Half of Low-Income Households' Credit Loans Taken Out to Cover Living Expenses

45.3% of credit loans taken out by households in the bottom 20% of assets (first quintile) were used to cover living expenses — the highest figure since such statistics were first compiled in 2017. The share rose for two consecutive years, from 33.4% in 2017 and 41.9% in 2021. Living-expense loans ranked first even among middle-asset tiers: 32.5% for the second quintile and 27.3% for the third, each the largest purpose in its group and the highest levels since 2020 and 2019, respectively.

By contrast, the top asset tiers had entirely different borrowing purposes. For the fourth quintile, business funding topped the list at 29.7%, while in the fifth quintile, business funding stood at 34.0% and purchases of real estate other than primary residences at 16.8%, with living expenses accounting for just 15.1%.

Lower income tiers showed a similar pattern. Last year, 38.2% of credit loans among the bottom income quintile went toward living expenses — an all-time high, surpassing the previous record of 34.5% set in 2024. The second income quintile also hit a record 32.2%, making it the top purpose overall. In the third through fifth income quintiles, business-purpose loans outnumbered living-expense loans.

Credit loans, being uncollateralized, carry greater risk for financial institutions, and interest rates are set correspondingly higher than those on collateralized loans.