Effects of Over-Indebtedness

Economic Effects

Research has shown that the effects of over-indebtedness can cause over-indebted employees to be less productive in the workplace. Accordingly, they make no contribution to the growth and prosperity of the companies they work for.

As over-indebtedness is more prevalent among low-income groups, the greater part of their already insubstantial salaries goes directly to micro lenders. In this way, employees become demotivated and despondent because nothing comes of all their hard work. Thus, as industry declines, so does the country’s economy, setting off a troubling domino effect on all other aspects of life, for both the poor and wealthy.

Psychological Effects

Studies all over the world reveal that mental health deteriorates as a result of over-indebtedness. Psychological or emotional distress is often at the root of some of the most harmful effects of over-indebtedness. The over-indebted suffer severe anxiety, anger, suicidal thoughts and depression. All of which can be acutely damaging to relationships, both personal and professional.

Enduring unrelenting harassment from creditors and debt collectors elicits a sense of being a ‘criminal’ or a dishonourable person. Just as the fear of losing their home, car or other hard-earned assets induces extreme anxiety. They experience an overpowering sense of shame, guilt and frustration over losing control of their finances, and no longer being able to support their families. As a breadwinner, failing to take care of their loved ones deals a devastating blow to their self- worth and ego, leaving them feeling impotent. What’s more, negative emotions and thought patterns often lead to impulsive, risky, violent and/or self-destructive behaviours. Substance abuse and self-medicating with cigarettes, alcohol and drugs are recurrent behaviours among the over-indebted.

Health Effects

As over-indebtedness undermines motivation, over-indebted individuals often neglect their health, diet and hygiene, as a result of feeling futile and apathetic. They either overeat or have no appetite, subsequently, becoming overweight or physically weak. In both of these cases, their energy levels are depleted. As a result, their stamina and the quality of their work suffers. Of course, a slower, weaker employee will be devalued, paid less or let go, especially as a manual labourer. Clearly, the adverse effects of over-indebtedness are inseparably linked.

As follows, being malnourished or obese may lead to a string of other serious and possibly fatal illnesses. Moreover, poor employees are likely to overwork themselves in an effort to make more money, as follows, their health declines. Depression and anxiety can be psychosomatic in nature, which means these emotions manifest as physical ailments and break down their immunity. Chronic stress is correlated with all manner of maladies, from heart disease to auto-immune disorders, such as chronic arthritis.

Pharmaceuticals, hospitals, surgery, doctors and specialists are exceedingly over-priced in South Africa. Without access to free health care, the sick and over-indebted can’t afford medical attention. Frequently, this results in further deterioration in the state of their already infirm health. Another factor may be that nutritious foods, which promote health are more expensive to produce and, thus, higher priced and inaccessible. Whereas processed, fast and junk food can be found in abundance, all of which cause malnutrition and obesity.

The Poverty Trap

Poverty is the cesspool at the centre of all the negative effects of over-indebtedness. Poverty is both a cause and effect of over-indebtedness, bringing about and prolonging poor physical and mental health. Similarly, disease arising from over-indebtedness ensnares individuals in a poverty trap, as bad health can result in unemployment.

In conclusion, considering the above effects of over-indebtedness should be enough to compel the credit impaired and ‘credit invisible’ alike to treat the decision to take out credit as one that could devastate their lives.