How to Finance Dental Care for Patients with Bad Credit

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Nearly a quarter of Americans (approximately 23%) don’t have dental insurance, and have to pay for any dental work out of pocket. Even patients who do have insurance often have to cover at least a portion of their care because of deductibles, copays, and procedures that are not covered.

The average American has less than $1,000 in savings. So how can they pay for expensive dental treatments and still afford to pay the rest of their bills? Unfortunately, many patients feel that they have no choice but to refuse treatment for financial reasons.

That’s why offering a variety of payment options is so critical for both patients and dental practices.

Credit-Based Options Don’t Work for Every Patient

When patients need help covering the cost of a dental procedure, they might apply for a medical credit card. Like an FSA or HSA, these cards can only be used for medical costs.

Medical credit cards aren’t the best option for securing dental financing with bad credit, because approval is almost always based on credit score. Patients with low credit scores or little credit history are unlikely to be approved.

As a provider, you may have to turn away patients who can’t get approval. That’s less revenue for your practice, wasted time for you, and bad news for the patient who needs treatment. 

The good news is that there are other options for patients with bad credit.

Option 1: Subprime Lender Financing

To expand access to treatment for patients with bad credit, you might offer subprime third-party lender financing. There are higher costs for both your practice and the patient, but it can make the difference between turning the patient away and being able to treat them.

Positives – Your practice receives the majority of the total amount owed just after treatment, with a cost that may be acceptable, depending on your financial circumstances. There is no credit risk or recourse for you, unless the lender has a recourse provision.

Negatives – With subprime lender financing, you can expect significant lender discounts and aggressive financing terms for the patient, including particularly high-interest rates. Although the financing is through a third party, some patients may feel that high-interest rates and aggressive collections tactics reflect poorly on you as a provider. Additionally, your practice will share in the credit risk if the lender has a recourse provision.

Option 2: Provider-Based Payment Plans

Provider-based payment plans are another option for patients who can’t get approval for traditional credit-based financing. Also known as in-house financing, this option allows patients to make incremental payments over time, payable directly to your practice. 

This option allows you to seriously expand access to treatment, because you’re completely in control of the acceptance criteria and plan terms. However, it also comes with some significant challenges.

Positives – Your practice can offer up to 100% approval, improving conversion rates. If you have high fixed costs, patient acquisition costs, and available capacity, this can have a serious positive impact on revenue and net profit. Since everything is handled without a third party, you don’t have to worry about lender discounts.

Negatives – The advantages of provider-based payment plans are compelling, but there are some challenges. First, you receive payments over time, not at the time of treatment. That means you’re taking on credit risk, and bearing the cost of defaults. This option also has a high administrative burden, and generally requires an internal finance department. Providers that offer in-house financing also open themselves up to new compliance requirements, as they become lenders in the eyes of the law. 

Option 3: Flexible Pay-Over-Time Plans

Wishing there was a “best-of-both-worlds” option? There is. 

Pay-over-time providers enable dental offices to take control of patient approval without taking on the burden of loan servicing and administration. 

With a pay-over-time provider like HFD, you can manage the risks associated with ongoing payment plans. At the time of treatment, your practice will collect a down payment. Subsequent monthly payments are automatically debited from the patient’s account (and you keep the interest!).

HFD doesn’t require a stellar credit score. Instead, they utilize a unique, data-driven risk assessment to determine the probability of default based on data from thousands of patients. From there, they create an installment loan agreement, including a down payment and interest rate that mitigates risk for the practice. That’s more revenue in your pocket, on time, without the challenges of managing in-house financing.

Learn more about payment options for dental offices. Download the ebook.

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