Nonprime Americans Struggle to Pay Emergency Expenses
Nonprime Americans, those with a credit score below 700, struggle to find credit, which makes it hard for them to pay for unexpected expenses. New research from Elevate indicates it is also difficult for these consumers to borrow money from friends and family.
According to Elevate’s Limited Borrowing Options: The Nonprime Experience, 70% of nonprime borrowers could not cover emergency expenses of $500 or more with their savings, and 64% could not borrow this money from their family or friends.
Other key findings of the study include:
- Even those who have credit cards are struggling to meet emergency expenses. 72% of nonprime Americans would not be able to charge $500 on their card, and 80% would not be able to put $2,000 on the card.
- More than half (59%) “regularly” carry a credit card balance each month.
- Only one in five nonprime consumers have borrowed money from their friends or family the past year.
- Many are resorting to desperate measures. 7% use overdraft protection strategically and use it to cover expenses for which they do not have the cash on hand.
“The fact that 69 percent of nonprimes are unable to cover an urgent expense of $500 with their savings highlights the gap between need and availability of borrowing options. Given the need, very few people have the option to borrow from their support systems, with only 21 percent of nonprimes saying they’ve borrowed from family and friends in the past 12 months,” said Jonathan Walker, executive director of Elevate’s Center for the New Middle Class. “Despite the widely perceived ease of asking friends and family for money, it’s simply not an option for most nonprime Americans.”