Three Ways to Jumpstart Troubled Borrowers’ Debt Repayment Efforts
By Mariel Beasley, SaverLife
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In a recent survey, one-third of more than 1,400 low- to moderate-income SaverLife members described their debt as unmanageable. Yet, a lack of awareness of debt management tools wasn’t the factor holding them back from seeking help. Nearly three-quarters knew about debt-management resources, but few were actually using them, mostly because of distrust.
That disconnect captures a challenge for financial institutions. The industry has spent years giving people more information about debt: calculators, educational content, repayment strategies, credit monitoring, and increasingly sophisticated digital tools.
But knowing what to do and doing it are two very different things.
• People may understand that paying more toward debt would help, but they’re worried about having too little room in their monthly budget.
• They may know credit counseling exists, but are wary of fees or scams.
• Or the ideal financial action may simply feel too difficult to take right now.
No amount of additional information, on its own, can solve those problems.
Need to Know:
- 73% of respondents to a survey were aware of debt-management resources, but few actually used them, mostly because they didn’t trust them.
- SaverLife conducted a series of behavioral interventions with 100,000 members to better understand what can move people from recognizing a debt problem to being more likely to move forward.
- The results show that people don’t necessarily need more information or resources. Instead, they need useful, reasonable guidance for how to begin tackling their debt.
- Three lessons for banks and credit unions designing tools to help customers: make the next step personally relevant, make the first action achievable, and make progress worth starting.
Over the last year, SaverLife, an app-based nonprofit fintech with more than 800,000 members, interacted with more than 100,000 members to better understand what can help people move from recognizing that they have a debt problem to being more likely to do something about it.
1. Make the Next Step Personally Relevant
Generic information puts the burden on the consumer to determine what applies to them. Personalization can help close that gap and move someone to act.
In one experiment, approximately 1,000 members were invited to use an AI-powered debt diagnostic. Rather than blasting out a recommendation, the experience asked a series of questions about each person’s circumstances to suggest a more customized path forward. Engagement was high: 87% of members who started the diagnostic completed it, and 35% continued on to additional debt or credit support.
Key insight: We saw an especially striking difference around credit counseling. Members who received a personalized recommendation to speak with a counselor through the diagnostic took the first step at a rate that was ten times the typical rate we see when we encourage counseling through traditional email outreach.
The takeaway isn’t that every bank needs an AI debt diagnostic. It’s that information becomes more useful when someone doesn’t have to figure out for themselves what applies to their situation, and even more so when the next step is teed up.
Technology increasingly allows providers to move from saying, “Here are the things you could do,” to, “Based on what you’ve just told us, here’s a good place for you to start.”
That refinement can mean a world of difference for someone seeking help.
It also creates opportunities to engage people when they are already thinking about their finances, rather than asking them to act through a message that arrives out of context.
In our case, people shared more about their debt, reflected on whether it was a problem for them, and began considering what they might want to do about it. Even when they were not ready to act immediately, the experience created space for that thinking to begin.
Read more: Why the ‘K-Curve’ Demands Proactive Strategies from Banks Right Now
2. Make the First Action Achievable
Key insight: The most financially beneficial action isn’t always the one with the biggest immediate impact.
We saw that in another experiment involving 110,000 members. We tested different messages encouraging people to take steps to address debt, including rounding up their payments, aligning payments, and setting up automatic savings.
The simplest suggestion performed the best. The message encouraging members to round up a current debt payment generated 43% more engagement than the other recommendations.
Why? For someone with little breathing room in their monthly budget, a generic suggestion to pay down debt faster can feel daunting … and out of touch.
On the other hand, suggesting that they round up a payment by a few dollars is a concrete, manageable action. It preserves control and does not require someone to completely overhaul a budget or make a large financial commitment.
Key lesson: For providers, designing a program around a behaviorally achievable action rather than the mathematically optimal one can make all the difference.
While a small first step won’t necessarily eliminate a large debt balance right away, getting someone started can create momentum and provide evidence that progress is possible, potentially opening the door to larger actions later.
Read more: How Chase Is Evolving Its Consumer Products from ‘What Can I Do Now?’ to ‘What Should I Do Next?’
3. Make Progress Worth Starting
Even when someone wants to improve their finances, today’s needs can compete with tomorrow’s goals. A modest incentive can help close that gap by making a beneficial action feel more immediate.
How this can work: We explored this idea through SaverLife’s debt pledge, which encourages members to commit to increasing a monthly debt payment. As part of the test, we provided a small incentive to participate in the pledge and paired it with recommendations for how much more they might contribute.
Across the pledge experience, 20% of the participants committed to increasing their loan payment, and by an average of $18. Interestingly, those with larger payments were more likely to commit to a larger extra payment.
An incentive or reward can lower the psychological hurdle to getting started, while an achievable commitment gives someone an opportunity to turn intention into repeatable behavior.
For households managing tight budgets, even small increases in repayment can lead to dramatic changes over time.
For providers, incentives don’t need to be large or permanent, but they do need to be strategic. They can be reinforcements that make the benefit of taking a single action more immediate.
Understand that the goal is not to pay people to make good financial decisions. It’s to design an experience in which taking a one-time positive step feels more worthwhile and attainable.
Read more: Banks Must Act as Consumer Credit Stress Begins to Spread
Design for the Moment Between Knowing and Doing
America’s debt crisis is about action, not information.
- People know when they are struggling with debt.
- They even know that solutions exist.
- But they are challenged to begin.
These experiments demonstrate the power of better behavioral product design. Providers need to understand what is relevant to an individual, reduce the friction in getting started, build trust, and create opportunities for people to progress.
Those insights and abilities can lead to products that have the ability to bridge the gap between information and action. They make the first step toward attacking debt relevant, manageable, and achievable enough to take.
Read next: How Privatization of Student Lending Creates Opportunity — and Risk
