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Debt Can Impact Your Mental Well-Being

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If people rely on high-cost credit (such as payday loans and overdrafts), does it put pressure on sleep, health, relationships, and mental well-being?

New research demonstrates an alarming increase in reliance on high-cost credit such as payday loans, credit cards, and overdrafts. 

The nationwide research conducted by Hastee Pay explores the consumer and spending habits of people in the UK. Hastee Pay is an app that allows users to receive their earned pay immediately.

The study shows that 82% of workers source funds from high-cost credit options between paydays. The research – a follow-up from 2018’s Workplace Wellbeing Study – recorded a 4% increase in workers using options such as credit cards, overdrafts, and payday loans. Last year’s report highlighted the impact that personal finance-related stress can have on workplace performance as well as sleep, health, and relationships. The rise in workers using high-cost credit has meant these issues are being exacerbated, with respondents reporting a 10% increase in financial stress.

The 2019 report also reveals that a third of workers feel they often need to borrow money, highlighting cash flow management issues within the UK’s workforce. The growing reliance on high-cost credit between paydays has resulted in 38% of workers applying for high-cost credit options despite knowing they would struggle to keep up with repayments.

‘There is a clear need for a safe and ethical alternative to borrowing to get by,’ says Hastee Pay CEO and founder James Herbert. ‘Workers deserve a fair chance to live debt-free but are being held back by traditionally rigid pay cycles that simply don’t fit with modern financial demands. Employers have a responsibility to do what they can to improve financial well-being, starting with better education around finances and alternatives to high-cost credit.’

Jasmine Birtles from MoneyMagpie, TV personality and money expert, adds: ‘These findings show how important it is for people to be financially fit in order to have more stability in their lives and also to be more productive at work. Employers have a lot on their plates as it is, but these figures show that if they help their employees get on top of their finances it will materially improve their bottom line.’

Despite the introduction of tougher financial regulations on lenders, workers reported an increase in the level of difficulty experienced as a direct result of using high-cost credit. The volume of workers that scored their experiences with different high-cost credit options as ‘difficult’:

  • payday loans: 59% (47% in 2018)
  • credit cards: 48% (36% in 2018)
  • doorstep loans: 56% (45% in 2018)
  • overdrafts: 51% (40% in 2018)
  • loans from family and friends: 45% (38% in 2018)
  • loans from other sources: 53% (40% in 2018)

The research also reveals how the face of credit appears to be changing. Buy-now-pay-later schemes have become more widely available in recent years and 56% of millennial workers (those aged 18–34) say that these schemes encourage them to spend money they don’t have. Those earning over £100,000 per annum are the most likely to say they are negatively influenced by buy-now-pay-later schemes (77%), supporting the notion that financial well-being is not an issue faced exclusively by low earners. It is a cash flow concern that is felt by workers across the board.

Digital money management tools are bringing workers some respite from financial stress. 70% of workers feel happier when using digital money management tools such as credit score and reporting apps, budgeting apps, challenger banks, and micro-investing apps. Workers say digital tools help them to save money, track their spending with greater visibility, make better financial decisions, and reduce debt.

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