Consumer Finance

Consumers Making Less Than $40K Per Year Worried About Paying Off Debt

A new survey has found that a divide is emerging over how Americans feel about their ability to pay down debt, with the poorest Americans the least confident about staying current on their loans and bills.

According to Business Insider, UBS’quarterly financial survey of about 2,100 U.S. adults found that most people felt confident in their ability to pay their debt, partly due to the stable jobs market.

“However, the responses from lower-income consumers suggest a much more pessimistic outlook ahead,” said Matthew Mish, a UBS strategist. “While acknowledging we cannot speak precisely for this cohort, rising anxieties about the future outlook could be clouded by the gridlock in Washington, the latest highly regressive healthcare and tax policy proposals … anti-immigration rhetoric, and rising financing rates on non-mortgage consumer credit (e.g., auto, credit card loans) amid a backdrop of lackluster wage growth.”

The survey found that while the total number of those surveyed saw lower chances of defaulting on a loan payment in the next year, those earning less than $40,000 annually thought they were more likely to miss a payment. In addition, this group is worried about their wages falling over the next six months.

The worry over missing a payment can also be attributed to the fact that more lower-income households said their salaries matched or were just slightly more than how much they were spending.

This income gap will certainly have implications for subprime consumer credit, especially for the auto-loan segment. In fact, the UBS survey found that delinquencies on car loans given to people with credit scores around 660 and below were worsening.

“Given the outlook from lower income consumers conveyed in our survey results, we believe subprime auto default rates will continue to climb,” Mish said.


Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.

Click to comment