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The Sad Truth About How Personal Debt Affects Mental Health

Money Savings Advice The sad truth about debt & mental health

If you’re in debt, you’re not alone. In fact, The Money Charity found that the average UK adult has more than £4,000 of unsecured debts. Including mortgages, the average household debt stands at more than £60,000 in total.

How Does Debt Affect Mental Health?

Debt is one of the UK’s most prominent causes of mental health issues. Charities such as StepChange are able to provide free debt solutions while your GP can recommend any necessary counselling.

Debt can keep you awake and make you feel guilty and ashamed. The best thing to do is talk about your debt, rather than hiding it away. Debt management charities and other people can help.

Whilst these figures can be reassuring, when you’re in debt, it can feel like your situation’s hopeless. Being in debt can bring on a variety of mental health problems, causing you to lose sleep and affecting your health and wellbeing.

Read on to learn more about how debt affects mental health.

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Debt and Your Mental Health

If you’re in debt, you probably have all sorts of thoughts running through your head. Often, these thoughts will keep you awake at night. Debt has an impact on your sleep quality, which can lead to more serious problems. If you lie awake at night thinking about money, you’ll simply end up exhausted.

Lack of sleep can cause emotional and hormonal unbalance, leading to conditions like depression and anxiety, and may affect your physical health. Put simply, the more you lie awake worrying, the more your brain becomes predisposed to worry!

You might feel ashamed and embarrassed. Debt is still a taboo subject, despite the large numbers in debt. How many of your friends have spoken openly about their struggles with debt? It’s likely that very few have, yet the statistics show that many of your friends will have money problems of their own.

We’re raised not to talk about our money problems, and debt is seen as something shameful, leading to feelings of isolation.

Debt can often feel hopeless. Many people fear that they’ll be trapped in debt forever, and this can even make it feel like life isn’t worth living. There are, however, ways out of debt even if you feel like you’re drowning.


A debt management plan is an agreement between a debtor and a creditor that addresses the terms of an outstanding debt. This commonly refers to a personal finance process of individuals addressing high consumer debt

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Talking About Debt

Talking about your debt problems isn’t an easy thing to do. Admitting that you’re struggling is hard, but essential. When you begin to talk about your money struggles, you start to build a network of support. Other people will be more willing to discuss their own experience with debt, often coming up with great ideas and showing that you’re not alone.

When we’re fearful of debt and refuse to talk, we give that debt incredible power. By speaking openly about your debt, you’ll start to improve your mental health. Find trusted people, like friends and family, or contact a debt management charity.

Also, tell your creditors about any diagnosed mental health conditions you may have. They may be able to support you with reduced payments, or simply by offering alternative methods of communication to take away some of your anxieties – you may prefer to stick to letters rather than having phone calls that may cause you stress.

Debt Management Charities

There are several large debt management charities designed to help in your situation. They can clear the fog with good advice and valuable practical solutions.

Most people don’t know how to get out of debt, so they about this the wrong way. In a panic, they can act in ways that will make their situation even worse. Many people borrow more money to keep up with existing repayments, ending up in a debt spiral that will pull them down like a whirlpool.

When you contact a debt management charity, they’ll help you get your head above water. Often they’ll help create a realistic budget, then suggest a debt management solution. Options available can include a DMP, an IVA, a DRO or bankruptcy.

Though debt management acronyms may not be your strong point, a debt management charity can help you get your head around the problem.

They’re also trained to be supportive and help if you have mental health difficulties, making sure communication is dealt with in a way that works around you and your needs.

Being on a Tight Budget

As well as worrying about how you’ll get out of debt, your mental health will be affected by all the things you can’t afford. Many people make big sacrifices when struggling to get out of debt. Often, the sacrifices people make will affect their emotional health. 

Maybe you haven’t had a haircut in a year because you’re struggling with minimum repayments? That can have a surprising impact on your self-esteem and confidence. Perhaps you’re skipping meals out with friends because you can’t afford to pay the bill?

Slowly, but surely, being in debt can impact friendships and your support network. Your emotional wellbeing is so important but can be damaged by debt.

Being on a tight budget isn’t good for your mental health. One of the best things you can do is make a realistic budget. Create a budget that factors in everything you really need to pay for.

Most people skip things like a birthday present budget, hoping that they’ll find the money somewhere, but a proper budget will create the space and help you see the situation you’re in. The costs that you leave off your budget don’t just disappear, so it’s best that they’re accounted for on paper.



Be Honest About Your Budget

When you make your budget, be honest about how much you really spend on different things. A grocery budget isn’t realistic if you stick to it weekly but occasionally buy a sandwich on the go through the week that you haven’t accounted for.

See what happens if you include a small haircut budget each month, or a bit of money for new clothes or a few drinks with friends. If you were really living as you should be, how much money would you have leftover? 

Creating an honest and realistic budget is absolutely essential. Be fair to yourself and don’t cut costs too much just because you’re struggling with debt. If your final total is somewhere in the red, seek help with your debt straight away.

Creditors understand that people have to live their lives and will accept realistic and fair budgets when negotiating repayment plans and other debt solutions.

Looking After Your Mental Health

It’s important not to spend all your time worrying about what you owe. Of course, that’s easier said than done. Try to find activities that will help to distract you and don’t add to your money worries. Walking or jogging doesn’t need to cost money, but it does great things for your mental health. Getting out in the open air and walking alone can be a good way to clear your head.

Feel free to write down how you’re feeling and start a diary or journal. Though debt might affect your mental health, it shouldn’t steal every moment of your day.

Getting Out of Debt

Your situation might feel hopeless, but there’s always a way out of debt. Even the worst scenario, bankruptcy, isn’t as bad as it seems. Nobody wants to be bankrupt, but if you’re forced to take this route, it’s a way out of most of your debt. You’ll start with a relatively clean slate and can build a better future from there.

It’s important to talk, and our trusted financial partners are waiting to listen if you need any help with your debt. With knowledge of your options and ways to manage debt, you can move forward successfully.

Quick Debt FAQs


If your financial situation is particularly bad, you might want to file for bankruptcy. This is the last resort and could lead to you losing your property. You might lose your house or your car, and will also destroy your credit file whilst being placed on insolvency registers.

An IVA is another form of insolvency. With this, you pay as much as you can, through a one-off payment or by making monthly payments over an agreed term length. Most people make payments under IVAs for between 5-10 years.

If you have very little money left over each month, you might want a Debt Relief Order. With this, your debts are frozen for 12 months to see if you can get back on track.

If you need to consider debt management, you certainly aren’t alone. The debt charity StepChange reported that, in 2019, over 635,000 people got in touch to discuss their problem debt to find a debt management solution – the equivalent of one new client every 49 seconds.

Creditors may be lenient and write off a debt if you’re seriously ill. They may ask for medical evidence, so you should be prepared to hand this over.

Debts aren’t instantly written off if you pass away. In fact, in the first instance, they’ll become the top priority and form part of your estate during probate.

If your debt is shared with someone else, it will become their responsibility. In most cases, this happens when a spouse dies.

Put simply; personal debt can’t be passed on to someone else. That said, it’s not always wiped away when you die.

Talking about your debt problems isn’t an easy thing to do. Admitting that you’re struggling is hard, but essential. When you begin to talk about your money struggles, you start to build a network of support. Other people will be more willing to discuss their own experience with debt, often coming up with great ideas and showing that you’re not alone.

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How Can Money Savings Advice Help You Reducing Your Debt?

Here at Money Savings Advice, we have partnered with some of the UK’s debt release brokers. They have already helped thousands of people reduce and remove a high percentage of debt, and if you are struggling with debt, they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers, then click on the below and answer the very simple questions.

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

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