Mental health and physical illness causing financial spiral for thousands, warns debt charity

One in five people struggling with debts are already under strain from mental health problems, serious illness or a significant life event – such as bereavement –  according to new research. 

StepChange Debt Charity said that it gave debt advice to 29,407 people who fell into this category of ‘vulnerable’ clients, who owed £10,312 on average.

Two in five of these people said illness was the number one reason they fell into financial difficulty and 43 per cent of those the charity helped had mental health conditions. 

Financial worries? There are free services and debt charities that can help

A significant number (4.7 per cent) of those StepChange spoke to in 2017 were coping with physical disabilities, while 4.6 per cent and 4.1 per cent respectively were battling cancer specifically or another cause of poor health.

The research by the debt charity shines a light on the financial tail spin illness particularly can cause.

And it clearly shows that more needs to be done to help vulnerable people already under strain, particularly by the banks and lenders.

The average level of debt owed by people StepChange helped hit £10,312 last year.   

Over half (59 per cent) have credit card debts – reaching £6,493 on average. 

Just under half (47 per cent) owe their bank money through an overdraft, averaging £1,372. In addition 57 per cent were behind on their household bills, by an average £2,062.   

Serious Illness and the effects on debt

StepChange figures showed that 77 per cent of those approaching the charity with a terminal illness, and 68 per cent of those with cancer,  said their health struggles were the number one cause of their debts.

This is Money has previously highlighted the devastation a cancer diagnosis can have on the finances of those battling the disease – costing them a whopping £570 per month at a time when they need to be concentrating on their health.

The same applies to other health issues.

A drop in wages is of course a huge contributing factor and those with poor health may find it difficult to work full hours, or at all.

As many as 45 per cent of those who sought advice from the debt charity were out of work, compared to a general unemployment rate across the UK of 4.2 per cent of the population. 

But the financial impact does not just reach to a loss in wages.

Illness often means increases in other costs including travel expenses or household bills such as heating. These quickly stack up if you are receiving a reduced pay packet or benefits that don’t stretch far enough.

In fact, 45 per cent of people with a serious illness who approached StepChange regularly pay out more each month for necessities than they have coming in – a fast track to major financial difficulty.

As many as 57 per cent are behind on their bills and an average 70 per cent of their monthly income is spent on food and essential household bills like energy, rent, council tax and water.

The percentage of people in debt and classed as vulnerable who owe money for household bills. Source: StepChange Debt Charity

The percentage of people in debt and classed as vulnerable who owe money for household bills. Source: StepChange Debt Charity

Where to get help 

If you are struggling with debt it can be tempting to bury you head in the sand, but there is free help and advice out there which can help.

This is Money has put together a 10 step plan to help get out of debt which you can read in full here.

You can also get free help from debt charities and advice websites, which have guides and factsheets or let you speak to an adviser who can help explain your options.

Mental illness and the effects on debt

The figures from StepChange, particularly highlight the effects of mental illness in contributing to debt issues.

Just under half (40 per cent) of those battling mental health problems said this was the main reason for their financial difficulties.  

Debt charities have long warned of the effects of debt in causing depression and anxiety. 

But those with existing mental health issues can also find it easier to fall into debt and manage their finances, creating a vicious cycle.

Research released by The Money and Mental Health Policy Institute last month showed that those with mental illnesses are one and a half times more likely to need to borrow from friends and family than anyone else.  

Something needs to be done 

Financial issues should not be inevitable for those facing health problems.  

Phil Andrew, chief executive of StepChange Debt Charity, says: ‘Among our clients, those who are vulnerable typically show higher levels of financial distress – but that shouldn’t be inevitable. 

‘While there has been progress, it’s clear that the finance sector, regulators and the debt advice sector could all still do more to help break the link between being vulnerable and being significantly worse off. 

‘There are questions, too, for Government. With mounting evidence that vulnerable people are not always being adequately supported in their times of need – including the DWP’s own recent survey on the impact on claimants of Universal Credit – it is only reasonable to ask whether changes to the welfare system are creating too many negative and stressful impacts on people who are least in a position to deal with them.’   

Get in touch

We think more needs to be done to help people with poor health – be it mental or physical – with their finances. We’d love to hear of your experiences, and treatment by banks or lenders.

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