New data: Living Paycheck to Paycheck triggers a personal loan request
When you think of those struggling between paychecks, people earning six-figure incomes usually don’t come into play. But PYMNTS research continues to find that an alarming percentage of well-paid people do not succeed financially from check to check.
This is one of the many important revelations from the September edition of Reality Check: Report: Personal Loans Help 36M Paycheck to Paycheck Consumers Stay Afloat, a PYMNTS and Loan Club collaboration.
As this latest opus indicates, “a third of these employees live from one paycheck to another, in fact, and 12% have difficulty paying their bills. These individuals also account for 32% of the demand for personal loans in the United States, according to our latest findings. “
Living from paycheck to paycheck attracts more of those high incomes to loan products that can help balance personal financial balances, catch up and even pay off some debt (student loans stand out), like the most recent PYMNTS survey of US consumers. shows.
According to the new study, “24% of consumers in the United States have used personal loans. This makes it the second most popular type of unsecured credit product after credit cards (used or acquired by 73%) and the fourth overall lending instrument after auto loans (50%) and mortgages (45%). . . “
A collection of contributing factors
Noting that “the prevalence of [those] living paycheck-to-paycheck among personal loan users suggests that personal loans have become a common financial tool for Americans, with paycheck-to-check consumers responsible for most of the demand, ”the September edition of Reality Check states,“ Americans’ need for credit fluctuates with changes in their circumstances and their ability to prepare for the unexpected.
A critical set of factors distinguishes lifestyles from paycheck to paycheque, with the presence or absence of children in the household being critical for many of those in financial difficulty.
According to the latest study, “28% of respondents living in households with children have taken out personal loans, which is a third more than those who do not live with a child (21%). Paycheck consumers who live with one child are again about a third more likely to be personal loan users (32%) than their counterparts in childless households (25%). These trends also apply to other credit products. Consumers living with one child are on average 31% more likely to have taken out some other type of loan, such as a home equity product.
Both savings and profits are telltale indicators
Other factors influencing borrowing to cover living expenses include things like rent and mortgage payments, and personal savings – or lack thereof.
The September edition of Reality Check points out that “the level of savings strongly influences consumer demand for personal loans,” with 53% of personal loan users surveyed reporting less than $ 2,500 in savings, “suggesting that they are financially vulnerable to emergencies or job loss. ”Some 46% of the average sample belong to the low savings group.
The fact that high incomes are among those who live paycheck to paycheck is somewhat shocking, although it is clear that a large number of high income people do not report having problems with income. money.
“Higher income consumers tend to have lower demand for personal loans on average, as 36% of all respondents qualify for this group, while only 32% of personal loan users earn that much,” the study found. . “The reverse is true for the middle bracket, which holds a smaller share of the general US population (31%) than personal loan users (36%). It should also be noted that consumers in the lowest income bracket do not represent a disproportionate share of the demand for personal loans, despite more limited resources. “