Financing Dental Care

A Guide To Your Options

Dentistry can do so much these days to improve a person’s health, appearance and self-confidence. From barely noticeable braces that straighten crooked smiles to dental implants that replace missing teeth, there is a state-of-the-art solution to virtually any dental problem. Of course, like anything that involves the time and resources of skilled professionals, highly technical and sophisticated dental treatment doesn’t come inexpensively; indeed, the phrase “you get what you pay for” probably applies doubly to dentistry. Also, the types of treatment mentioned above, as well as many others, are often considered elective and therefore may not be covered (or only partially covered) by dental insurance. This can be the case even when a given procedure offers proven health benefits.

It’s important to keep in mind that dental insurance isn’t really insurance — meaning, it doesn’t protect you from large, unforeseen expenses. It functions more like an annual discount coupon that pays a maximum of $1,000 – 1,500 a year. Therefore, it can only help a little for a big-ticket item provided that a particular treatment procedure meets various criteria for coverage (decided upon by your employer and the insurance company). So if you need and want anything from limited treatment to a complete smile makeover, how do you pay for it?

Well, there is always the old fashioned way: with money saved specifically for this purpose. In addition, some dentists will discount a large fee if a patient is able to pay up front, which can be a good strategy. However, it may mean a delay in gaining the use and benefits of the treatment if you have to save for it.

In the case of orthodontic treatment, dentists, generally orthodontists in this case, traditionally will accept partial payment up front and then monthly payments to cover the balance over an extended period of time. It’s an arrangement that makes sense because you, as a patient, have to visit the dental office regularly over a course of months or even a couple of years to complete the treatment. But if you’re having treatment that takes only a few visits over a short period of time, your dentist is less likely to offer an extended payment plan because it could be a riskier financial proposition for the practice.

Therefore, it may be that financing (in essence borrowing) or using credit to pay for the care you need is the best option for you. And there are various ways people go about doing this; some are described below. If you are contemplating one of these methods, it’s important to figure out exactly what size monthly payment will fit your budget. Equally essential is to understand — thoroughly — all the terms of the specific credit offer you are contemplating.

Borrowing Opportunities For The Healthcare Consumer

General-Use Credit Cards
There’s a good chance your dentist accepts payment by a credit card you already have. If you use it, you won’t have to apply for a new loan. The downside is that you might tie up credit you routinely rely on for other needs; plus, credit card interest rates can be higher than other types of loans. Here’s a good tip from one consumer advocate: If you want to charge dental expenses to your credit card, look for a good deal on transferring that balance to a new card. Some credit card companies offer a single-digit interest rate for the life of the transferred balance, along with a transfer fee, but always make sure to read the fine print.

Healthcare Credit Cards
In recent years, credit cards designed specifically for charging medical/dental expenses have emerged. The largest is CareCredit™, offered by GE Capital and accepted by thousands of healthcare providers nationwide. CareCredit allows you to charge as many dental treatment procedures as you want until you reach your credit limit. Typically, consumers who are approved for this card will pay an interest rate of 14.9%, though a few may qualify for a promotional period in which no interest is charged. Late monthly payments, however, can result in penalty interest rates that are significantly higher (some reaching into the high twenties) and late fees of up to $35. So it is important to be comfortable with the size of the monthly payment required.

This type of arrangement should only be entered into with the utmost care — particularly for no-interest promotional plans. If the entire balance is not paid within these promotional periods, the cardholder will pay an agreed-upon double-digit annual percentage rate (APR) — on interest that was accruing (but not yet charged) from the day of purchase. This means that if circumstances you didn't foresee prevent you from paying off the balance on time, it can add a large amount to your overall debt.

Healthcare Installment Loans
If you have a large dental or medical expense that you want to finance, an installment loan might be your best option. Springstone Patient Financing is the leading company that offers this particular type of healthcare loan. Unlike a healthcare credit card account to which you can charge many smaller procedures as long as you don’t go over your credit limit, an installment loan sets a payment schedule and fixed interest rate for one larger instance of borrowing — say, to have your missing or failing teeth replaced with dental implants. In that way, it’s very much like taking out a car loan. And like a car loan, an installment loan can be “re-financed” to add in additional procedures if they are large enough (typically a $1,000 or more) while still keeping one low monthly payment.

Interest rates depend on your credit history and can go as low as 3.99% APR or as high as 17.9% APR, with the average consumer paying around a 9.9% APR. There are no penalty rates. The rate you get at the beginning does not change over the life of the loan, even if a monthly payment is late. Monthly payments are often lower too, as healthcare installment loans are available for up to 84 months.

Equity Loans
Equity loans are secured by collateral, such as the borrower’s house. Because of this, equity loans tend to have lower interest rates than so-called unsecured debt such as credit cards and installment loans. That is the main advantage of an equity loan. The risk is that the lender can take the collateral — i.e., your home — and sell it if you don't repay the debt. The equity you have in your home — its value minus any amount you still owe on the mortgage — determines the amount you can borrow. Of course, many people choose not to reduce their home equity because preserving it is a great way to preserve capital and/or save for retirement.

It’s Your Finances — And Your Decision

All of these options have advantages and disadvantages, which may not be so obvious at first glance. The important thing is to take your time and make sure you ask all of the questions you have. Said one healthcare finance expert, this decision is akin to the one you are making about undergoing treatment in the first place: You wouldn’t want to have a dental procedure for which you did not clearly understand the risks and benefits, or if you did not completely trust the doctor. “Think of this as an extension of the trust relationship you have with your healthcare provider.”

If you take it slowly and enter into a financing agreement with a clear understanding of the terms and your own financial situation, it can work out very well.

If you take it slowly and enter into a financing agreement with a clear understanding of the terms and your own financial situation, it can work out very well. And be advised, if you are rushed into an agreement you don’t understand or which is beyond your means, the results can be disastrous. So before you sign on the dotted line, do your research, read and understand the fine print, ask plenty of questions, and seek professional financial advice or credit counseling if you need it. After all, the point is to get a great smile, not a bad headache!