‘Survival Debt’ Drives More Borrowers Toward HELOCs

Consumer financial stress keeps climbing, reaching a new high in the first quarter of 2026, according to the financial stress forecast from National Foundation for Credit Counseling (NFCC). 

The financial stress forecast reached 6.8 in the first quarter of 2026, up from 6.5 in the fourth quarter of 2025. A growing number of NFCC clients are struggling to stay afloat financially. They are so overextended, they don’t have money for a structured repayment plan after covering their basic expenses. 

“Our forecast of 6.8 tells us who is going to hit the wall tomorrow,” said Mike Croxson, Chief Executive Officer of the NFCC. “We are seeing a disturbing shift from discretionary debt to survival debt. When the financial buffer runs out, the climb in stress isn’t gradual. It’s vertical.” 

Tightening of Credit for Subprime Borrowers

Credit limits may be rising for prime borrowers, but this is not the case for subprime borrowers for whom credit has been tightening. In addition, the credit that is available to subprime borrowers comes with high interest rates, NFCC data reports. 

How high are credit card interest rates? According to Forbes Advisor, the average credit card interest rate is 25.35%. Subprime borrowers may be charged even higher rates.  

Masking Signs of Consumer Distress

According to NFCC, traditional credit reporting models do not capture the full financial picture of consumers because consumers are making credit card payments a priority over other financial obligations. They do this to remain liquid, but it also masks their financial fragility until they tumble into default. 

Higher-Income Clients Have Debt Problems

It’s not just lower-income consumers struggling with debt problems. At NFCC, the average client makes about $70,000 a year and carries $35,000 in unsecured debt. Before the pandemic, an average client made about $40,000 a year and had $10,000 in unsecured debt, The Wall Street Journal reports.

More Homeowners Tapping Home Equity

More homeowners are tapping the equity in their homes for their credit needs.  

Balances on home equity lines of credit (HELOC) grew by $11.6 billion to $434 billion in the fourth quarter of 2025, according to a report from the Federal Reserve Bank of New York. Limits on HELOCs increased by $25 billion, continuing an expansion that began in 2022. 

The Bottom Line

When it comes to their finances, consumers are feeling stressed. In fact, an indicator of financial stress reached a new high in the first quarter of 2026. Financial stress is not just limited to people with lower incomes. People earning higher incomes are dealing with financial stress as well.

The average client at NFCC makes $70,000 a year but is saddled with $35,000 in debts.

Homeowners are tapping into the credit in their homes with balances in HELOCs growing $11.6 billion to $434 billion in the fourth quarter of 2025.