A new report has shown that personal loans are “absolutely corrosive to mental health”.
Everyone knows how stressful having a loan can be, and it seems like most people today are struggling with some kind of loan. Whether it’s student loans, house loans or just day-to-day loans, it seems like loans are an inescapable reality of today’s society – and a bane for many. But the Glasgow Centre for Population Health (GCPH) wanted to see just how people deal with their loans mentally – and the results weren’t optimistic.
They focused exclusively on payday loans, a controversial practice which refers to short-term, unsecored loans for small amounts of money with high interest rates and fees. Payday lending is targeted toward lower income, high-risk borrowers and can often lead to spiraling debt.
Chris Harkins, public health research specialist at GCPH and author of the new report, told The Herald that the loaning industry is far from being fixed.
“I think there was a common perception that the payday lending industry was fixed to a degree.
“But the feedback we were getting from a lot of our third sector, partner agencies we work with was that this issue was very much still alive. They were still encountering families and individuals who were getting into spiralling debt still with pay day lending, but I guess most importantly of all the demand for short term easily accessible credit was not reducing to a huge degree.”
The study comes as complaints regarding payday loans in the UK have risen sharply, tripling in the first six months of the year compared to 2015’s similar period. But while most studies focused on the economic part of the situation, ignoring the social aspect. It clearly shows the mental damage is also considerable.
However, these loans are also important. People who use them are generally unable to access other, more conventional types of loans and they don’t have bank deposits they can turn on. Banning them could leave people struggling to afford basics with nowhere to turn, the report found. But the way the system is designed now is absolutely crippling, Mr. Harkins concludes:
“There is no doubt that spiralling unmanageable debt is absolutely corrosive to mental health.”