High earners also struggle with emergency costs, study finds

A young high-earning couple anxiously discusses their finances on the couch. They weren't expecting so many unexpected expenses and emergency costs to come up in one year and they need to borrow money to pay for it all.Image: A young high-earning couple anxiously discusses their finances on the couch. They weren't expecting so many unexpected expenses and emergency costs to come up in one year and they need to borrow money to pay for it all.

In a Nutshell

A new analysis of Credit Karma data finds six-figure earners are among those who look to borrow money to deal with unexpected expenses.
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Would a six-figure salary shield you from having to borrow money in the face of an unexpected expense?

Not necessarily, according to a new analysis of data from approximately 1.5 million Credit Karma members who recently sought prequalification for a personal loan.

High earners, members making $100,000 or more per year, represented 8% of people seeking prequalification for a personal loan through Credit Karma’s website or mobile app in the first three months of 2018.

What’s more, over one-third of high earners in this group said unexpected expenses prompted their interest in a loan. And high earners were more likely to seek larger loan amounts than middle- or lower-income earners.

Key findings

34% of high earners seeking prequalification said they wanted a personal loan in order to cover unexpected expenses, which could include emergency costs
47% of six-figure earners looking for a personal loan said they wanted a loan for debt consolidation (including credit card refinancing)
Nearly one-third of those making $100,000 and up sought loans for $30,000 or more
High-income earners represented 10% of the members who sought loans to help cover unexpected costs
People making $100,000 or more annually accounted for 21% of the members who sought loans for debt consolidation (including credit card refinancing)
Approximately half of the people who sought loans of $30,000 or more were looking to borrow an amount that represented more than 50% of their annual income

People across income levels seek personal loans for unexpected expenses

The relationship between debt and insufficient emergency savings isn’t exclusive to lower- or even middle-income individuals. Credit Karma’s data suggests that unexpected expenses can be a problem for people across income levels.

Regardless of income, Credit Karma’s data showed that covering unexpected expenses was the second-most-cited reason for seeking a loan, behind refinancing credit card debt:

Loan purpose % of loan seekers
Credit card refinancing 38%
Cover an unexpected cost 27%
Major purchase 13%
Home improvement 9%
Other 7%
Debt consolidation 6%


Among those who sought a personal loan to cover unexpected expenses, 10% made $100,000 or more a year.

Research from the Federal Reserve offers some insight into the types of emergency expenses Americans of all income levels might face. According to the Fed’s 2017 Report on the Economic Wellbeing of U.S. Households, which includes survey data from the 12-month period ending October 2016:

  • 23% of adults faced unexpected out-of-pocket medical expenses
  • A quarter reported skipping health treatments they couldn’t afford
  • Nearly a third of adults or a family member living with them experienced a financial hardship
  • 13% of adults had a family member who experienced significant health problems
  • 12% of adults had a significant health problem of their own
  • 8% saw their work hours and/or wages reduced
  • 7% lost a job

Higher earners look to borrow more

Across earning levels, the majority of Credit Karma members from our study sought personal loans to either deal with current debt (credit card refinancing and debt consolidation) or to take on new debt to cover unexpected expenses.

Loans between $10,000 to $15,000 were the most requested loan amounts, with 38% of those across all income levels seeking loans in that range. The majority of loan-seekers (83%) reported incomes between $25,000 and $75,000.

However, higher income earners were significantly more likely to request larger loan amounts than were middle- and lower-income earners:

  • 29% of higher earners said they were seeking loans of $30,000 or more
  • 47% of higher earners sought loans of at least $20,000
  • 4% of those earning less than $25,000 wanted to borrow $30,000 or more

About half of people who sought loans of $30,000 or more were looking to borrow an amount that would be more than 50% of their annual income.

Tips for coping with unexpected expenses

According to the Federal Reserve’s report, when Americans at any income level lack sufficient savings to cover a variety of emergency expenses, many may fall back on strategies that can increase their debt load – and worsen their financial struggles.

The report found that for those who wouldn’t be able to pay an emergency expense in full, 45% would pay with a credit card to pay the expense over time, 29% would borrow from a friend or family member, and 8% would use money from a bank loan or line of credit. It also found that 5% would resort to a payday loan, deposit advance or overdraft.

When an unexpected expense comes up, it’s important to carefully weigh your options and think through how you’ll pay for it. Here are some money tips that could help:

What are your borrowing options?

If you need to borrow to cover an emergency expense, you have options beyond your credit card. A personal loan can be a helpful way to manage your debt over a longer period of time, and it could even cost you less in interest than if you charged the unexpected expense and carried the balance on your credit card. It helps to do some comparison shopping to find the best rate available for you.

Can you arrange a payment plan?

Service providers may be willing to work out a payment plan that can cost you less in the long run than you would pay in interest if you borrowed the funds. There’s no charge to ask a mechanic, contractor or even a healthcare provider if they would accept payment over time.

Can you fix it yourself?

Some emergencies may have DIY fixes. Is your car problem or home issue something you or a knowledgeable friend can repair for the cost of parts or materials? Can you come up with the money you need by cutting spending in less important areas?

Get proactive with an emergency fund

A great way to deal with an emergency expense is to have the cash you need already saved in an emergency fund. If you don’t have one, start one. Consider having a portion of every paycheck automatically deposited in a separate, interest-bearing savings account until you reach your savings goal – typically several months’ worth of expenses. Resist the temptation to dip into the fund for anything but a true emergency.


To generate this analysis, we drew on information provided by approximately 1.5 million U.S. Credit Karma members who sought prequalification for a personal loan through Credit Karma’s website or mobile app between Jan. 1 and March 26, 2018. In the prequalification process, members self-report individual annual income and their reason for seeking a personal loan. Prequalification applicants may or may not have applied for and received approval for a personal loan through Credit Karma partners. The percentages reported in this article have been rounded to the nearest whole percent.

About the author: With nearly 30 years of experience in media, marketing, public relations and journalism, Evelyn’s written about nearly everything — from newspaper accounts of salacious capital murder trials to whitepapers on what typ… Read more.