“Easy to moralize”: Paying off loans has become a threat to mental health

There is a clear link between debt and mental health, says Statistics Norway. Experts say: the greater the consumer debt, the lower the quality of life of people.

People who have consumer loans or debt are more likely to have a poor quality of life than others, according to a new analysis.

“The correlation between quality of life and the presence of unsecured debt increases when debt increases,” according to Statistics Norway.

“This is not surprising,” agrees psychologist Ingvild Stjernen Tislov in an interview with TV 2.

Conventional debts such as mortgages and student loans have no bearing on perceived quality of life, but debts with very high interest rates such as personal loans do. Such debt cannot be secured, for example, by real estate. It is noted that most people in Norway are mired in debt. But having one is not a problem, according to Tislov, as long as the person can repay his loan.

This trend in the connection between debt and mental health is that many people take out consumer loans simply because they do not have the necessary money, and when the time comes to pay off this debt, they experience difficulties.

Minister for Children and Family Affairs Kjersti Toppe said of the analysis: “it’s easy to moralize.” She is supported by consumer economist and Nordea lawyer Derya Incedursun. Consumer debt still raises a lot of moral issues, she said, in large part because people who are struggling financially and have such debt find it difficult to talk about it and ask for help.

People aged 17-29 are more than twice as likely to experience a poor quality of life due to credit debt compared to other age groups.

“It’s really scary. I think it’s terribly sad that consumer debt should be a driving force behind the poor quality of life of young people,” says psychologist Tislov.

She states that young people in their early stages are vulnerable to influence and may have poor prerequisites for making good financial decisions. The brain is fully developed by about 25 years of age. According to the psychologist, the ability to plan well for the long term, consider consequences and control impulses are skills that develop in the late 20s. The expert admits that many young people may not understand that credit loans come with high interest rates.

Tislov says the most important thing people can do when they notice their finances are jeopardizing their health is to ask others for help. Outside support, be it family, friends or a bank, can be very helpful.

Economists advise that those with consumer debt need to talk to their creditors.

“If you find yourself in a situation where you no longer have the strength to open accounts because you don’t know if you’ll be able to pay, reach out to your creditors. Explain your situation and try to get a new payment plan, the economist advises.” Both experts admit that problems that remain unresolved only make the situation worse.

Minister for Children and Family Affairs Kjersti Toppe believes that this confirms that many who have consumer loans are experiencing economic difficulties, and that this naturally affects the quality of life.

“At the same time, I don’t want to completely ignore the fact that people who have a low quality of life due to other conditions, such as illness, unemployment or loneliness, find it easier to take out consumer loans,” the politician tells TV 2. The minister promised that a number of measures will be taken to solve these problems. The most important has already been introduced – a debt register in 2019.

“In 2023, lenders received a commitment to reject loan applications from people who may have trouble repaying their loans. At the same time, requirements for credit ratings were tightened,” explains Toppe.

One of the most important things when a situation like this arises, the minister said, is to get help. Here, both the financial advice service and – in the worst case scenario – the Debt Settlement Law are important tools. The Norwegian Ministry is currently working on a revision of the Debt Settlement Act, which will make it more accessible.