Americans Use Short-Term Loans to Pay Off Debt

Bills on the floor in debt

American debt is at an all-time high. How did we manage to dig ourselves into a steep $13 trillion hole? Credit card debt alone accounts for $1 trillion of this debt, with the average balance over $6,000 per capita. Student loans, credit card debt and other long-term debt continues to skyrocket as the cost of higher education and living increases.

It’s to the point where people are taking desperate measures to make their debt payments. Just how many Americans have to resort to risky short-term loans to pay down long-term debt?

We conducted a survey asking Americans if they’ve ever taken out a short-term loan in order to make a payment on their credit card or other long-term debt.

Key Findings:

  • 33% of Americans are going into debt to pay off debt
  • Generation X is most likely to incur short-term debt to pay down long-term debt
  • Women who use debt to make other debt payments tend to do so multiple times

33% of Americans are going into debt to pay off debt

1 in 3 Americans obtain short term debt to pay down long term debt

Over 30 percent of Americans said that they have used a short-term loan to pay down long-term debt. Of those, 1 in 4 said that they’ve done so on several occasions. This is risky because short-term loans can put your finances in jeopardy.

The problem with short-term loans is that they have extremely high interest rates and short repayment periods. Whether it’s a cash advance, payday loan, home equity loan, or another personal short-term loan from a bank, it’s riddled with liabilities.

Short-term loans are easy to acquire which makes them enticing to people who need money quickly. Unfortunately, they lead to an even more vicious debt cycle. If you don’t have the money to make long-term debt payments, paying excessive fees and rates in just a few months may be nearly impossible, leading to more loans.

Generation X is most likely to incur short-term debt to pay down long-term debt

Gen X is more likely to make debt payments using short-term loans

Gen Xers make up a hefty 61 percent of those who said they’ve used short-term loans to make debt payments, while millennials only account for under a quarter.

What’s more, a third of the Gen X members who have used debt to pay off debt have done so multiple times. Not only is Generation X more likely to amass short-term debt in order to pay down long-term debt, but they’re more likely to resort to it more than once.

As the younger generation is beginning to buy real estate and make other large purchases, why is Generation X in more debt?

They are the generation with the most non-mortgage debt, or debt not secured by real estate. In other words, Gen Xers have the most credit card and auto debt, student loans and other long-term loans. This adds up to over $30,000 of debt, exceeding millennials and baby boomers by about $7,000 and $3,000, respectively.

Women are More Likely to Acquire Multiple Loans

Women are more likely acquire multiple high interest loans to pay debt

Of the Americans who responded yes to whether or not they’ve used short-term loans for debt payments, gender was split nearly down the middle at 49 percent male and 51 percent female.

However, women are more likely to use short-term, high-interest loans to pay long-term debt multiple times. Among the men and women who said they defer to this payment method, nearly 30 percent of females admitted to doing it more than once as compared to 20 percent of males.

This means that gender doesn’t play a role in whether or not people have to resort to acquiring risky debt in order to make other payments. But when it comes to how often this happens, the data is skewed toward women.

62 million Americans sought a short-term loan to pay their debt.

The survey results showed that 25 percent of Americans have used short-term loans to pay long-term debt one time, and 8 percent of Americans have done this at least twice. This means that together, a third of American adults (a number greater than 80 million) are acquiring debt in order to pay other debt.

This is a broken system and an inescapable cycle. In fact, 22 percent of Gen Xers think it’s nearly impossible to get rid of significant debt once it’s been obtained. Another quarter, likely with some overlap, aren’t confident about the way they manage their finances.

Americans are drowning in so much debt that the only way to find temporary relief is to get into more debt. It’s crucial that we teach future generations how to manage money and repair their credit so they won’t get stuck in the same insidious debt circuit.


The statistics in this post came from one survey question facilitated by Survey Monkey. The sample consisted of 268 Americans and ran during February 2019. Post-stratification weighting was employed in order to attain a sample that is representative of the population.

Sources: Money | CNBC | Bankrate | MSN