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Insights
Approval rates: the hidden lever of patient finance
Approval rate determines whether finance works at all
The success of patient finance is often judged by cost, APR, or product structure. In practice, one factor dominates: approval rate.
If approval rates are low, patients get declined, staff lose confidence, finance is offered less often, and usage collapses. If approval rates are high, finance becomes predictable, teams trust the system, and adoption increases.
Approval rate is not just a credit outcome. It is a behavioural driver.
Affordability: two different realities
Affordability is often misunderstood. It operates on two levels.
1. Regulatory affordability (the lender view)
Lenders are required to assess income, existing commitments, and ability to repay. This applies to all regulated loans regardless of term or APR.
A strong credit score is not enough. A patient may have good credit history but insufficient disposable income. Affordability is a hard constraint. Loans cannot be approved without it.
2. Psychological affordability (the patient view)
Patients think differently. They ask how much they can spend monthly, and how much of their savings they are willing to use.
Tabeo data shows that across income levels, savings behaviour is remarkably consistent, with average discretionary capacity of around £150 per month. Patients typically optimise for £150 to £250 per month, not total cost or maximum borrowing capacity. Monthly payment, not total price, is the true affordability anchor.
The role of loan terms
Loan terms directly affect affordability. Moving from 12 months to 24 months reduces monthly payments significantly, producing a meaningful increase in approval rates of around 10% as more patients become eligible.
Extending further to 48 or 60 months has limited impact on approvals but changes the customer mix. The biggest approval gain comes from 24 months, not 60 months.
What actually drives approval rates
Three core factors drive approval rates.
1. Loan size
Larger loans reduce affordability and lower approval rates. Bigger treatment plans do not equal higher conversion.
2. Customer profile
Approval depends heavily on credit score, employment type, and financial stability. Certain segments are harder to approve, including the self-employed, students, and those with irregular income.
3. Lender coverage
Not all lenders serve all profiles. Best practice is to work with multiple lenders across segments: prime, for low risk and low APR, and near-prime, for higher risk and higher APR. This increases approval coverage, reduces declines, and improves patient experience. One lender is a structural limitation on approval rates.
Product design as a lever
Practices cannot control income or credit score, but they can control how finance is structured.
First, offer the right terms. The minimum effective setup is 12, 24, and 36 months. Second, avoid over-reliance on long terms. A 60-month option lowers monthly payments but attracts weaker applicants. Third, match the product to patient behaviour. Patients optimise for manageable monthly payments, not maximum borrowing.
A critical mistake: making treatments too large
A common strategy is to bundle treatments and increase total loan size. This fails because it reduces affordability, lowers approval rates, and delays decision-making.
The better approach is to sequence treatments. Instead of a £10,000 full plan, use £3,000 to £4,000 phases. This produces higher approval rates, faster decisions, and better patient acceptance. It mirrors card payments, where patients pay in stages rather than all upfront. Smaller, sequenced treatments outperform large bundled plans.
The role of APR in approvals
APR has limited impact on affordability. For loans under £5,000, APR changes monthly payments by around £5 to £10, so it does not materially affect approval rates. What APR does affect is practice economics, customer perception, and product positioning.
The system view: how to maximise approvals
To optimise approval rates:
Design for affordability: use 24-month options and target the £150 to £250 monthly range.
Control loan size: avoid over-bundling and use phased treatments.
Expand lender coverage: include prime and near-prime, and avoid single-lender setups.
Maintain simplicity: standard options, consistently applied.
Final takeaway
Approval rates are not random or purely lender-driven. They are the result of how finance is structured and applied. The key shift is from reacting to declines, to designing for approvals.
Finance does not fail because patients cannot afford treatment. It fails because the system is not designed around how affordability actually works.