What is a dental loan?
If you need expensive dental work and don’t have dental insurance or enough cash to pay upfront, a dental loan you could be the answer you’re looking for. With a dental loan, you could borrow the money required to cover important dental work then make monthly payments until the amount you owe is paid off.
Since dental loans are really just personal loans, they work just like a personal loan you might take out for another purpose, such as remodeling your kitchen or consolidating debt. Generally speaking, personal loans come with a fixed interest rate and fixed monthly payments for a predetermined length of time.
Interest rates may start as low as 3.24% APR and surge all the way up to 35.99%, with the best rates going to individuals with very good or excellent credit, or a FICO score of 740 or higher.
While some personal loan lenders let consumers borrow up to $35,000 for dental care or other purposes, other lenders may let you borrow even more.
Dental loans or credit cards?
While dental loans might seem like an obvious solution to any dental financing crisis, you may be wondering why you shouldn’t just use your credit card. After all, charging your dental expenses could be as simple as swiping your card at the dentist’s office on the way out. Why bother getting a dental loan when you can just use plastic then pay off your balance when you get time?
The truth is, there are advantages to using both dental loans or credit cards to cover expensive dental care. The best option won’t be the same for everyone since it depends on a wide range of factors.
Dental loan advantages
One easy way to tell if a dental loan is a better deal is if the interest rate is lower. If the interest rate on your credit card is higher than what you would pay on a dental loan, then skip credit cards all together, he says. To find out whether you can get a lower interest rate on a personal loan, you can apply for a free quote online and compare the rates you qualify for to the APR offered on your credit card. At LendingTree, for example, we have a online form you can use to potentially compare offers from several lenders at once.
In addition to interest rates, many consumers prefer the fixed monthly payments of personal loans versus the unpredictable payments of credit cards. Not only may your credit card’s interest rate be variable, but your balance and monthly payments can surge if you continue using your credit card for purchases.
Credit card advantages
According to Brian Hanks, a financial adviser for dentists and the author of “How to Buy a Dental Practice”, a credit card can be a good option when the procedure is an absolute emergency and you don’t have time to apply for a dental loan ahead of time.
In addition, credit cards can be a good option if you score a special financing deal, like a card with a 0% intro APR. “If you know you can pay 0% on a credit card balance for a period of time, and you know you’ll be able to pay for your dental procedure, go ahead and put it on the card,” said Hanks.
Last but not least, it can make sense to use a credit card if you have the cash to pay your entire bill but want to use credit to earn rewards. By putting your dental expenses on a cash-back credit card and paying your bill off right away, you could earn an average of 1-2% cash back on your total bill, which could add up quickly if you’re spending a lot.
Saving money on dental expenses
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Ask for a cash discount
“Always negotiate care costs and see if you can get a discount for paying cash,” said Brein. And, believe it or not, you are considered a cash buyer if you pay in cash – even if you borrowed the money with a personal loan. The less you have to pay for dental care, the less you can borrow and the faster you can pay it off.
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Get a second opinion
If you’re considering expensive dental work done but could choose an alternative treatment method, make sure to get a second opinion, says Hanks. “Dentistry has an element of art and judgement, and some dentists are more aggressive than others,” he said.
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Shop around for dental loans
As mentioned already, the total costs of a dental loan can vary by lender. Make sure to compare loans in terms of their interest rate, repayment terms, and fees, says Hanks.
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Use your FSA benefits
A flexible spending account (FSA) is an employer-sponsored savings account you can use for medical or dental expenses. These accounts let you set aside pretax funds to pay for medical expenses, with the agreement that you “use it or lose it” if you don’t tap out your funds by the end of the calendar year. If you have money in a FSA account or can contribute to one, using the savings for dental expenses could be a smart move. In 2018, you can contribute up to $2,650 to a FSA, up from the 2017’s limit of $2,600.
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Open a Health Savings Account (HSA)
A Health Savings Account (HSA) is a tax-advantaged account that lets people save pretax dollars for qualified medical and dental expenses. If you have a high-deductible health insurance plan, you can contribute up to $3,450 for individuals and $6,900 for families to this plan in 2018. Better yet, you can deduct your contribution amount directly from your taxable income. Using these funds for dental expenses lets you lower your taxable income and pay for dental care with pretax dollars.
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Consider in-house dental financing
Hanks notes that many dentists set their own rates and may be willing to negotiate in-house financing plans with clients. You may be able to pay monthly payments directly to your dentist and avoid loans and finance charges all together, for instance. Make sure to ask your dental professional to see if this option is available.