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June 2024

Help improve your borrowers' financial well-being with payment protection

Making ends meet is hard — very hard — for most Americans.

As of January 2024, 62 percent of Americans report living paycheck to paycheck, an increase of 2 percent from a year ago. That's data from New Reality Check: The Paycheck-to-Paycheck Report by PYMNTS Intelligence.1 This includes 36 percent of consumers with incomes of more than $200,000 a year and means that for most individuals or families, their income barely covers essential living costs like housing, groceries, transportation and utilities.

Rising inflation and stagnant wages are partially to blame. Although inflationary pressures have mostly eased — to 3.8 percent from a peak of around 9.1 percent in June 2022 — average prices remain higher than they were three years ago.2

No margin for error creates stress

Living paycheck to paycheck means that missing just one paycheck can be devastating, and the thought of that is extremely stressful. In a recent survey of more than 2,000 people conducted by Securian Financial, over half of consumers feel that increasing prices and stagnant salaries make meeting loan or credit card payments more stressful.3

This is especially true if they have multiple loan payments to prioritize. The majority are also concerned with how their existing loan might negatively affect their credit score. One respondent said “Pay is staying the same and the cost of everything is going up. Just living and paying normal bills is hard.”

Unexpected costs or events make it even more difficult. Another respondent noted, “I had a personal hardship last year that prevented me from working all year, and it consumed my savings. Now I need to figure out how to pay for a loan that I had no problem paying before the unexpected hardship.”

Loss of income or employment are most common reasons for default

A quarter of those surveyed have defaulted/stopped making payments on a loan, with most reporting loss of income or job loss as the reason. Other reasons included unexpected expenses such as car or home repair, medical or disability issues, and divorce.

Consumers worry about making loan payments and how it can impact their credit score. Sixty–four percent of consumers are worried about a current or existing loan negatively affecting their credit score.

Payment protection can ease the worry

Payment protection, also known as credit insurance, reduces or pays off a loan balance or makes monthly payments if something unexpected happens, such as involuntary job loss, disability or death. This insurance can be offered with a loan or credit card. Payment protection refers to our suite of products that support lending solutions sold through financial institutions. These products include debt protection and credit insurance. For more information, check out payment protection (debt protection).

The peace of mind it brings is well worth it — 80 percent of those who bought payment protection were satisfied with their decision to purchase. They found the small added cost to be worth the protection of their finances and credit score, if they were no longer able to make payments.

“It doesn’t cost much, and it gives me peace of mind if something unexpected happens,” noted one survey participant.

They would buy it again and recommend it to others

An overwhelming majority of those we surveyed — 75 percent — said they are likely to purchase the product again and would recommend it to others taking out a loan.

This provides financial institutions with a fantastic opportunity to help those in underserved markets and the many people making a solid income but still living paycheck to paycheck.

Consumers also told us they want to learn about the protection product early in the process but want to apply for it along with the loan, for convenience and logistics. Big opportunities exist to aid these consumers.

Learn more about consumer preferences and our products. Contact a Securian Financial consultant today.

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1. New Reality Check: The Paycheck-to-Paycheck Report, February – March 2024 Report. PYMNTS Intelligence. Murray S, Muñiz M, Suydam M.

2. New Reality Check Report. Murray S, Muñiz M, Suydam M.

3. Unless otherwise noted, all statistics are from the Securian Financial proprietary survey conducted in February 2024.

DOFU 6-2024