Many American households facing the affordability crisis today find themselves cash-poor. They are living paycheck to paycheck and teetering on the edge of financial ruin from an unexpected expense that they cannot pay for.

Financial options to access cash in a crunch exist from fintech to small-dollar loans to buy-now-pay-later options. A new analysis, the 2025 Cash Poor Report, presents a profile of America’s cash-poor and explores the costs of borrowing cash through short-term loans.

Policymakers are increasingly looking for ways to crack down on short-term loans. If they succeed in limiting access to credit by capping interest rates on loan products or other measures, the people that will be hurt are the cash-poor, those who need as many options to cash as possible.

The 2025 Cash Poor Report

SoLo Funds, a community finance platform, has released its annual report examining cash-poor Americans and the costs they face in borrowing money to cover unexpected expenses.

According to the report, just 25% of cash-poor Americans can cover unplanned expenses by tapping savings or credit cards. Furthermore, only 7% of Americans living paycheck to paycheck can’t cover their unplanned expenses.

These individuals turn to short-term loans as a means of covering those expenses, the top three of which are auto repairs, medical bills, and utility bills. It’s encouraging that they averaged 2.5 unplanned expenses last year, totaling $1,825 at $730 each, which means they are not living off short-term loans.

The report also captures the demographics of cash-poor Americans:

  • Young: 2/3 are Millennials and Gen X.
  • Female: 54% of cash-poor Americans are women.
  • Racial Minority: 14% are African American.
  • Employed: 40% of cash-poor Americans have a full-time job.
  • Working and Middle-class: one in seven cash-poor households earn over $75,000 annually.
  • Banked: 1/3 have a savings account and 3/5 have a checking account.

When cash-poor Americans don’t have access to short-term loan options, their alternatives are to turn to other channels: borrowing money from friends or family (43%), selling possessions (23%), pawning possessions (16%), taking out a payday loan (11%), and crime (2%). 

There are other impacts of being cash-poor:

Lacking resources and sufficient income for emergencies, cash-poor Americans experience a cascade of other issues; they are forced to cut consumption in other areas, take hits to their credit, and suffer negative impacts on their mental and physical health. In fact, 36% of this group reported experiencing a negative impact on their mental health, a 20% increase over the prior year. And the negative impacts linger, with cash-poor Americans reporting that it takes nearly 5 months for their situations to improve after a setback from an unplanned expense.

The 2025 Cash Poor Report

Although short-term lending options come with costs, they still remain viable options to meet needs. This report is biased towards providing more innovation in peer-to-peer lending as a less costly solution than credit cards and small-dollar loans. 

Policy Matters

Accessing credit is critical today. As the 2025 Cash Poor report illustrates, women especially need options. We don’t favor one form of financial options over another.

Consumers need to be informed about each but, most importantly, have as many options as possible. Policymakers need to understand that when they propose policies that will limit short-term loans, such as a federal rate cap on all small-dollar loans, they will restrict options, and that’s the intention.

For example, Destyni Dindy, an athlete-turned-entrepreneur, responsibly used short-term loans to help her build her business.

We have fact-checked oft-cited statistics about high interest rates charged:

While it is technically true that short-term loan rates can be incredibly high, these loans are used differently than the long-term loans that most people use for, say, a house or car. So the annualized interest rate is misleading and should be understood as a separate type of product.

Federal policymakers have sought to implement a national 36% rate cap. That will nationalize the hardship from state-level rate caps while failing to deliver the benefits as I explained previously:

My colleagues and I have written over and over about small-dollar lending. IWF dedicated a policy focus to explaining why about 7 million unbanked households Americans turn to non-bank lending services to help them when a financial need arises. Installment loans offer access to vital credit when other forms of cash or credit (such as credit cards, bank loans, and savings) are out of reach.

Furthermore, capping interest on credit cards punishes low-income borrowers, as I explained in RealClear Markets:

Former President Donald Trump has proposed capping interest rates that consumers pay on their credit cards to 10% to provide them with temporary relief. History tells us that good intentions can still lead to negative outcomes. Past efforts to cap interest rates on other financial products have backfired on low-income consumers in unexpected ways. We would not want the same to happen with credit cards.

While the intention of wanting to ease financial burdens on Americans is right, the solutions presented in limiting access to short-term loans and other options will do more harm than good.

We need more Americans to earn more and keep more of what they earn. Perhaps then we can move more Americans out of cash-poor status.