Despite recent gains in the U.S. economy, nearly half of all Americans live paycheck to paycheck, Time magazine reports
Citing data from the Washington-based nonprofit Corporation for Enterprise Development, Time reported that 44 percent of Americans are considered "liquid asset poor,"
meaning they have less than three months of savings — $5,887 for a family of four, or three times the monthly income at the poverty level.
According to the data, more than half the country, about 56 percent, has subprime credit, meaning weakened credit histories that are likely to include delinquent payments, charge-offs, judgments, or bankruptcies against them.
"If a liquid asset poor family faces an unforeseen expense, such as a broken down car or a medical bill, they have to borrow to cover the tab," states the Enterprise Development report. "For the 56 percent of consumers who have subprime credit scores, the only option may be to take out a high-cost — often predatory — loan, which can create a cycle of debt and worsen financial insecurity."
Because of the higher risk of default than loans to prime borrowers, subprime lenders charge higher percentage rates.
The report says that one-quarter of the "liquid asset poor" are middle income households who earn between $56,113 and $91,356 annually.
"The majority of the liquid asset poor are white (59%) and employed (89%), and nearly half (48%) have at least some college," the report states, noting that 51 percent of liquid asset-poor families with children are headed by two parents.
According to the Enterprise Development data, nine of the 10 states with the highest percentage of liquid asset-poor are in the South: Alabama, Mississippi, Georgia, Kentucky, Arkansas, North Carolina, Tennessee, Louisiana, Texas, and Nevada.
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