Unsecured Debt Associated With Low Psychological Wellbeing
Research indicates that unsecured loans, such as credit cards, are causing high stress. A study in the Journal of Economic Psychology found that respondents with unsecured debt were less likely to report complete psychological wellbeing.
Secured debt, like mortgages, where not associated with a decrease in psychological wellbeing, even if the debts were “large”.
Possibly, this is due to the fact that mortgages can be ended by the sale of the property and repayment of the loan. Credit cards generally have no asset associated that can be sold in repayment of the debt.
Credit cards are the canary in the mine of debt. They are the first debt that clients have difficulty repaying. Quite often, they are seen as the primary issue rather than an indicator of other issues.
The inverse of this is that feeling financially stressed can be lessened by reducing credit card debt.
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