Mental health issues and debt are a marriage made in hell. If you or someone you know is hit by this combination, you’re not alone.
It is one of the biggest but least known financial problems affecting the UK. The more we talk about it, the better, so I want to take you through what is happening and offer some tips if you’re affected.
The statistics are horrific. Here are just two of them: you are four to six times more likely to have a debt crisis if you have mental health issues, and half those seeking debt help have mental health issues.
Breaking this relationship has been a passion of mine for a long time. So a few weeks ago I launched the new Money and Mental Health Policy Institute – with a brilliant full-time team I’m funding for at least four years.
The aim of this charity is simple: to reduce the number of people affected by the issue. When I have written about it on social media I have been swamped by the responses. For example: “I am bipolar and was given huge amounts of credit which I spent while on a manic high. I am now in so much debt there’s no way out, which has an impact on my depression.”
So what can be done to help people in situations like this? Thankfully, over the past decade, the financial services sector has improved its attitude and procedures when dealing with people with mental illness once they are already in the mire. So the Policy Institute’s focus will be on prevention, to research solutions and lobby to get them in place.
Two of the ideas we’re looking at – both based on spending sprees – are common among people with bipolar disorder or depression. A credit freeze would allow people to voluntarily register the fact with credit reference agencies, so they cannot apply for any new credit. The freeze would last for a set time – say 30 or 90 days – giving you breathing space if your decision-making ability is temporarily impaired.
Unusual spending patterns
Accounts offering strict controls are also vital. Go abroad and your debit and credit card firms will freeze your accounts if they detect unusual spending patterns.
Why not allow people to voluntarily apply that to all spending? Then, if unusual spending patterns happen, their card is cut off for a set time, say 10 weeks, unless a nominated trusted friend or mental health case worker agrees that it should be unfrozen, because the high spend is, for example, due to a house move.
Of course there are many other conditions too, such as dementia, which require other solutions. I have a free Mental Health and Debt booklet at moneysavingexpert.com/mentalhealth.
Here are some tips:
1. Speak to a non-profit debt help agency. If you’re in debt crisis, then CitizensAdvice.org.uk, StepChange.org, NationalDebtline.org and especially CapUK.org can help (I say especially because it also offers emotional counselling);
2. Can you cut the interest rate? The lower it is, the more of your repayments clear the actual debt. A balance-transfer credit card can shift debt to 0 per cent for as long as 40 months;
3. Consider telling your bank. Once a lender is aware that a customer has a mental health condition, it is obliged to make adjustments. The Lending Code says banks should consider keeping a problem debt in-house rather than passing it to debt collectors. Discuss this with a caseworker or debt counsellor;
4. You can’t be discriminated against for your mental health. If the fact that you’ve declared your illness to a bank affects your ability to get other products with them, such as a mortgage, this would probably breach the Equality Act;
5. Know the early warning signs. Issues like depression don’t bite overnight. Look out for tension headaches, arguments at work, back pain or bad skin. And seek help;
6. Banking control if you are bipolar: a few banks let you register to stop your overdraft going beyond a certain amount. If not, consider a basic bank account, without an overdraft;
7. If you overspend when you are unwell, you can volunteer to add information to your credit files in a “notice of correction”. This alerts potential lenders so they don’t extend further credit. Be aware that this may stop you borrowing when you are well, but it can be added or removed whenever you want;
8. Consider paying bills by direct debit, ensuring bills still get paid when you’re ill.
9. Prioritise heating and eating. Don’t simply pay those who hassle you the hardest. The debt counsellors above can help;
10. There’s no such thing as an unsolvable debt. For as long as I’ve been doing my job, I’ve never once seen a debt case that isn’t solvable. It may not be easy, it may not be quick, but it is always doable.
Martin Lewis is the founder and editor-in-chief of the Money Saving Expert website. To receive the weekly Martin’s Money Tips email, visit moneysavingexpert.com/latesttip