Can Unpaid Medical Bills Affect Car Loan Approval?
Yes! Unpaid medical bills can impact your ability to get car finance, especially if they have been sent to collections or recorded as a default on your credit report. Lenders assess your overall debt and credit history, and medical debt can:
❌ Lower your credit score
❌ Increase your debt-to-income ratio (DTI)
❌ Make lenders question your ability to repay a car loan
❌ Lead to higher interest rates or loan rejection
While medical debt is different from credit card or loan debt, lenders still view unpaid bills as a sign of financial risk. However, there are ways to improve your chances of getting approved for a car loan, even with medical debt.
🔍 How Lenders View Medical Debt When Assessing Car Loan Applications
| Factor | Why It Affects Approval | How to Improve Chances |
|---|---|---|
| 📉 Credit Score Impact | Medical debt in collections can lower your credit score. | Check your credit report and dispute any incorrect records. |
| 💰 Debt-to-Income Ratio (DTI) | High medical debt increases your DTI, reducing borrowing power. | Reduce other debts before applying for a car loan. |
| 🚗 Loan Risk Assessment | Unpaid medical bills signal financial struggles to lenders. | Show consistent income and responsible financial management. |
| 🏦 Loan Interest Rates | If approved, you may face higher interest rates. | Work with a finance broker to find lenders with flexible approval criteria. |
✅ How to Improve Car Loan Approval Chances with Medical Debt
If you have unpaid medical bills, follow these steps to increase your chances of getting car finance:
1️⃣ Check Your Credit Report – Get a free credit report from Equifax, Experian, or illion to see if medical debt appears as a default or collections account.
2️⃣ Negotiate with Medical Providers – Many hospitals and clinics offer payment plans or settlements to clear outstanding medical debt.
3️⃣ Pay Off the Medical Debt Before Applying – If possible, clear unpaid bills to improve your credit score and approval odds.
4️⃣ Show Strong Employment & Income Stability – Lenders prefer applicants with consistent income and the ability to manage existing debts.
5️⃣ Save for a Higher Deposit – A larger deposit reduces lender risk, making approval easier.
6️⃣ Apply for a Lower Loan Amount – Choosing a cheaper car increases approval chances, even with medical debt.
7️⃣ Work with a Finance Broker – Brokers help find lenders who approve car loans for applicants with medical debt.
🚨 What If Your Car Loan Is Declined Due to Unpaid Medical Bills?
If your car finance application is rejected due to medical debt, try these solutions:
✅ Negotiate Debt Removal – Some creditors remove paid medical debts from credit reports upon request.
✅ Look for Bad Credit Car Loan Lenders – Some lenders specialize in car loans for applicants with past debt issues.
✅ Increase Your Deposit or Choose a Cheaper Car – A lower loan amount reduces lender risk.
✅ Use a Guarantor – A co-signer with good credit can support your application.
✅ Consult a Finance Broker – Brokers help find lenders that accept applicants with past unpaid bills.
🚀 How a Finance Broker Can Help You Get Car Finance with Medical Debt
A finance broker can assist applicants with unpaid medical bills by:
✅ Finding Lenders That Accept Medical Debt Applicants – Some lenders consider medical bills differently from traditional defaults.
✅ Helping You Strengthen Your Loan Application – Brokers structure your application to reduce lender concerns.
✅ Negotiating Better Loan Terms – Brokers can help secure lower interest rates and flexible repayment options.
🔑 Final Thoughts
Unpaid medical bills can affect your car finance approval, but they don’t have to stop you from getting a car loan. By checking your credit report, settling debts, and working with a finance broker, you can increase your chances of approval and secure a car loan with better terms.
🚗 Need car finance but have medical debt? Get expert help today and find the best loan options available!
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
