According to a recent NHIS survey, approximately 1 in 4 adults¹ will forgo dental care due to a lack of dental coverage and concern about the costs of visiting the dentist. Even individuals with health insurance may run up against annual limits or deductibles, making routine procedures unaffordable. Many practices have tried to alleviate the issue by providing dental patient financing through a service such as Dental Intelligence. 

However, doing so isn’t without risk — lower-income individuals may struggle to meet their monthly payments and put additional pressure on the practice. A useful indicator of risk is the credit score, which is why it’s vital that practices know what credit score is needed for dental financing. This way, you can inform their patients about their options and mitigate the risks associated with in-house financing. 

Types of Dental Financing

Dental financing spans several options, giving patients the flexibility to choose an option that works best for their financial situation. Each option will have some drawbacks and benefits, and dental practices may assist patients with identifying the right one for them.

Personal Loan

The most common method of dental financing is an unsecured personal loan. Online lenders, banks, and credit unions offer these loans. Patients should shop around before committing to a single lender. Online lending is a competitive space, and many platforms will attempt to get more customers by offering flexible loan terms, good interest rates, and waiving administrative or early payment fees. 

Credit Card

Most Americans have at least one credit card, which can be useful in dental emergencies as a dental financing option. However, some may need to get a new credit card to pay for larger dental procedures. 

Medical credit cards often offer deferred interest — if the patient pays off the debt within the deferred period, they don’t incur interest on the debt. However, if they can’t pay off the balance within that period, they’ll have to pay all of the interest accrued from the card’s start date.

0% APR cards work similarly, but instead of deferred interest, these cards have a 0% interest period for purchases and balance transfers, often for 12 or 24 months. Patients who pay off the debt according to the card’s terms can get their dental care interest-free.

In-House Financing

An increasingly popular option for dental practices is to offer in-house financing through third-party lenders. Doing so can make your practice more appealing while also allowing you to offer more expensive procedures to a larger portion of your client base.

What Credit Score Is Needed for Dental Financing?

Most personal loan lenders evaluate the borrower’s ability to pay off the loan before approving it. The two most important metrics to do so are the person’s credit score and their annual income. Credit scores provide a history of the individual’s credit record and any missed payments and other risk factors. Some lenders also require a certain debt-to-income ratio to ensure that the individual isn’t taking on an unpayable burden.

Patients with good or excellent credit scores (670+) will often have no problem securing a personal loan or financing. However, individuals with credit scores of 580 or less usually need financial assistance and will struggle securing personal loans or additional credit cards.

While most lenders will happily take on high-credit-score debt, a market has also emerged for bad-credit loans, which have more lenient restrictions on credit score and annual income. However, these lenders must still have a way of reducing their risk, as approximately 60% of poor credit individuals² will fail to meet their monthly payments and end up delinquent on their loans. 

The most popular way of mitigating risk is using high interest rates to get as much money out of the person before they default on their loan. Many personal lenders may even charge up to 35% APR (significantly higher than credit card interest rates), dramatically increasing monthly payments and the loan’s total repayment value over its lifetime.

Offering Financial Assistance

Financing options are an attractive way for dental practices to encourage routine and specialized procedures, but your practice must know what credit score is needed for dental financing to ensure that your patients make the right financial decision. 

The main drawback of dental practice patient financing is that it requires extensive administration and time to implement. That’s why working with our team at Dental Intelligence when offering financing options makes sense — we can handle the administration, allowing you to offer pay-as-you-go and tailored financing options for all your patients. For more information, visit our website and schedule a demo today!

References

¹ How does cost affect access to care?

²Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores