The effects of debt can be long-term and utterly devastating if not attended to properly. 

Many people only look at the toll debt takes on their financial lives but very few look towards the impact it can have on their mental health. 

In this post, I’ll be looking at how being in debt can affect many different aspects of your lives and what you can do to prevent it from doing so. 

The Effects of Money Problems and Debt

As mentioned above, being in debt does not only impact you financially but also mentally and physically.

In order to get a full understanding how debt can break a person down, let’s look at its most obvious effects first: financial. 

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Financial Effects of Debt

When it comes to financial effects of debt, the most obvious problem one can point to is the fact that it restricts the amount of money you can spend on a monthly basis. 

This is because if you’ve entered into any sort of debt repayment plan with your creditors, then most (if not all) of your surplus income will be going towards your debts. 

This means that you’d only have money for essential costs to run your household. Any other money will go towards debt payments. 

Furthermore, if your debts have high interest rates and other additional charges, then you may end up paying back a lot more money than the amount you initially borrowed. 

This is especially troublesome which is why you should always think about taking out a loan with a high interest rate. You should only do so in cases of emergencies and never for luxury/unnecessary purchases. 

If you choose to enter into a formal debt solution such as an IVA, it could mean that you have to release equity from your home in your final year. 

If you don’t have a home and choose to enter into an IVA, then its duration could be extended by another year. 

Being in debt can mean that you have to stick by a very restrictive budget for an extremely long time (several years). Furthermore, if you make a mistake or your income falls and you fail to make a monthly payment towards your debt, that could lead to your entire debt solution failing. 

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Debt and Stress 

Of course, being in debt can definitely be a great cause of anxiety.

In addition to that, being hounded by creditors and debt collection agencies can exacerbate your stress levels even more. 

If this is left unaddressed, it can lead to further complications with both your mental as well as physical health. 

Stress has been known to cause several health issues such as insomnia, severe anxiety, muscle tension, chest pain, high blood pressure, etc. 

Being in debt can cause a tremendous amount of mental health problems as well. 

A study conducted by the Citizens Advice Bureau suggested that individuals with unmanageable debt were 24% more likely to have a mental health score that is in the bottom quarter of the total population. 

Furthermore, when they looked at people with lower than average mental health scores, they found that: 

  • More than a fifth of them are more likely to be in debt
  • They are twice as likely to be behind on paying a utility bill
  • They are nearly 66% more likely to be behind on their council tax

From this, it can be seen that debt and mental health issues go hand-in-hand. Poor mental health can be the effect of debt issues but at the same time, underlying mental issues can also be the cause of debt. 

Debt and Relationships

One in four people have stated that being in debt has had a negative affect on their relationships.

I’ve discussed above how debt can cause stress levels to rise. This can cause other problems such as irritability. 

When you’re stressed out all the time, you’re not going to be able to communicate your needs and wants effectively to your partner. 

This can cause increased arguments between you and your partner and in more extreme cases, it can even lead to the relationship ending. 

On one hand, debt such as this can cause increased resentment between you and your partner due to lack of communication and increasing distrust. 

On the other hand, some people often choose to hide their debt from their partners. Keeping things bottled up inside themselves like this can cause devastating feelings of guilt and shame. Hence, in this way, debt causes increased mental health issues in such individuals. 

Debt and Behaviour 

Going back to the Citizens Advice Bureau study I mentioned earlier, another great impact of debt that is often overseen is how it can affect the behaviour of a person. 

By behaviour, what’s being referred to here is the fact that being in debt often discourages a person from taking major life decisions that could be good for them. 

This can cause their lives to become stagnant. 

The study conducted showed that people who had unmanageable debt are: 

  • 49% less likely to start a business of their own. (Compared to 33% without debt)
  • 41% less likely to study or retrain (Compared to 27% without debt)
  • 34% less likely to move to somewhere else (compared to 25% without debt)
  • 28% less likely to change jobs (compared to 19% without debt)

Many people tend to not make these major decisions by saying that they’ll consider them once they have paid back the money they owe. 

In this way, debt holds back the potential of many individuals that would have made decisions to make their lives better otherwise. 


The negative impact of debt on individuals can be devastating if left unchecked. Money issues can cripple a person to the point where their mental health becomes irreparably damaged. 

This is why it’s important to educate yourself about its underlying impact so you can prepare yourself effectively.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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