Life’s Big (Unplanned) Expenses
Most people tend save in advance for life’s big expenses: purchasing a new home, paying college tuition, or buying a new car. However, if they find themselves in need of financial assistance, they have options with a home mortgage, a 529 plan, a student loan, or a new car loan. But what about with cosmetic surgeries and other beauty procedures?
$12.9 Billion Amounts to Serious Financing
According to the American Society of Plastic Surgery, 16 million procedures were done in 2014, an increase of 3% from 2013. And, a total of 12.9 billion dollars was spent. Beauty doesn’t come cheap, and insurance typically doesn’t cover any of it! So what are your payment options?
Your 8 Medical Financing Options
- Cash savings, medical savings plans, and gift certificates are the best option as you don’t have to borrow or pay interest. You simply save some money each month (think: lay-a-way plan) until you have enough to cover the bill; or, ask for gifts in the form of gift certificates to help you reach your goals.
- Regular credit cards may allow you to use an existing low APR card or a new card with a 0% introductory period. If the card has reasonable interest rates (10% or less), this can be an affordable way to finance the surgery while building your credit. But, a large purchase can tie up your credit line and lower your credit score while you are paying it off. Be sure to pay off the balance before the introductory rate expires!
- Health care or medical credit cards come with attractive 0% promotions, and some can have reasonable interest rates and payment plans. But, many of these health care card lenders have been deemed predatory, applying interest retroactively and 30% APR in cases of missed payments. Be sure to research the card and read the fine print!
- Loans from family and friends may be your only option if you can’t get credit elsewhere. Terms may be excellent and flexible! But, you may jeopardize a relationship if you don’t pay interest and if you default on your agreement. So, think twice and reconsider whether cosmetic surgery and/or aesthetic beauty procedures are really within your financial reach.
- Bank loans may be an option. Interest rates can be similar to those on credit cards and loans tend to be fixed with set payment terms. In addition, these can boost your credit rating provided you make payments on time and in full. Secured loans may have lower interest rates: but, beware of unsecured loans which can have variable and high interest rates.
- Unsecured medical loans can be in the form of personal loans or credit cards, brokered through third parties like doctors or brokers. This is a good option for those with a low credit score who can’t find alternate sources of financing. However, always read the fine print because loans must often be co-signed and the interest rates can be high or balloon after an attractive introductory offer.
- Home equity loans and lines of credit are loans against the equity of your house with interest assessed at current mortgage rates. These can be easy to obtain and affordable when mortgage rates are low. In addition, the interest is tax-deductible for most people. But, when the job and/or housing market is poor, you could be forced to sell your home, causing many folks to get into financial trouble. This type of loan is best considered as a last option.
- 401K loans allow participants to borrow up to 50% of the vested balance. Repayments are automatically deducted from your paycheck over the course of up to five years. With no impact on your credit rates, and low interest fees, you may be tempted to take out a 401K loan, but know that you will then repay the loan with taxed money. And, because you will ultimately withdraw the money in retirement and pay taxes then, you will (in effect) be paying double taxes. In addition, your plan may not allow you to make contributions while you’re paying off the loan, causing you to possibly lose out on tax benefits and asset growth during the repayment period. Finally, if you are under 59 1/2 years old, and you leave your job, you will suffer a 10% penalty.
BOTTOM LINE: Before you opt for a cosmetic surgery or an aesthetic beauty procedure, be certain that it is something that you realistically can afford!