Low Credit Score Borrowers Seek More Than Half of Personal Loans for Everyday Bills
With housing and transportation costs as high as they are, many Americans are struggling to make ends meet. The latest U.S. Census Household Pulse Survey from late April and early May shows that 38.5% of Americans say they had at least some difficulty paying household expenses in the past week. And some — particularly those with low credit scores — are turning to personal loans to help pay those everyday expenses.
We analyzed personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023. Here’s what we found.
Key findings
- More than half (54.9%) of consumers seeking personal loans for everyday bills on the LendingTree platform have credit scores below 580. 43.3% of consumers seeking loans for this purpose have credit scores below 560, while 11.6% have credit scores between 560 and 579. Just 2.8% have credit scores of 720 or higher.
- 1 in 5 consumers who seek personal loans for everyday bills earns $24,000 a year or less. This includes 13.1% who earn between $12,001 and $24,000 and 6.9% that earn $12,000 or less. The highest rate of potential loan borrowers for everyday bills (26.2%) earn between $24,0001 and $36,000 annually. Of these consumers seeking loans for everyday bills, 72.8% are employed full time and 3.7% are unemployed.
- Millennials account for nearly half (47.7%) of the inquiries for personal loans for everyday bills. Gen Xers are the closest to millennials but are more than 20 percentage points less at 24.5%. Gen Zers (18.6%) and baby boomers (9.2%) make up the bottom.
- Between January 2022 and April 2023, the number of consumers seeking personal loans to pay their bills peaked in the summer of 2022. The peak was in August 2022, followed by July and June 2021. At its low point, interest for loans to pay everyday bills in February 2023 was 47.4% less than in August 2022.
- Overall, 3.4% of personal loan inquiries on the LendingTree platform are to pay everyday bills. The District of Columbia (4.6%), Arkansas (4.3%) and New Mexico (4.1%) have the highest percentage of inquiries for personal loans to pay everyday bills. Consumers in Vermont (2.4%), New Hampshire (2.6%) and New Jersey, Delaware and Connecticut (all 2.9%) show the least interest. The average amount requested by borrowers seeking these loans to pay everyday bills is $4,728.
Majority of potential personal loan borrowers for everyday bills have credit scores below 580
When it comes to everyday bills, consumers with low credit scores make up the majority of personal loan inquiries. In fact, 43.3% of consumers seeking these loans have credit scores below 560, while 11.6% have credit scores between 560 and 579. In total, that means 54.9% of these potential borrowers have credit scores below 580.
For context, a FICO Score of 300 to 579 is rated as poor. Following that:
- Scores between 580 and 669 are rated as fair
- Scores between 670 and 739 are rated as good
- Scores between 740 and 799 are rated as very good
- Scores between 800 and 850 are rated as exceptional
Meanwhile, high credit score consumers are far less likely to take out personal loans for everyday bills. Just 2.8% of these inquiries came from consumers with credit scores of 720 or higher.
Credit scores of consumers seeking personal loans for everyday bills
| Credit score | Credit score rating | % of inquires |
|---|---|---|
| Less than 560 | Poor | 43.3% |
| 560-579 | Poor | 11.6% |
| 580-619 | Fair | 19.8% |
| 620-639 | Fair | 7.6% |
| 640-659 | Fair | 6.1% |
| 660-679 | Fair to good | 4.3% |
| 680-719 | Good | 4.4% |
| 720+ | Good to very good to exceptional | 2.8% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023. Note: Totals don’t equal 100% due to rounding.
LendingTree chief credit analyst Matt Schulz says it makes sense that consumers with low credit scores make up the majority of these inquiries.
Those seeking personal loans for everyday bills are low earners
Not only do borrowers looking to pay off everyday bills have low credit scores — they’re also typically low earners. Of those seeking these loans, 20.0% earn $24,000 a year or less. Breaking it down even further, over a quarter (26.2%) earn between $24,0001 and $36,000 annually — making this income group the most likely to seek these loans.
Annual income of consumers seeking personal loans for everyday bills
| Income | % of inquiries |
|---|---|
| $0 to $12,000 | 6.9% |
| $12,001 to $24,000 | 13.1% |
| $24,001 to $36,000 | 26.2% |
| $36,001 to $48,000 | 20.4% |
| $48,001 to $60,000 | 14.6% |
| $60,001 to $75,000 | 8.7% |
| $75,001 or more | 10.2% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023. Note: Totals don’t equal 100% due to rounding.
While Schulz says it’s understandable that low earners may need extra help with their everyday expenses, he cautions that taking out a loan is more expensive in the long run.
While 72.8% of those seeking loans for everyday bills are employed full time, 7.3% are self-employed and 6.4% are employed part time. Another 3.7% are unemployed.
Employment status of consumers seeking personal loans for everyday bills
| Employment status | % of inquiries |
|---|---|
| Full time | 72.8% |
| Part time | 6.4% |
| Self-employed | 7.3% |
| Unemployed | 3.7% |
| Other | 9.8% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023.
Majority of personal loan inquiries for everyday bills come from millennials
By age group, millennials ages 27 to 42 make up the majority of personal loan inquiries for everyday bills, accounting for nearly half (47.7%) of the inquiries analyzed from January 2022 through April 2023. Gen Xers ages 43 to 58 follow at a distant 24.5%. Meanwhile, Gen Zers ages 18 to 26 (18.6%) and baby boomers ages 59 to 77 (9.2%) are the least likely to look into borrowing for everyday bills.
Age of consumers seeking personal loans for everyday bills
| Age group | % of inquiries |
|---|---|
| Gen Zers (ages 18 to 26) | 18.6% |
| Millennials (ages 27 to 42) | 47.7% |
| Gen Xers (ages 43 to 58) | 24.5% |
| Baby boomers (ages 59 to 77) | 9.2% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023.
Why are the majority of these borrowers millennials? According to Schulz, it’s because they have fewer options.
“Younger people are more likely to have lower credit scores, and that can lead to less access to credit,” he says. “Instead of getting that 0% credit card, tapping into home equity or leveraging other types of loans, personal loans may be the best choice available to them.”
Here’s when personal loan inquiries for everyday bills peaked
Interest in personal loan inquiries for everyday expenses was hot in the summer of 2022. In fact, interest in these loans between January 2022 and April 2023 reached a high in August 2022. Inquiries fell significantly in the following month, dropping by 21.7%.
According to Schulz, consumers are more likely to inquire about loans to pay off bills in August because summer is an expensive time.
Inquiries for these loans reached a low point in February 2023, with interest falling by 47.4% compared to August 2022.
Where personal loan inquiries for everyday bills are most common
While taking out a personal loan to pay off everyday expenses is concerning, it’s worth noting that only 3.4% of personal loan inquiries on the LendingTree platform are to pay everyday bills.
Reasons for personal loan inquiries
| Personal loan reasons | % of inquiries |
|---|---|
| Business | 4.1% |
| Car financing | 5.5% |
| Car repair | 1.3% |
| Credit card refinance | 10.1% |
| Debt consolidation | 30.8% |
| Everyday bills | 3.4% |
| Homebuying | 1.4% |
| Home improvement | 5.4% |
| Major purchase | 5.5% |
| Medical expenses | 3.7% |
| Moving and relocation | 4.0% |
| Other | 24.1% |
| Vacation | 0.5% |
| Wedding expenses | 0.3% |
Source: LendingTree analysis of personal loan inquiries on the LendingTree platform between Jan. 1, 2022, and April 30, 2023. Note: Totals don’t equal 100% due to rounding.
Still, that figure varies by state. Consumers in the District of Columbia are the most likely to inquire about a personal loan for this reason, with everyday bills comprising 4.6% of inquiries here. That’s followed by Arkansas (4.3%) and New Mexico (4.1%).
A high cost of living could play a role in D.C.’s ranking. As of the first quarter of 2023, the District of Columbia has the second-highest cost of living, according to a Council for Community and Economic Research (C2ER) survey. The District of Columbia’s index was 148.7, meaning the cost of living was 48.7% higher than average in the U.S.
States where consumers are most likely to seek personal loans for everyday bills
| Rank | State | % inquiring about personal loans to pay everyday bills |
|---|---|---|
| 1 | District of Columbia | 4.6% |
| 2 | Arkansas | 4.3% |
| 3 | New Mexico | 4.1% |
| 4 | Indiana | 4.0% |
| 5 | Iowa | 3.9% |
| 5 | Kentucky | 3.9% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023.
On the other end of the list, consumers in Vermont showed the least interest — inquiries related to everyday bills made up just 2.4% of all personal loan inquiries in the state. That’s followed by New Hampshire (2.6%) and New Jersey, Delaware and Connecticut (all 2.9%).
Income levels likely play a role here. While the U.S. median income in 2021 was $69,021, the median income in all five states (except for Vermont, which was only about $1,300 less) was higher.
How much were these borrowers requesting? For those looking to pay off everyday expenses, the average requested loan amount was $4,728.
Full rankings
States where consumers are most/least likely to seek personal loans for everyday bills
| Rank | State | % inquiring about personal loans to pay everyday bills |
|---|---|---|
| 1 | District of Columbia | 4.6% |
| 2 | Arkansas | 4.3% |
| 3 | New Mexico | 4.1% |
| 4 | Indiana | 4.0% |
| 5 | Iowa | 3.9% |
| 5 | Kentucky | 3.9% |
| 7 | Louisiana | 3.8% |
| 7 | Mississippi | 3.8% |
| 7 | South Dakota | 3.8% |
| 10 | Alaska | 3.7% |
| 10 | Arizona | 3.7% |
| 10 | Nebraska | 3.7% |
| 10 | Oklahoma | 3.7% |
| 10 | Texas | 3.7% |
| 15 | Kansas | 3.6% |
| 15 | Maryland | 3.6% |
| 15 | Michigan | 3.6% |
| 15 | Ohio | 3.6% |
| 19 | Alabama | 3.5% |
| 19 | Hawaii | 3.5% |
| 19 | Missouri | 3.5% |
| 19 | North Carolina | 3.5% |
| 19 | Virginia | 3.5% |
| 24 | Georgia | 3.4% |
| 24 | Illinois | 3.4% |
| 24 | North Dakota | 3.4% |
| 24 | South Carolina | 3.4% |
| 24 | Tennessee | 3.4% |
| 24 | Wisconsin | 3.4% |
| 30 | Colorado | 3.3% |
| 30 | Minnesota | 3.3% |
| 30 | Nevada | 3.3% |
| 30 | Utah | 3.3% |
| 34 | California | 3.2% |
| 34 | Florida | 3.2% |
| 34 | Idaho | 3.2% |
| 34 | Pennsylvania | 3.2% |
| 34 | Rhode Island | 3.2% |
| 34 | West Virginia | 3.2% |
| 40 | New York | 3.1% |
| 41 | Massachusetts | 3.0% |
| 41 | Maine | 3.0% |
| 41 | Montana | 3.0% |
| 41 | Oregon | 3.0% |
| 41 | Washington | 3.0% |
| 41 | Wyoming | 3.0% |
| 47 | Connecticut | 2.9% |
| 47 | Delaware | 2.9% |
| 47 | New Jersey | 2.9% |
| 50 | New Hampshire | 2.6% |
| 51 | Vermont | 2.4% |
Source: LendingTree analysis of personal loan inquiries for everyday bills on the LendingTree platform between Jan. 1, 2022, and April 30, 2023.
What to consider before taking out a personal loan for everyday bills: Expert tips
While taking out a loan to cover your everyday costs isn’t ideal, it may be your only option. For those looking to borrow money for this reason, Schulz offers the following advice:
- Always shop around to compare lenders. “A site like LendingTree can be extremely helpful with this,” he says. “Different lenders will offer different interest rates, fees and more. If you don’t take the time to comparison shop, there’s a good chance you’ll pay more than necessary for the loan.”
- Consider how much of a loan you need. “It’s important to understand that just because someone is willing to give you a lot of money doesn’t mean you should take all of it,” he says. “If you only need $5,000 and someone offers you $15,000, you may think it makes sense to take that loan. You may even be flattered that someone would offer you that much. However, overborrowing can be a recipe for disaster and make an already challenging situation even more difficult.”
- Ensure you can afford your loan. Utilizing a personal loan calculator can give you a better idea of your monthly payments — allowing you to adjust your budget as needed.
Methodology
LendingTree researchers reviewed millions of online forms filled out by people inquiring about personal loans on the LendingTree platform between January 2022 and April 2023.
The generations are defined as:
- Generation Z (ages 18 to 26 in 2023)
- Millennial (ages 27 to 42 in 2023)
- Generation X (ages 43 to 58 in 2023)
- Baby boomers (ages 59 to 77 in 2023)