Banking, Financial Services and Insurance (BFSI)

Medical loan is a type of personal loan that offers funds for urgent medical expenses with flexible tenure to repay and minimal documentation. These loans serve as a practical alternative to pay for dental, cosmetic, and medical procedures. They cover expenses from hospitalization, treatments, surgeries, medications, to preventative care. Multiple benefits are provided by these loans such as no collateral requirement, immediate access to funds, coverage for large medical expenses, and instant approval. In addition, they offer faster processing, lower interest rates, and easier eligibility criteria as compared to standard personal loans.

Medical Loan Emerging as a Crucial Financial Tool

Rise in healthcare costs and alarming increase in prevalence of chronic diseases act as the key forces driving the demand for medical loans. According to a 2024 study by the World Health Organization, chronic diseases resulted in 43 million deaths in 2021. Allied Market Research stated that the medical loans market is estimated to garner a revenue of $320.3 billion by 2032. The industry accounted for $161.9 billion in 2023 and is anticipated to grow at a CAGR of 8.2% from 2024 to 2032. Revenue growth is additionally supported by factors such as increase in awareness of financing options and efforts to improve credit access as well as rise in penetration of fintech-driven lending platforms to make medical loans more accessible. Thus, approximately 80% of adults globally now have access to formal financial services, which facilitates the adoption of medical loans, reveals a study published in Global Findex 2021.

Assessing Various Financing Options for Emergency Medical Needs

Currently, patients have access to multiple financing options apart from conventional medical loans, including hospital-provided financial assistance, crowdfunding, medical credit cards, payment plans, and buy now, pay later services, which offer flexible repayment terms and immediate access to funds for medical expenses. In hospital-provided financial assistance, some hospitals offer financial support through free or discontinued services, depending on the patient’s financial background. On the other hand, crowdfunding platforms such as CoFund Health, GoFundMe, and PlumFund allow patients and their families to raise funds for their medical expenses. These platforms enable individuals to create fundraising campaigns; share their stories; and receive donations from friends, family, and the general public.

Furthermore, unlike a regular credit card, medical credit card is used only to pay for medical expenses, covering treatments and medications that are not covered by traditional health insurance policies such as dental care, cosmetic treatments, and hearing examinations. On the contrary, payment plans are offered by many medical facilities such as hospitals, dental clinics, and specialty care providers that allow patients to repay the treatment expenses over a period of months rather than paying the full amount at a time. Some providers offer interest-free payment plans, which provide a more affordable option for individuals who may not be eligible for medical loans or prefer not to use credit cards. Buy now, pay later service is a short-term financing option that facilitates immediate payment of medical expenses and pay for them in installments over a set period of time. With such wide range of options available for supporting medical needs, patients can choose the most suitable financial solution depending on their treatment costs, insurance coverage, and ability to repay without any financial strain.

Final Remark

With rising prevalence of chronic diseases and increasing inflation rates, the demand for medical loans is increasing considerably. The demand is further boosted by their associated benefits such as instant approval, faster processing times, and lower interest rates as compared to regular personal loans. Moreover, to offer easier access to medical emergency funds, different types of medical financing options are available such as buy now, pay later services, crowdfunding, hospital-provided financial assistance, payment plans, and medical credit cards.

✍ **𝑨𝒓𝒕𝒊𝒄𝒍𝒆 𝒘𝒓𝒊𝒕𝒆𝒓: Akshata Tiwarkhede

Akshata Tiwarkhede is an experienced content editor with nearly 10 years in the field. Recently, she has expanded her expertise into business writing, applying her editorial skills to create clear, precise, and professional content. With a keen eye for detail and commitment to quality, she continues to refine and develop content that aligns with industry standards.

Debt securities refer to financial assets that are bought or sold between two parties with basic terms defined. These financial instruments hold a promise from the issuer to pay the holder a specified amount at a particular date, which is when the debt security matures. They are negotiable assets which means their ownership can be transferred from one party to another easily. Government bonds, certificate of deposit, mortgage-backed securities, preferred stock, and municipal bonds are some of the popular examples of debt securities.

How does debt security work?

Debt securities are created when one party lends money to another. For instance, corporate bonds are types of financial instruments that are issued by corporations and sold to investors. Mostly investors return money to the organizations in return for a pre-established number of interest payments along with the return of their principal upon the bond’s maturity. Similarly, government bonds are issued by government bodies, which are sold to investors in return for interest payments and the bond’s maturity. These financial assets are known as fixed-income securities as they provide a fixed stream of income for their interest payments. In other financial instruments such as equity investments, the return earned by the investor completely relies on the market performance. However, debt securities ensure that investors receive payments of their principal amount along with a predetermined stream of interest payments.

A look into the features of debt securities

Various notable features of such financial instruments are there that investors must pay attention to. Debt securities include coupon rates that issuers need to pay. These coupon rates are fixed throughout the life of the security, or they vary depending on the inflation of the economy. In addition, these securities involve issue date which means the date at which the debt security was first issued. Further, the maturity date is the key feature of these financial assets, on which issuers need to repay the principal amount and remaining interest. It holds great importance in debt securities as the term length defines the price, interest rates, and benefits investors look for, such as higher returns with longer investments. In addition, yield-to-maturity is another aspect of these financial assets. It refers to the rate of return that investors expect to receive if the debt is stretched to maturity.

Impairment of debt securities

Impairment is a reduction in the value of an asset due to a decrease in its quantity, quality, or market value. Basically, it is an intricate accounting concept that means investors are accountable for any impairment losses on their companies’ profit or loss accounts. They usually compare the recoverable value of the asset with their book value before writing that amount as a loss. Therefore, the impairment of debt securities refers to the scenarios where the fair value of debt security is less than its amortized cost basis.

Are debt securities a beneficial investment?

Many benefits are associated with these financial assets. Basically, they are designed to provide investors with repayment of their initial capital investment. These fixed-income streams are an attractive alternative for investors who prefer a steady cash flow, especially after retirement or during uncertain economic conditions. Moreover, they are considered safer than equities, offering a higher degree of security compared to stocks due to their priority in claims during bankruptcy. In addition, these financial instruments offer extensive portfolio diversification by effectively reducing overall risk and stabilizing returns during market volatility. They act as a shield against the fluctuations of equity markets, providing a balance that enhances the overall performance of an investment strategy.

Risks associated with debt securities

Though debt securities are less volatile than stocks, they still possess some risks. As the borrower is legally required to make these payments, debt securities are considered to be a less risky form of investment compared to other equity investments such as stocks. For instance, a company with a strong balance sheet operating in a mature marketplace is less likely to become a defaulter than a startup company functioning in an evolving marketplace. Moreover, companies with higher credit ratings usually offer lower interest rates on their debt securities while keeping with the general tradeoff between risk and return.

What is the main difference between debt securities and equity securities?

Mainly, equity security represents a claim on the earnings and assets of a corporation, however, debt securities are the loans given by investors. For instance, stock is an equity security, however, bond is a debt security. When investors purchase a corporate bond, they are essentially loaning the corporation money and have the right to repay the principal & interest on the bond. On the other hand, when someone buys stock from a corporation, they essentially buy a piece of the company. However, if the company gains profits, the investor receives profits as well. At the same time if the company loses money, the stock also loses money. Such promising benefits of these financial assets are expected to boost the growth of the debt security market in the coming years. According to Allied Market Research, the industry is anticipated to rise at a CAGR of 7.8% from 2023 to 2032.

SEBI’s new liquidity window facility

In October 2024, the Securities and Exchange Bureau of India (SEBI) launched a new facility that is designed to enhance liquidity for investors in debt securities. The initiative allows investors to sell their bonds back to the issuer before the maturity date, improving the liquidity and flexibility of corporate bonds. SEBI aims to create a more dynamic and investor-friendly corporate bond market by offering a clear and standardized framework for implementing this facility.

Key features of the new facility

The liquidity window facility is an optional feature that debt security issuers choose to offer at the time of issuance. This flexibility enables issuers to tailor the facility to their specific needs and market conditions. The facility is designed to be available for all investors or retail investors to hold their debt securities in dematerialized form. Moreover, issuers have the flexibility to set a maximum limit for the total amount of debt securities that are redeemed through the liquidity window. This limit is set at 10% or more of the total issue size. In addition, issuers impose sub-limits for each liquidity window session to manage redemption flows effectively. Furthermore, issuers are able to maintain transparency by disclosing detailed information through the liquidity window, including the schedule, redemption activities, and outstanding amounts. Moreover, issuers designate a specific stock exchange to operate the liquidity window. This exchange is responsible for facilitating the redemption process and ensuring transparency. The new facility is typically open for three working days on a monthly or quarterly basis.

Who is expected to benefit from this facility?

This facility is especially beneficial for retail investors who do not have easy access to secondary markets for selling their debt securities. It offers a guaranteed exit option, improving liquidity and minimizing investment risks. Moreover, institutional investors have more flexibility in managing their portfolios, this facility is useful for tactical portfolio adjustments to meet specific liquidity needs. In addition, brokers and dealers benefit from this facility, enabling them to adapt their systems and processes to facilitate the trading and settlement of debt securities under the modern liquidity window framework.

Final words

Debt securities are profitable financial instruments that investors mainly purchase to get significant returns. They offer a safer option for investors to make investments and offer them greater flexibility to diversify their portfolios. Moreover, the rise in integration of modern technologies such as blockchain, electronic trading, and algorithm trading is expected to increase the liquidity of the industry in the coming period.