Report Warns Mental Health of Britons Being Affected By Soaring Personal Debt

November 22, 2013

Luke-Notley small (Custom)Although there are signs of national economic recovery, Britain’s personal debt has reached £1.4tn – almost the same amount as Britain’s national economic output – according to a report by the Centre for Social Justice.

The report, entitled Maxed Out, says that those less well-off are “bearing the brunt of a storm” as average household debt has risen to £54,000 – nearly twice what it was a decade ago.

According to the report, more than 5,000 people are being made homeless every year as a result of mortgage or rent arrears.

There is a chance that the number of households being made homeless will increase in the coming years should interest rates rise, the think-tank warned.

Households in the lowest income decile have average debts more than four times their annual income, the study found, with almost half of their gross monthly income going towards debt repayments.

The report warns, “Rising personal debt levels represent a significant problem for people in Britain.

While most personal debt is healthy and manageable, such as an affordable mortgage, student loan or low-interest credit card used to bridge income gaps, for many people their debt has become unhealthy and unmanageable.

‘While people of all income levels can end up seeking debt advice or declaring bankruptcy, the problem of debt seems to be more of an issue for low-income and vulnerable households.

‘A perfect storm of rising living costs, decreasing real wages, low savings and expensive credit seems to have pushed many to the edge and over a financial cliff edge.”

Christian Guy, director of the think-tank, which was established by the work and pensions secretary Iain Duncan Smith, said: “Years of increased borrowing, rising living costs and struggling to save has forced many families into a debt trap that is proving very difficult to escape.

Problem debt can have a corrosive impact on people and families. Our report shows how it can wreak havoc on mental health, relationships and wellbeing. Across the UK people are up until the early hours worrying about their finances and bills.

‘Some of the poorest people in Britain are cut off from mainstream banking and have no choice now but to turn to loan sharks and high-cost lenders,’ he said.

Payday loan companies have seen an increase in business from £900m in 2008-09 to more than £2bn in 2011-12, with 310,000 people turning to loan sharks.

The report says, “For the most financially excluded, there is often no option but to turn to illegal moneylenders. It is estimated that over 310,000 people borrow money from these criminals each year. Illegal moneylenders extort money from their victims, often arbitrarily raising interest rates, demanding payments or charging penalties. Their use of violence and intimidation terrorises people and communities, enforcing a ‘veil of silence’ that allows them to escape detection. This is an inexcusable crime in modern Britain.

Many of the side effects of problem debt can also work to drive people further into debt, creating a vicious cycle. While it is often hard to prove causation, there is a clear relationship between the following and problem debt: unemployment, family breakdown, addiction, and poor mental health. Similarly, many of these factors are interrelated, meaning problem debt can have diverse causes, requiring multidimensional support in order to fully resolve the underlying problems.”

Steve-Bean1 (Custom)

Steve says:

“Here at In Control we see and hear more and more of the mental and emotional problems that can result from the stress caused by `over-indebtedness`. We often deal with individuals or families that have found themselves in a `negative income position`, usually through excessive repayments on various forms of credit, and work with them to reassess their finances to ensure that they can heat their homes and put food on the table. This is why we offer a service that is not only clear and transparent but also full of empathy and understanding. We ensure that the solutions that we suggest to people in financial hardship are realistic, affordable and above all else fully supported via our team of dedicated and experienced account managers.

We also strongly believe that when somebody`s financial position is causing them stress and anguish, as well as having an effect on their overall mental and sometimes physical wellbeing, it is time they contacted an institution for some advice on how to stem the flow of endless red letters coming through the door. As with all `real life situations` the first step is the hardest but we pride ourselves on being very approachable and sympathetic to the nature of anyone’s financial strain.”