‘Rent Burdened’: 30% of Americans have taken out a loan to help pay their rent, half of them in the past year

‘Rent Burdened’: 30% of Americans have taken out a loan to help pay their rent, half of them in the past year
Moving in can be quite exhausting.  image bank

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While most renters are interested in owning a home in the future, this is still a goal years away for many. According to a new survey, the majority of renters surveyed say they currently cannot save money.

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The new survey by the Piñata rewards app – a program that works with renters to build their credit and get cash back to pay their rent – found that 64% of renters surveyed say they are not in able to save at all at this time, let alone a down payment, confirming their status as an “encumbered tenant”. Additionally, the survey found that 30% of respondents said they had ever taken out a loan to help pay their rent, and half of those respondents had done so in the past year.

Lily Liu, CEO of Pinatatold GOBankingRates that with many tenants financially impacted by the pandemic due to job losses and other unforeseen challenges, it’s unfortunate – but not surprising – that loans have been needed over the past year to make ends meet.

“With home prices jumping 9% from the previous year and another 9% expected this year, more potential homeowners will stay as tenants,” Liu said. “With more people renting and fewer units available, rental prices have skyrocketed, even surpassing pre-pandemic levels. Based on these statistics, we can infer that tenants may continue to need additional support to make their monthly payments. But we hope things will improve for tenants, as residential building permits will increase by more than 25% per year.

She added that this increase in new rentals could help meet demand, reduce competition and reduce the competitive prices tenants currently face.

The survey also found that 38% of respondents said they wish they could save for a home right now. Asked what tenants can do to reach the goal faster, Liu said to work on building your credit.

“Obviously saving money for a down payment is important, but having good credit is a major factor in buying a home, from the impact on interest rates to even getting a approval,” she said. Indeed, the survey noted that 25% of renters surveyed don’t even know their current credit score, and 30% weren’t actively doing anything to improve their score.

“There are many ways to build credit, including paying your credit card bill, car payments, or student loans on time each month, but these options may not be possible for everyone. In fact, 45 million adults are considered invisible credits, which can result in these Americans being completely excluded from financial systems in the United States,” she said. “While renters make up 36% of the 122.8 million households in the United States, their biggest monthly expense isn’t helping them build credit. In fact, many tenants are unaware that their monthly rent payments don’t automatically impact their credit. »

Using apps like Piñata can help achieve this goal, as it reports rent payments to a major credit bureau for free.

“According to research by TransUnion, rent reports can boost a person’s credit score by an average of 60 points, which can give them access to better mortgage rates,” Liu said.

Other recommendations would include having a strict budget, ideally with a savings goal, to track your spending and see where you can cut.

“Consider if there are any hustles or opportunities to earn extra money. Try rounding apps that automatically round to the nearest dollar on your purchases, helping you increase your savings in small, automated increments “, she said.

Other survey results indicate that less than 10% of respondents said they currently save more than $500 per month. Of these, 55% say they can only save for an emergency rather than a major future purchase, and only 31% said they are saving for a home.

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“The majority of respondents admitted to not being able to save at all right now, not even necessarily for a house,” Liu said. “While that doesn’t really sound surprising, given the current economy and inflation rates, it should give anyone pause. Talk to almost any financial adviser and they’ll tell you the classic rule and well established that you should save 20% of your income. It’s a big deal if half of the 100 million Americans who rent are potentially unable to save money. That means a large portion economy is at risk and cannot afford to buy a home, let alone pay for unforeseen emergencies.

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About the Author

Yael Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a VP/Senior Content Writer for major New York-based financial firms, including New York Life and MSCI. Yael is now independent and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Toulouse-Jean Jaurès University, France.

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