The impact of debt on people’s lives

Joe Lane, Policy Researcher

The impact of debt on people’s lives

From the 350,000 people we helped manage their debt last year – it is clear that debt problems are often related to wider problems in their lives, whether that be housing, employment or the welfare system.

In total, around half of the people we help with debt problems have a problem in at least one other area of their life.

In a new report, A debt effect?, we investigate some of those relationships in more detail, building on existing research which shows that high levels of debt are related to wider problems in people’s lives.

The research uses the Understanding Society survey, which surveys around 40,000 people each year, to assess how much debt people are in and how high levels of debt are related to other problems in people’s lives. It also uses Citizens Advice data and a YouGov poll of 2,109 UK adults.

How many people have unmanageable debt?

One commonly used indicator of unmanageable debt is having debt worth more than six months of your income. Our analysis finds that one in twenty adults have that level of debt. When looking at different groups in society however, that figure is far higher:Table 1As shown by the chart above:

  • One in fourteen of the lowest paid fifth of the population have debt worth more than six month’s income (7%)
  • One in ten private renters have debts worth six months of their income, nearly twice the proportion among people with a mortgage (10% compared to 6%)
  • One in seven of 20–29 year olds have more than six months’ income in debt, twice the figure for 30–39 year olds (14% compared to 7%)

What is the wider effect of those high levels of debt?

Beyond the financial strain that debt causes, we looked at how that debt relates to other problems in people’s lives; unemployment, low pay, poor physical health, and poor mental health.

The report isolates the effects of debt from other factors in people’s lives such as their income and level of education. The most striking finding was the relationship between debt and mental health. People with unmanageable levels of debt are 24% more likely to have poor mental health – even taking into account their incomes and other factors.

Looking at the relationship another way, by comparing people with below average mental health scores with those with above average, we found that those with below average mental health were:

  • Over 20% more likely to have unsecured debts
  • Twice as likely to be behind on a household bill
  • Nearly two thirds more likely to be behind on their council tax

One challenge presented by the research was how to identify whether unmanageable debt causes poor mental health or whether poor mental health leads people to have higher levels of debt. In reality, both are true.

How does debt lead to wider problems in people’s lives?

Thinking about how debt might worsen outcomes in other areas of people’s lives, we found that people with high levels of debt not only caused stress and anxiety but, significantly, meant they were less likely to say they would be willing to take major life decisions because of their debt.Table 2That restricted decision making, over time, can have a major impact on the course of people’s lives.

What can we do?

There is no easy way to limit the impact of debt on people’s lives but advice services play a crucial role in ensuring that people can get high quality debt advice to help them sort out their problems.

One way those services can further help mitigate the wider effects of debt is to help people avoid getting into problem debt in the first place. The ongoing review of the funding of public financial guidance is a good opportunity to direct more funding to frontline money guidance services in order to encourage more people to get help managing their money before they get into difficulties.


What do you think of this post?
  • Spot on 
  • About right 
  • Not what I think 


  1. Paul

    I have a money saving idea.

    next time one of these surveys and reports needs doing to save time and resources , just copy and paste bits form the previous 10 years of identical articles

  2. Chris

    Hi Madeline,

    I would contact them via social media in order to remove your details.It is unlikely they check these comments daily.

  3. Alan Ghillyer

    I went to the CAB in Plymouth last Wednesday for help with a CCJ that was imposed against me. The Court in Northampton has decided that I am to pay £50 per month. I am on sickness benefit and cannot afford that amount, hence my reason for visiting the CAB. The advisor I saw was of little help, made up a list of figures that did not make any sense and basically told us to get on with it. We have tried to negotiate with the debt collectors, (who will not budge), and have rung the advisor who seems to refuse to call us back. I now am going to struggle to keep myself and my family going whilst paying out £50 per month that I can’t afford. Thanks for nothing CAB.

    1. Sarah

      Go back to your local CAB and ask to see a debt specialist. You should be able to apply to the court on form N245 and ask them to vary the payments you are paying on the basis that you cannot afford them. You will need to provide income and expenses to the court and Proof of your income ( bank statements or benefit award letters). Unfortunately the application to the court usually costs around £50, but you may be eligible for a reduction if you complete form EX160. Good luck. You can find more detailed information on this website under ‘Debt’ and ‘Changing a court order for debt’.

  4. Malcolm Rodgers

    I broadly agree with the article. My one finding, having been a money adviser for a while, is that a full advice may often require extending into the causes of debt. This can lead to a requirement that the bureau support the client in such matters as Mandatory Reconsiderations; challenging findings of intentional homelessness; reviews of benefits decisions. If these are not addressed then often the debt and money advice is little more than a sticking plaster.


  5. Allan Blackburn

    Having just read the first blog I was about to respond with the same point as Phil Ashby regarding the impact of student loans.

    If the analysis excludes these loans then the debt situation for this age group is likely to be markedly worse.

    This is the age group who should have opportunity to start a business, move location or otherwise begin to contribute positively to the economy if we are to thrive as a country.

    Student loans – – treat them as an investment for us all is my opinion.

  6. Jenny Lee

    Agree about finangial management services but debt management is far more compliacted than just managing money. There are in addition to mental health issues a range of socio politiacal reasons for debt = undereduaction that laeds to a limited skill base, low wage levels in a very consumer driven society and poverty to name a few that need to be understood and recognsed perhaps as research and campaigning issues for the CAB to address.

  7. Phil Ashby

    I am not sure that the 20-29 group is really telling the stroy that you suggest. In that age group there will be many who have a debt which will be significant and that is their student loan and student fees. These are debt may well exceed 6 months income, however there is a repayment plan in place which I would suggest places these debts in a different category.

    We might want to question whether this debt should have been created in the first instance, but that is another question

    1. Joe Lane

      Hi Phil,

      Thanks for your comment, the analysis excludes student debt. It should be more explicit in the blog – but it’s hopefully clear in the research.

      I agree with the wider point that the nature of repayments means student loans have to be treated carefully.


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