When Lamb’s insurer wouldn’t cover the cost of dental implants, her dentist convinced her to apply for two lines of medical credit totaling $24,000.But when Lamb canceled the procedure due to complications from diabetes, she still wound up footing the bill, she told Orlando’s WFTV.
Medical credit functions a lot like credit cards, but there’s a huge difference consumers may not realise: There is no simple refund policy. You get approved, you get stuck with the payments – or wind up like Lamb, battling it out with lenders while your credit score tanks.
“Even if you do not need or receive all the procedures you paid for, receiving a refund is a time-consuming, mind-numbing, next-to-impossible process,” writes NerdWallet’s Anisha Sekar.
Here’s what you should know before following Lamb’s path:
Research your lender. One of the biggest medical credit lenders in the country, CareCredit, is currently under investigation in New York for allegedly engaging in predatory practices (i.e.: pushing patients to sign up when they had other payment options at their behest). It was also one of the lenders that backed Lamb’s loan.
Negotiate your interest rate. Most medical credit is applied with a zero per cent interest rate – if you agree to pay off the loan in under two years. If you can’t, interest could run from 13 to 26 per cent, according to Nerdwallet. “If you cannot pay your bill all at once, ask your provider if you can arrange for an interest-free payment plan,” says Joshua Greenburg, President of HealthCPA.com. “Once the provider has allowed you to set up interest-free monthly payments, be sure to keep up your end of the arrangement and make these monthly payments on time. “
Beware of fees. If you do miss a payment or can’t meet your monthly minimum, brace yourself for a bruising. First your interest rate will jump – as high as 30 per cent, according to Nerdwallet – and your credit score will take a hit. And here’s the zinger: “If you’re late, you’ll pay interest on the full amount of the loan,” Sekar says.
Consider credit. If your credit is decent, you might qualify for a zero interest credit card offer for as many as 18 months. Not only would you still pay no interest, but you’d be free to pay off the debt on your own time, says CardHub CEO Odysseas Papadimitriou. But here’s some food for thought: “If you know it will take longer than two years to pay off the debt, then the medical loans could be a cheaper alternative,” he adds. Do you homework and compare your credit card interest rate to whatever interest you can negotiate with your doctor.
When medical credit works. You don’t want to get pushed into applying for medical credit like Lamb, but you shouldn’t cancel it out altogether. Research has shown consumers are sometimes more likely to be responsible about paying down debt if it’s tied to their healthcare provider.
“I think subconsciously people link the medical procedure they have to that loan and they’re literally afraid that something might go wrong,” Papadimitriou says. “And the second psychological driver behind that is a concern of whether maybe their doctor finds out (they’ve missed payments) and they would be embarrassed.”
As for Lamb, WFTV says her dentist is temporarily closed and wouldn’t respond to requests for comments.