional leverage by asserting, politely and accurately, that the provider charged an unfair rate, bolstered by research on average prices in your area and what Medicare allows for the service.

Even if you can’t get your payment reduced, you may be able to extend the due date. Many providers and hospitals will work with you to set up an affordable payment plan, sometimes without charging interest.

Budgeting for the Unexpected

Medical bills can pack an unexpected punch to an already tight budget. If you’ve already used some of the strategies listed above to reduce what you owe, it might be necessary to reduce expenses or increase income while you pay medical bills.

Taking a look at current spending is a good place to start. Determine whether there is nonessential spending that could be put toward what is owed.

If there is absolutely no wiggle room at all, you might consider increasing your income by taking on a side hustle or asking for a raise. Once you find a way to include medical payments into your budget, using a spending tracker could be a helpful way to make sure you have the funds available each month.

Using a Credit Card

Paying medical bills with a credit card is certainly an option. It might be a quick and initially easy option, but it might not be the best. Credit cards typically charge high interest rates, which could make your medical debt larger over time. One solution might be to look for a no-interest credit card.

You’ll also want to create a debt reduction plan so that you can pay the balance in full before the promotional period ends.

Taking Out a Personal Loan

A personal loan can be a smart way to pay off medical debt. This type of loan is typically unsecured, meaning you are not putting your home or any other asset on the line.

A personal loan can be used for many purposes, including paying off medical bills, but typically comes with much lower interest rates than credit cards or payday loans.

Note that you can use a personal loan calculator to see how much interest you could save by using a loan to pay off a credit card.


💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

The Takeaway

Taking time to review medical bills and making sure there are no errors can save time and money in the long run. Understanding medical bills and the insurance appeals process — if that’s a step you have to take — can be confusing, so getting assistance is sometimes helpful.

Keep in mind that even if you’re able to resolve the medical billing error, you may still owe money. There are different strategies for paying off medical debt. You may decide to try negotiating a reduced bill or setting up a payment plan with your provider. You could try removing nonessential items from your budget so you can pay off your bills. A credit card is another option, as is taking out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Paying off a loan early could help you save money on interest, but it could cost you a few points off your credit score. Closing loan accounts can affect things like credit utilization, payment history, and credit mix, all of which factor into your score.

Does that mean you shouldn’t pay off a loan early if you have the opportunity to do so? Not at all. But it’s important to consider how your score may be affected if you decide to pay a loan in full ahead of its scheduled payoff date.

What Is a Personal Loan?

A personal loan is a loan that’s designed for personal use. When you get a personal loan, your lender agrees to give you a lump sum of money that you can use for just about anything. Some common uses for a personal loan include:

•   Debt consolidation

•   Credit card refinancing

•   Medical bills

•   Large expenses, such as a wedding or vacation

•   Emergencies

Personal loans are repaid in installments, according to the schedule set by your lender. For example, you might pay $350 a month for 36 months to pay off a personal loan. Each loan payment includes principal and interest, and your lender may also charge fees, such as origination fees.


💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.

Can You Pay Off a Personal Loan Early?

Unless your loan agreement specifically states that you must agree to pay every installment as scheduled, then you should be able to pay off the balance early.

Keep in mind that paying off a personal loan before the loan maturity date may trigger a prepayment penalty. This is a premium you pay to your lender for ending the loan agreement ahead of schedule. Lenders charge these penalties to recoup any interest they might miss out on if you pay off your loan sooner rather than later.

If your lender charges a prepayment penalty, they should tell you that up front. At a minimum, any prepayment penalties or other requirements for paying off a loan early should be disclosed in your loan paperwork.

Does Paying Off a Personal Loan Early Hurt Your Credit Score?

Paying off a personal loan early can hurt your credit score, at least temporarily. To understand why, it helps to know a little more about how credit scores are calculated.

As an example, let’s use FICO® Credit Scores, which are the most widely used among major lenders. Here’s how these scores break down:

•   Payment history. Payment history accounts for 35% of your FICO score. Paying on time builds your score, while late payments can hurt it.

•   Credit utilization. Credit utilization refers to how much of your available credit you’re using at any given time. This factor represents 30% of your FICO score.

•   Credit age. Your credit age is the overall average length of your credit history. This factor accounts for 15% of your credit score.

•   Credit mix. Credit mix is simply the different types of credit you’re using. It makes up 10% of your FICO score.

•   Credit inquiries. Inquiries show up on your credit report when you apply for new credit. They make up the last 10% of your FICO score.

Why does paying off a loan hurt credit? It has to do with some of the factors listed above.

When an account moves from open status to closed, that means you’re no longer racking up points for on-time payments. You’re also affecting your overall credit utilization and credit mix. That combination can mean a dip in your score, though it’s less drastic than what you might see if you were to suddenly stop paying your debts or max out your credit cards.

When does paying off a debt help your credit score? When you have high credit limits but low balances, that’s good for your credit utilization — assuming that you’re not closing credit card accounts after paying them off.

Your score is less likely to suffer a drop after paying off a loan if you have other debts that you’re making on-time payments to and a healthy credit mix. Signing up for free credit score monitoring can help you keep track of score changes over time and the factors that might cause your score to go up or down.

Does It Make Sense to Pay Off a Loan Early?

Paying off a loan early can make sense if you would like to clear the debt and have the cash to do so. Here’s what paying off a loan early might do for you:

•   Eliminate a monthly payment in your budget so you have more cash to direct toward other financial goals.

•   Potentially save money on interest, since you’re not making any additional payments to the lender.

Whether you should pay off a loan early depends on your personal debt repayment plan and strategy. Keep in mind that it’s not always the right solution. For example, say that you plan to take $10,000 out of savings to pay off a personal loan early. If doing so leaves you with nothing for emergencies, then you can find yourself back in debt pretty quickly if you have to charge an unexpected expense to a credit card.

If you’re interested in the fastest ways to pay off debt, there are some options. For example, you can:

•   Use your tax refund or other windfalls to pay off what you owe.

•   Double up on your monthly payments.

•   Make biweekly payments, which adds up to one extra full payment per year.

•   Refinance the debt into a new loan with a lower interest rate.

What matters most when paying off debt is finding a method that works for your budget and situation.


💡 Quick Tip: An easy way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

Credit Cards vs Installment Loans

Credit cards and installment loans are very different. A credit card is a revolving credit line. As you pay down your balance, you free up available credit. Installment loans, on the other hand, let you borrow a lump sum. As you pay it off, the balance goes down until it reaches zero.

In terms of how they’re treated for credit scoring purposes, credit cards tend to carry more weight. That’s because credit scores lean heavily on your credit utilization. Does carrying a credit card balance affect credit? Yes, and it can also cost you money if you’re paying a high interest rate.

Installment loans can help you build a positive payment history. They can also enhance your credit mix. Examples of installment loans include personal loans, car loans, federal student loans, private student loans, and mortgage loans.

How much does paying off a car loan help credit? What about student loans? The biggest boost you’ll get from paying off installment loans is with your payment history. As long as you’re making your payments on time each month, your score can benefit. That can show lenders that you’re responsible about meeting your debt obligations.

Additional Considerations About Paying Off a Personal Loan Early

If you’re thinking of paying off a personal loan early, it helps to weigh the pros and cons. Credit score aside, here are a few other questions to consider:

•   Do I have enough money to pay the balance in full without draining my cash reserves?

•   Am I planning to apply for new credit after paying the loan off?

•   Will the lender charge a prepayment penalty? And if so, how much will it be?

You can ask these same questions if you’re paying off a different type of installment loan, such as a car loan or a student loan.

It’s also helpful to think about what you’ll do with the money that you’ll be freeing up in your budget. For example, you might decide to park it in a high-yield savings account or invest it to start growing wealth for retirement.

Keep an Eye on Your Credit When Paying Off a Personal Loan Early?

If you’re planning to pay off a personal loan early, it’s a good idea to check your credit scores regularly. While you’re making payments, you can monitor your scores to see what kind of positive impact they’re having. Once you make the last payment, you can go back and see if doing so helped or hurt your score.

You should make sure that the account has been properly marked as closed on your credit reports. Keeping records of all your payments is a good idea as well, in case the lender tries to come back later and say that you still owe.

Should your credit score go down after paying off a loan, the best way to bring it back up again is to make on-time payments to other debts. Paying down credit card balances and limiting how often you apply for new credit can also work in your favor.

The Takeaway

Paying off a personal loan early can save you some money on interest charges and free up cash for other goals. Before paying off a personal loan before maturity, it’s helpful to consider how it might affect your credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Is there a downside to paying off a loan early?

Paying a loan off early can impact your credit score negatively if it affects your credit mix or payment history. Your lender may also charge you a prepayment penalty to recoup lost interest.

Why does credit score go down after paying off loan?

Credit scores can go down after paying off a loan because you’re no longer benefiting from making on-time payments. You may also see a score loss if you no longer have an installment loan showing in your credit mix.

Does it hurt your credit score if you pay early?

Paying early on a loan can hurt your credit score if you’re no longer seeing on-time payments reported to the credit bureau. However, you can recover your score by continuing to pay other bills on time, maintaining a low credit utilization, and limiting how often you apply for new credit.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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