Patients Arrange Interest-Free Loans For Services Typically Not Covered By Health Insurance

Zero-interest financing has increased in popularity in a "big-ticket consumer market: doctors' and dentists' offices," the New York Times reports. According to the Times,"millions" of consumers have arranged financing for procedures nottypically covered by insurance -- such as laser eye surgery or ceramictooth implants -- through more than 100,000 physicians and dentiststhat offer a year or more of zero-interest financing.

Interest-freefinancing has become "one of the fastest-growing parts of consumercredit" and likely will increase "as rising deductibles, copayments andother costs ... force more of the nation's 250 million people withhealth insurance to finance out-of-pocket expenses for even basicmedical care," according to the Times. The loans only areavailable to the "creditworthy" and "only if users are able to makepayments on time and close the loan on schedule, typically within 12months" because "[o]therwise, the loans after defaults can carryinterest rates of 20% or more," the Times reports.

Someconsumer debt experts warn that "as more people try to bridge wideninggaps in their health insurance, paying for medical care on credit couldplunge the unwary into a financial crisis," noting that in recentyears, the "use of high-interest credit cards to pay big medical billshas become a leading cause of consumer bankruptcy," according to the Times (Freudenheim [1], New York Times,8/30). The "big problem" with using credit cards to pay medical billsis that the "interest rates on credit cards can be hard to predict"because the rates "may rise sharply if a cardholder falls behind onpayments -- even payments on another card or, for that matter, on anyother debt," according to the Times (Freudenheim [2], New York Times, 8/30).

However, zero-interest financing "can make it possible to receive treatments that otherwise might be out of reach," the Times reports. For CareCredit,the leader in consumer medical financing, about 80% of medical loansprovided are paid off on time and incur no finance charges, accordingto company President Michael Testa. Red Gillen, a senior analyst at Celent,said, "As more and more of the costs of care are shifted to consumers,people are going to need more credit," adding, "They are still going toneed health care" (Freudenheim [1], New York Times, 8/30).
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