A majority of Americans revealed that they wouldn’t be able to comfortably pay off an unexpected bill of $1,000, further underscoring how the coronavirus pandemic is leaving an increasing number of people strapped for cash.
According to Bankrate’s January Financial Security Index, only 39% of adults said they would be able to tap into their savings in order to absorb the four-figure bill.
“The precarious state of Americans’ emergency savings has been further set back by the pandemic, with nearly as many needing to borrow to cover a $1,000 unplanned expense as those that can pay for it from savings,” Bankrate chief financial analyst Greg McBride said.
About 18% of Americans say they would have to put the expense on a credit card in order to pay it off over time. In doing so, though, they open themselves up to interest charges, which are on average higher than 16%, according to Bankrate’s national survey of lenders.
About 12% say they would have to borrow money from their friends or family. However, another 8% would rather resort to a personal loan.
In that case, consumers may face “unsavory options such as high-interest payday loans” according to Signe-Mary McKernan, vice president at the nonprofit Urban Institute.
Meanwhile, another 18% of Americans say they could handle the charge without borrowing the money, but they would have to tighten their budgets by spending less on other items.
Even after a harrowing year, some Americans had a positive outlook for 2021, with 44% forecasting their finances will improve.
About 12% project their bank accounts will get “significantly better” while 32% say they will get “somewhat better.”
However, about 14% percent expect their finances to get worse in 2021.
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