New research suggests that payday loans have the most negative impact on mental health. Read our blog to find out more.
Payday loans have always been a controversial topic. They are notoriously hard to pay off and have incredibly high interest rates. Recent research suggests that payday loans are the “unhealthiest” financial products available on the market today.
Michael Sheen, the famed “The Queen” actor, founded the End High Cost Credit Alliance in 2017. In an effort to take on payday loan sharks, the alliance was created with four aims in mind:
- To debate the changes needed in our society to create healthy credit options
- To lead the changes needed with expertise, resources and responsibility
- To offer solutions, support current ideas and back new ones
- To collectively call for changes to policy, regulations and practises to make credit fairer for everyone.
Sheen stated, “We share a moral responsibility to help protect vulnerable customers from the harm high-cost credit causes. The evidence on the impact on our health and well-being is now overwhelming. We have the evidence. Now we need action.” He has taken a step back from his acting to focus on his work with the End High Cost Credit Alliance.
Earlier in 2018, the End High Cost Credit Alliance worked with the Royal Society for Public Health (RSPH) to investigate the impact of debt on mental health.
The investigation was titled “Life on Debt Row” and was surveyed against 500 people. Each person was asked to give different forms of credit a “mental wellbeing” score out of five, based on how each product made them feel. The general consensus of the report found that people in debt felt angry, depressed, anxious, and guilty.
Further findings of the report conclude that:
- Payday loans were deemed the most detrimental form of credit to mental health
- Unauthorised overdrafts and doorstep loans came a close second and third
- Most users of payday loans stated they felt judged
- Payday loan users felt more depressed than users of other forms of credit
- 49% of credit users who drink feel their debt causes them to drink more
- This figure rises to 62% when you look solely at payday loan users
Following the report, the RSPH has called for the government to stop targeting vulnerable people when marketing high interest loans. The RSPH has also demanded health warnings to be put against the most unhealthy forms of credit.
In 2016, Google banned adverts for payday loans with an interest rate of above 36% APR, with David Graff, Google’s director of product policy saying, “Our hope is that fewer people will be exposed to misleading or harmful products.” Google has also previously banned adverts for other industries such as tobacco, weapons and counterfeit goods.
Alternatively, catalogue credit was found to be one of the “healthier” forms of credit, as this form of credit can easily become part of people’s weekly budget. The report also found that the products purchased with catalogue credit can give users a feel good boost, even if it is just for a small amount of time.
Life doesn’t always go to plan for any of us. It can be easy to fall into debt when unexpected bills come through or you boiler goes on the blink.
MoneyPlus helps those struggling to manage their income and expenditure with services designed to ensure people feel valued, supported and safe. And you’ll never be judged. That’s not the way we work.
If you would like advice on how to manage your payday loan debt, contact us here.