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30th November 2018

What financial stress does to you – True cost of debt and it’s effects on health

You're probably aware that being in debt, especially unplanned debt, can cost you a lot of money. Moreover, being unable to report debt on time can damage your Credit Score, resulting in even greater credit charges in the future.

You're probably aware that being in debt, especially unplanned debt, can cost you a lot of money. Moreover, being unable to report debt on time can damage your Credit Score, resulting in even greater credit charges in the future. You may be surprised to find out that debt and the resulting financial stress can have a big effect on your health.

Stressed about your finances? You’re not alone. With prices rising faster than salaries, it is perhaps not surprising that money and finances are consistently found to be the top stressor in many countries. In fact, our survey research highlighted that 62% of Britons worry about their finances on a weekly basis, and 13% spend a full working day each week doing so!

It turns out that now we have even more reasons to worry. Apart from the financial cost of debt and the time it takes to pay it off, recent research demonstrates that debt can actually damage your health. In fact, borrowing from moneylenders is linked to a greater risk for physical and mental health problems, and being in debt explains 6% of the differences in mortality across districts. Moreover, studies show that credit card debt has a more damaging effect on physical health than a low income, suggesting that it’s not strictly about not having enough money to take care of one’s health, but rather, the financial stress and worry caused by being in debt.

In line with this, health risks are especially common for individuals taking on debt with a high-interest repayment structure or over long periods of time. For example, households in long-term debt have reduced life expectancy. Moreover, because financial stress can impair your productivity and performance, high-interest loans and the resulting worry can further increase debt problems. Helplessness caused by the increasing debt can also make you depressed and increase the temptation to engage in health-damaging ways of coping, such as smoking or excessive drinking. In other words, debt-related stress can quickly turn into a vicious cycle where debt leads to illness and illness leads to debt.

How does one break this vicious cycle and get closer to financial stability? The easiest solution would be to get paid more. But unfortunately, that isn’t looking likely in today’s climate, and with Brexit looming, it’s hard to see that changing.  Second to getting paid more, we think that if you could somehow smooth the bumps of unexpected expenses and irregular income, it would make it just that much easier to achieve financial stability. But, current solutions for doing this all carry high potential risks and costs.

We believe hardworking families in the UK deserve better than what is currently out there. In this new environment, where the reality is that people are going to be using credit more and more, it’s time to think of new solutions to make credit simpler, safer and cheaper. And that's exactly what we've done. We've created a safer, simpler, way to borrow that helps reduce the level of financial stress people experience and supports them on a path to financial stability and wellbeing. If you'd like to find out more just click here