Dental financing plans: What to look for. Terms to watch out for.

Dental financing is a type of unsecured personal debit. Nothing is put up as collateral. Your dental work can't be repossessed. And for this reason, extending this type of credit is one of the riskiest types of consumer lending that there is.

To insure that they will make a profit, a dental financing company will need to structure the terms of their loan or credit agreement in a fashion that is as favorable for them as possible. A part of this structuring will involve the program's interest rate (which can be high or, surprisingly enough, in some cases zero). And it will also certainly involve strict repayment terms and substantial penalties if these terms are not met.

What is the interest rate of the dental credit plan being offered to you?

As we mentioned above, dental financing is unsecured debt and because of this its interest rate can be expected to be comparatively high. It will most likely run along the same line as that of your credit card. You may very well find that your own credit card offers a lower interest rate. Now, having said that, the terms of some dental financing plans are zero.

Does the term "no interest" really mean no interest?

Many dental credit plans have a no-interest feature. For example, the terms of the agreement may be such that (for amounts more that a certain minimum but less that a specified maximum) no interest is charged for the first one, maybe even two, years. This can be a great deal for the dental patient, if they are capable of strictly adhering to the terms of the agreement. (Your taking advantage of a no-interest option may have consequences for the dentist.)

But what happens if you don't make a payment on time, or if your balance isn't paid off in full before the end of the interest-free period? You better check. Your failing to explicitly comply with the terms of the financing agreement may not only disallow your eligibility for the zero-interest but it will probably also place you in a situation where significant financial penalties are applied. We've seen estimates that suggest that as many as twenty percent of people participating in no-interest financing agreements (of all sorts) fail to meet the plan's terms.

Why not shop around for other ways to finance your dental treatment?

With dental credit offered through your dentist's office, a part of what you are "paying" for is the convenience of doing your financing right there in their office. We'd suggest to you, however, that you owe it to yourself to at least shop around a little bit. Your own bank, credit union or savings and loan may very well be able to arrange for a loan whose interest rate and terms are more favorable for you, or else of a nature that it is more likely you can comply with.

If a dentist will finance, they are probably open to other deals too.

We haven't mentioned this yet but when you participate in a third-party dental credit program offered through your dentist's office, they typically end up paying a fee. It can be on the order of five to almost fifteen percent of the total amount that you finance. Now, take a moment to think about what this implies.

By their offering a third-party credit plan you already know that the dentist is willing to discount the cost of their services. So why not consider making your dentist a better offer. Arrange for financing on your own (at your credit union, bank, etc...) and offer to pay this lump sum to your dentist, in advance, in return for a cash discount. You pay less in financing charges, you get the cash discount and the dentist makes more money. Win, win and win.