Context

Credit, lending and debt is foundational to the economy. Most UK households have some form of borrowing, which can help them to improve their living standards or invest for the future. However, borrowing can also have negative impacts on people’s and households’ wellbeing if repayments become or feel unmanageable.

Problem debt is defined in the review as secured and unsecured borrowing which has become or feels unmanageable to the individual or household or arrears on bills or balances due for goods and services.

The study

This literature review was written by the Parliamentary Office of Science and Technology (POST) team with contributions and external review from representatives of a range of organisations. It was prepared in 2024 as a briefing for the UK Parliament on the links between debt and mental health. The briefing covers several topics:

• Definitions of problem debt
• Drivers of consumer financial vulnerability
• Relationship between debt and mental health
• Mental health, income and money management
• Risk factors associated with debt and mental health
• Debt support and interventions
• Policy considerations

Key Findings

Evidence suggests both a correlation between financial and mental wellbeing, and that financial and mental wellbeing have mutual risk factors such as other health conditions and changes in circumstances. Government schemes, such as the Mental Health Breathing Space Scheme, and charities and non-profit organisations support people experiencing problem debt and mental ill-health. However, consumers might not disclose mental health or debt problems until their financial difficulties are serious, may be unaware of the support available to them, and can have difficulty accessing support services because of the distress or financial constraints they are experiencing. Support might be improved by integrating problem debt and mental health provision, greater use of financial technology and addressing systemic issues which affect household financial resilience.

Points to consider

Methodological strengths/weaknesses:

• Although the briefing cites a long list of references, the scope of the review is unclear, and its methods are not given.
• The author notes that operational definitions of ‘problem debt’ vary across studies. The briefing sometimes conflates credit or borrowing with debt (which is sometimes used to refer to manageable borrowing and sometimes to problem debt).
• Mental health, financial wellbeing and vulnerability are not defined.
• The report infers causal relationships between financial and mental wellbeing where these might be more correctly interpreted as correlations.

Applicability:

• The review should be of interest to a range of stakeholders, including researchers, policymakers and practitioners who wish to contextualise mental health and personal wellbeing within credit use and problem debt, and vice versa.

Relevance:

• The review is particularly relevant in a UK context in which mental health issues are at historically high level, recent changes in the lending landscape, and the socio-economic impacts of Covid-19 policies and increases in the cost of living.