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The Relation between Debt and Mental Health – How to Cope?

Debts are there in various forms, and even though it is not precise, the common definition for debt is as follows. Debt is primarily a financial sum which is borrowed by someone from another party. Debt can be on an individual to even the biggest corporate as a mode of making funds to purchase something or pay for something which one cannot afford in the given normal circumstances.

Debt break-down

The major form of debt is conventional loans, which include:

  • Personal loans
  • Mortgages
  • Auto loans
  • Credit card debts etc.

In case of a loan, the borrower needs to repay the outstanding balance within a certain date with specified interest. The term of a loan repayment may vary from a few weeks to even years. In loans, interest is the component with which the lender is compensated for the risk taken and at the same time encouraging the borrower to repay the capital at the earliest possible to limit the total cost of the loan. As like a bank loan, mortgage, or auto loan, credit card debt also operates in the same way except that the borrowed amount may change over time based on the borrower’s requirement to a predetermined limit.

Business/corporate debts

Companies also need to get some fund advance for which there are various debt options. Equities and commercial bonds are the most common types of fundraising debt models in business, which are not available for individual borrowers. Bonds are a unique type of financial vehicle which let business to generate the needed funds by selling a promise to repay the investors. The catch for investors is that the equity also includes the profit share of the business which they make with this investment. On the other, commercial paper is a kind of short-term corporate debt which matures in 270 days or lesser.

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Good vs. bad debts

In the case of corporate finance, a lot of focus will be there on a debt a company owes. An organization which bears a huge amount of debt may not be considered reliable as they cannot make the repayments if sales drop. This may ultimately put the business in high risk of break down and bankruptcy.

Good debt is a debt owed for a constructive purpose, and the returns on investment on that fund can outweigh the total cost of the debt. While assessing the financial standing of an organization, different metrics are used to assess the level of debt and whether the company has good financial health.

As you are clear about the concept of debt and its implications in personal and corporate financial situation, let’s now get on to the major topic of discussion as the condition of debt and mental health of human being.

Mental health and debt

As we have seen above, there are various types of debts, and there are many reasons too why people and firms fall into bad debts as you can see in the debt consolidation reviews. Say, for example, if you suffer from any mental health problems, it may adversely affect one’s financial health too.

Why people end up in debt?

There is a widespread misconception that people end up in debt due to hefty spending on lifestyle or being shopaholics while they use their credit cards on shopping malls. However, the truth is that is that redundancy and unemployment are the major triggers of debt issues, which may happen to anyone anytime, no matter what attitude you keep towards money matters.

You may struggle with your personal finances like paying off the utility bills or credit card payments for many reasons like:

  • Loss of a job.
  • Poor physical condition.
  • A marriage breakup
  • Social isolation or some other reasons.

Sometimes, it may be for a shorter term, but to get adjusted to such a financial struggle may be so difficult.

Mental health issues affecting finances

Even though people who are diagnosed with mental health issues like depression or bipolar disorders are more prone to having debt issues, there are so many other reasons too why adverse mental health affects proper finance management.

At the first point, lack of energy due to impaired mental health may make it hard to keep track of your finances, which require a perfect approach. The loss of focus may also end up in making some unwise or rash financial decisions, which may ultimately be a problem. If you want to know more Debt read here mediologiest.

The mental health problems like dementia or cognitive impairment may also cause troublesome decision making when it comes to handling money. At some places, it is even unlawful for people with mental health impairment to take a financial decision, and another caretaker will be assigned to do so legally.

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How does debt affect a person’s mental health?

On the other side of the spectrum, it is also important considering how does debt affect the mental health condition of a person. A 2010 study of the Royal College of Psychiatrists revealed that more than half of adults living in the UK faced debt problems, in many cases this was one major reason for those who found to have mental ill-health. The symptoms were expressed more like depression, anxiety, or lowered mood, etc.

Mental health professionals say that much of debt-generated anxiety may be due to the lack of financial support from the family, peer group, employers, or creditors. Debt is always a tiresome burden, which can be made so worse in dealing with it all alone. Another problem related to debt may be a lack of quality sleep resulting from being anxious.

Losing a good night sleep will not only affect one’s energy level and mood, but it can also have a very negative impact on other areas like family, career, or business, etc. All these can come together to contribute to the overall debt problem and make it worse.

Some questions you may ask yourself if you are into debt?

  • Do I feel anxious or depressed often while thinking of repayments of debt?
  • Do I struggle to do things on time or frequently miss payments towards utility bills, mortgage, credit card payments, or loan repayments?
  • Do I avoid telephone calls from unknown numbers due to the fear of creditors?
  • Do I set aside any money to meet up any unexpected reduction in income due to redundancy, emergency repairs, or other cause?

If you get the answer as ‘yes’ for these questions, then you may have to consider getting some help from a mental health professional.

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Updated: October 18, 2018 — 8:38 am

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