New Credit Study
Majority of Americans unprepared to absorb a financial shock; desire ways to make consistent progress in paying off debt and taking control of finances
SAN FRANCISCO, February 9, 2016—Prosper Marketplace, which operates a leading online marketplace that connects borrowers and investors, today released results from the Prosper Marketplace Financial Wellness Study, which examines the current state and sentiment around personal finance in America. The study revealed that nearly 60 percent of Americans do not have the financial freedom to enjoy life, but improving financial wellness is a top priority. In fact, more than 60 percent of those surveyed said they currently have, or plan to have, a financial plan in place in 2016. Additionally, the survey found technology plays a key role in helping Americans feel more in control of their finances.
Americans’ Current Financial Standing
According to the Prosper Marketplace survey, only 29 percent of people feel very strongly that they are in control of their finances, and nearly 50 percent are living paycheck to paycheck. Related findings include:
- More than 50 percent of survey respondents said they could not absorb a financial shock. The group most likely to be impacted—Americans over 55 years old—are the most worried about their financial future, with 59 percent not confident in their ability to absorb a shock. Millennials, on the other hand, are most confident in their ability to absorb shocks.
- More than 50 percent have less than $5,000 in their checking or savings accounts, and more than a third have less than $1,000.
- 60 percent of Americans have credit card debt; two thirds are going deeper into debt by not paying them off in full each month.
- A full 22 percent do not even think about their long-term stability.
Taking Control in 2016
Above all, one thing came through loud and clear: Americans are taking control of their financial standing this year. Findings include:
- Debt relief is ranked a top priority for improving standing, closely followed by consistent progress in paying off debt (44 and 34 percent, respectively).
- When asked what they will do to better manage their finances, 38 percent of survey participants said they currently have a financial plan for themselves; another 23 percent claim to be making financial plans in 2016.
- Thirty percent of survey participants currently contribute to their 401(k) plan; an additional 28 percent will be doing so in the near future.
- Owning life insurance (30 percent), investing in stocks (29 percent) and contributing to a 401(k) (28 percent) also emerged as top next steps survey participants intend to take.
“Our research is consistent with our impression of the financial well-being of the average American: while our national economy may have pulled out of the depths of the recession, the after-effects are still being felt, with many Americans still struggling to get ahead financially,” said Aaron Vermut, CEO of Prosper Marketplace. “With the current economic volatility, the power of having a clear plan in place—whether that be consolidating debt at a lower, fixed rate; cutting expenses; or creating a better strategy for saving—is instrumental in helping people feel in control of their finances.”
Personal Finance Technology Bolsters Control
The adoption of new financial technology and its impact on Americans’ sense of control was also examined, particularly the rise of apps to manage finances. Findings include:
- Sixty-five percent of those surveyed are currently using technology to improve their financial well-being, and those people say it’s making them feel more in control of their finances (84 percent).
- The majority of respondents use between one and three applications to manage their financial lives, and most use those apps at least a few times a week.
- A growing number of survey participants are also using personal financial management tools such as BillGuard (29 percent) and marketplace lending services like Prosper (16 percent).
- Tech adoption will continue to grow; 18 percent of people who are not currently using online apps or sites for finances say they plan to do so.
To read the full Prosper Marketplace Wellness Study, visit the Prosper blog.
The survey was conducted on Prosper Marketplace’s behalf by Market Cube between December 2, 2015 to December 9, 2015 among 1,000 Americans aged 18 or older with decision-making power with respect to their finances. The margin of error is 3.1 percent.
Prosper is built on a simple idea: connect people who want to borrow money with those that have money to invest. Prosper is an online marketplace that gives borrowers immediate access to a huge pool of individual and institutional investors. Borrowers get low, fixed rates with no hidden fees or prepayment penalties. Investors can earn great returns through the platform’s data-driven underwriting for personal loans, creating a new and diverse investment opportunity. Through Prosper, more than $6 billion in personal loans have helped borrowers consolidate their credit card debt, pay for large purchases, make home improvements and even cover unexpected medical expenses. Prosper Marketplace is headquartered in San Francisco, with offices in Salt Lake City, Phoenix and Tel Aviv. Learn more about borrowing and investing through Prosper at www.prosper.com. The Prosper lending platform is owned by Prosper Funding LLC, which is a subsidiary of Prosper Marketplace. Follow Prosper on Twitter @ProsperLoans.