The Everlane of Straight Teeth: Episode 3

On Episode 1 of The Everlane of Straight Teeth, we discussed how orthodontists look at pricing. On Episode 2, we looked at how insurance companies break down pricing.  On Episode 3, we will discuss third party financing.

Third Party Financing

When you pay with Care Credit or Lending Tree, these are third party financing companies.  There are many other dental loan companies, simply google “dental care financing” or “medical care financing” and you can peruse the options.

There are “interest free” options and “low APR” options.  What is really happening here?  There are several scenarios:

With the “interest free” options, your doctor is paying the interest for the “free” promotional period.  In exchange, your doctor gets paid the entire fee, minus the interest the doctor is paying for the patient’s promotional period.  The interest ranges with the length of promotional period and company from as low as 7% to as high as 27%.  Then if the patient pays off the balance in the promotional period, the third party financing company does not get paid anything else.

If the patient does not pay off the entire amount in the promotional period, then an interest rate is applied to the patient’s account with the third party financing.  Many times the interest rate, that is usually above 25%, is applied to the starting balance.  Let me say that again.  Most of the time, the large interest rate is not applied to the remainder of the balance at the end of the promotional period but the starting balance before any payments are made.

There may be some third party financing companies that does not charge the interest rate on the starting balance, but the remaining balance after the promotional period, but the most common ones charge the interest on the starting balance.  The third party also promotes that there is no set monthly payment during the promotional period.

With the “low APR” options, there is a set amount of interest charged with a fixed monthly payment for a long duration of time.  If you do not pay the fixed monthly amount, then more interest is charged on the amount left unpaid.  Your doctor pays a small amount of interest on these, but again, gets the rest of the balance up front.

If there is any interest charged or collections calls, it will be from the third party financing company, not your doctor.

Why use these options?  The doctor loses a portion of the fee and the patient is paying interest, unless they have a promotional period.

The big advantage for both parties is that it detaches the doctor and the patient from the financials.  The doctor has no idea if the patient is having issues paying for the procedures and the patient doesn’t have to avoid treatment from the doctor.  For some people this detachment is critical to them actually seeking treatment.

The doctors get paid up-front and do not have to have staff work on collections from patients that are not paying or stop seeing patients that have not caught up on their balances.  Therefore, even though they lose some profit, they do not have to wait to get the money and they do not have to have staff work on collecting the money.

The patients do not have to be concerned about showing up for recurring care and facing a front desk asking for payment.  It is simply another tool to pay for treatment, and if this is what is in the patient’s best interest, then it can be employed.

Overall, this is a system that can work, but just like balance transfers, you cannot afford to let your payments for these third party financing companies slide to the end of your priority list.  If you mess up with one of them, your credit can be horribly affected and your ability to use this avenue again can be affected.  So use when needed, but read all the fine print and understand what you are signing up for and if you really can meet the terms of the agreement.