Top tips for dealing with mental health and debt

Mental health and debt are a marriage made in hell, according to our Money Saving Expert Martin Lewis. Indeed, he’s so concerned he’s founded and funded with a £2 million donation the new Money and Mental Health Policy Institute.

The statistics are horrific. Here are just three of them: 1) You’re four to six times more likely to have debt crisis if you’ve mental health issues; 2) Half those seeking debt help have mental health issues; 3) Treatment time for clinical depression is extended by up to 18 months for those with financial problems.

Millions of people are affected by this, yet most think they’re alone. Actually, having a mental illness and debt problems is so common it’s ordinary. But worse, while it’s ordinary, it’s not seen as a mainstream subject – making it the biggest and most hidden financial issue out there. Here are just a couple of things I’ve heard…

“I have 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.”

“When I’m in a depressed state I find that I can spend recklessly, without thinking about the bigger picture. Having financial struggles does make you stressed, anxious and cause sleep issues, which can then all lead to further depression. It’s a vicious circle.”

What can be done about it?

Over the last five years lenders have got much better at dealing with people with mental health issues once they’re in debt, but little has been done about prevention. That’s our aim, to come up with solutions, research them and then lobby to get them in place.

Here are a couple of examples, based on spending sprees, which are common with bipolar disorder and depression…

- High-control account options. Go abroad and often debit and credit card firms freeze your cards if they detect unusual spending patterns. Suppose we take that technology and allow people to opt for ‘high-control options’ on their spending. Then if unusual spending patterns are spotted, their card is frozen for a set time, say 10 weeks.

But, when the freeze is put on, the card firm would call a nominated trusted friend/family member/mental health case-worker, who could say, “John’s just moving house, so please unfreeze it,” and the card firm would, or they’d say, “Thanks for letting me know, I’ll go check”.

- Credit freeze. A similar idea is to allow people to voluntarily choose to put a freeze on their credit account. That means they can’t apply for any new credit until it’s unlocked, and unlocking would take a set time – say 30 or 90 days (research is needed).

So, if you have a bipolar mania phase and believe you want to borrow £50,000 whatever the cost, as you’ve worked out how to start a business to take on Google, there’s breathing space to allow things to calm down before you’re locked in to debt.

Of course there are many other conditions too, such as dementia, which require other solutions.

Martin’s 44-page free Mental Health and Debt Booklet can take you through step-by-step. Of course all the usual measures about cutting interest and repaying on time help here too.

1. Speak to a non-profit debt help agency. If you’re in debt crisis, then Citizens Advice, StepChange, National Debtline and especially Christians Against Poverty can help – I say especially as they also do emotional counselling.

2. Can you cut the interest rate? The lower the interest the more of your repayments clear the actual debt itself. So, things like balance transfer credit cards which can shift debt to 0% for up to 40 months can help – if you can face dealing with the debt.

3. Consider informing your bank. Once a lender is aware that a customer has a mental health condition, it has to make adjustments. The Lending Code says banks should consider keeping a debt in-house rather than passing it to debt collectors, and they should make court action the last resort. Though telling your bank is a decision to discuss carefully with a case worker or debt counsellor.

4. You can’t be discriminated against for your mental health. In other words, if the fact you’ve declared your illness to a bank affects your ability to get other products with them, such as a mortgage, it would likely breach the Equality Act.

5. Know the early warning signs. Even when people plunge into debt, depression doesn’t bite overnight. Dr Rob Waller, consultant psychiatrist and director of Mind and Soul, advises working out your warning signs, such as tension headaches, arguments at work, back pain or bad skin. This is the time to take steps to keep on top of debt and depression.

6. Banking control if you have bipolar. A few banks have minor procedures to allow you to register your mental health issues and stop your overdraft going beyond a certain amount. Bipolar disorder sufferers, who may be prone to overspending during a manic episode, could consider discussing this with their bank (it’s worth chatting through with a debt counsellor or case worker first).

7. Consider adding a note on your credit file. If you overspend when you are unwell, you can volunteer to add information on mental health problems to your credit files in what’s called a ‘notice of correction’. This alerts potential lenders so they don’t lend further credit. This can be added or removed whenever you want though. Yet this may stop you borrowing when you are well.

8. Consider paying bills by direct debit. These automatic payments can help simplify your finances, helping you to budget and ensure bills get paid when you’re ill. Though do keep checking your bank statements and ensure you have the cash. A warning: while DDs for gas and electricity bills, home phone and broadband can save you money, home and car insurers charge you interest that can be catastrophic.

9. Prioritise heating and eating. Sticking to the right order of repayments is particularly important for people with mental health issues. So prioritise ‘heating and eating’, not just the people who harass you the hardest.

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’s always doable. If you start to sort it out, it does get better.

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