What orthodontic financing option should you choose? We have many options to help you.
One question that comes up very frequently when I am speaking to new patients is: what are the best financing options for various orthodontic procedures and services in St. Louis? In order to answer that question, we must first determine what amount is covered by a patient’s insurance, which is based upon a number of factors that I have explained in a previous blog post. After we determine the remaining amount, I always explain what I think the best payment arrangements are for that patient based upon his/her circumstances and answer any questions about my particular recommendations.
It is during this conversation that patients often ask me about medical or dental credit cards or other special lines of credit that will finance dental or orthodontic work. These types of financial arrangements often appear very attractive because they are advertised as having no interest or low interest rates, having no upfront charges and being widely available, even to those that have no credit or bad credit. So, they seem to be a welcome solution that meets a serious or urgent financial need in a manner that is quick, helpful and affordable. That being said, I have performed quite a bit of research in this area and although these types of financial arrangements may be acceptable for some people under limited circumstances, these options often have some very serious drawbacks that may only be spelled out in the fine print.
The first drawback is that many of these so called, low or no interest offers only remain so if you pay off the entire amount borrowed during a contractually fixed term, otherwise the interest rates often climb to a punishing 25%-30% retroactively. This in effect means that if you do not pay off the entire amount during whatever period you agree to, you will not only be charged a very high interest rate on the remaining balance, but you will also be responsible for financing charges at that high rate of interest on the original amount that you borrowed as if that high interest rate had applied at the beginning of your loan. This type of practice was supposed to be banned by the CARD Act that Congress passed in 2009, but these types of offers exploit a loophole in the law. If you read the fine print, you are actually being offered a low or no interest credit line during a “promotional” period during which time all financing charges are reduced or waived. Thus, what is really happening here is that your interest rate is not being increased because that is prohibited by law, but rather you are being charged the high rate of interest all along but it is being reduced or waived for a limited period of time. As such, this type of situation can be an extremely serious financial trap for the unwary. For example, suppose you borrow $4000 at no interest under this type of arrangement and you have two years to pay off the loan or else the interest rate will rise to 25% retroactively. Then, for whatever reason, you are only able to pay off $3000 during the two year period. Now, not only does a 25% interest rate apply to the $1000 that has not yet been paid. But, under the terms of this type of agreement you would also be responsible for the 25% interest rate for the beginning balance from the original date of the loan, which would add approximately $1719 to the unpaid $1000, for a total of $2719, all of which now has the higher interest rate going forward.
The second drawback is that some of these programs automatically raise your interest rate to a very high level if you miss any payments. So, even if you begin with a low or no interest payment arrangement, if you miss just one payment you will have to carry the entire unpaid balance often at rates as high as 25%-30%. Adding to this frequently unexpected financial difficulty, if any payments are missed, late payments and other types of charges may be tacked onto the growing unpaid balance.
The bottom line is that this type of financial arrangement may be okay if you read and understand the fine print and you are willing and able to strictly abide by the entire contract. Even so, there are usually significantly better options for financing a variety of orthodontic services. Under any circumstances, before you enter into any type of financial arrangement it is essential that you speak to someone that is knowledgeable on the subject and that can provide you with good advice.