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Mental health and debt: how it affects us and how to recover

Don’t let debt impact your mental health - this practical guide to financial support can help you get control over your money issues
Discussing debt worries and taking the first steps to find advice on how to handle it can help Credit: Pexels/Ekaterina Bolovtsova

Debt has a massive impact on our mental health. Even before the COVID-19 pandemic, the link between money and mental health was clear. Covid has put all our finances under stress, and there’s a spiralling cost to our mental health too.

Laura Whateley speaks to leading mental health charities for our guide on how to cope, with tips, support and insight to get your bank balance – and your stress levels – back on track.

Mental health and debt 

Concerns about owing money, being bombarded by bills or chased for payment can lead to stress or anxiety disorders.

Those who already live with mental health conditions such as depression or bipolar may have more difficulty controlling spending, find it a challenge to open bank letters, keep on top of a budget, or stay in well-paid work during periods of ill health.

Research by charity the Money and Mental Health Policy Institute found that the typical average income for people with common mental health conditions is £8,400 lower than for the rest of the population. Those with experience of mental health problems would be three times more likely to run out of money within a week if they lost their main source of income.

“Mental health and debt problems can be a marriage made in hell,” says Conor D’Arcy, head of research and policy at the charity. “The two issues feed off each other, creating a vicious cycle which can destroy lives.”

Mental ill health is one of the main reasons cited by those contacting National Debtline for debt problems, says Jane Tully, of the Money Advice Trust, the charity that runs National Debtline and Business Debtline. It estimates that nearly half of people in problem debt are also experiencing a mental health problem.

Unsurprisingly, that is set to rise. National Debtline is already hearing from more clients who are unemployed as a result of the pandemic.

Anxiety, depression and COVID-19

Two-thirds of new clients who contacted the debt charity StepChange between May and November last year reported struggling with anxiety, and 62 per cent experienced depression.

Covid-19 is exacerbating the divide between those who have adequate income and resilience, and those for whom an income shock becomes a debt spiral”, says Sue Anderson of StepChange.

“Debt is hugely stressful at the best of times, and coping with it in the midst of an ongoing global pandemic is particularly difficult. For many people, the uncertainty of not knowing whether their long-term financial future will recover is a very particular form of worry.”

Face up to your debt

It doesn’t help that we Brits do not find talking about money, and debt in particular, very easy, and many suffer in silence. The nature of debt, however, means that the longer you ignore the problem, the more it grows.

“A third of the people we help wait more than a year before contacting us, during which time their situation can worsen,” says Tully. “Taking this first step can feel like the hardest, but more than three quarters of the people we help said their emotional and mental wellbeing improved after seeking advice.”

We asked James Jones from Experian to share his tips for three simple steps that can help you get on top of your money worries.

Banks, credit cards and payment holidays

Don’t be afraid of calling those you owe money to, such as banks or credit card companies, to explain your situation or discuss your options. They may be more forgiving than you anticipate. Most lenders are offering payment holidays during the pandemic, and should take mental health conditions into consideration.

“They may be able to make adjustments based on your circumstances,” says Tully, “including allowing you extra time to gather information, payment deferrals and agreeing to contact you at set times only.”

Looking after loved ones in debt

If you have concerns about a friend or loved one’s well-being, trust your instincts, especially if you’re aware that debt may be playing a part”, says Anderson. “Making yourself available to talk is hugely valuable as many people experiencing debt feel uneasy about talking to loved ones about it. The NHS has put together a list of various organisations that can provide anonymous emotional support over the telephone, email, and in some cases, webchat.”

Top tips to start managing your debt

  • This National Debtline and the Money and Mental Health Policy Institute fact sheet outlines how to start dealing with debt, including how to fill out a ‘Debt and Mental Health Evidence’ form to present to creditors.
  • National Debtline and StepChange offer independent, free, anonymous and compassionate advice over the phone or online. They can discuss your rights to “breathing space” – where you can ask lenders not to chase money you owe for 30 days while you get debt advice.
  • Beware predatory organisations offering to help for a fee. National Debtline and StepChange are free.
  • StepChange has a specific Covid Payment Plan for those facing financial uncertainty linked to the pandemic but who expect their income to recover in the future.
  • Experian has useful tips and advice on how to start tackling your debt and regular updates that give advice on how you can find extra support if you are struggling financially during the pandemic.
  • Some banks offer help to budget or add “friction” back into spending, borrowing or gambling. Some let you block gambling websites from your debit card, while others including Barclays let you set spending blocks for specific retailers.
  • Lloyds offers a Trusted Person Card, and Starling Bank a Connected Card, to help you safely share access to your account if you can’t get out or prefer someone else to manage your day to day finances.
  • You can add a temporary notice of correction (up to 200 words) to your credit reference files, outlining anything you’d like a bank to consider before lending to you. Applications may take longer to assess, which may buy you time to decide if you really want to borrow more.