Personal Debt and Society

Societal Perception of Debt

The society’s view of personal debt has evolved over time. Historically, being in debt was seen as a sign of financial irresponsibility.
In today’s consumer culture, however, debt is often considered a necessary means to fund major life events or purchases, such as higher education or home ownership.
That said, negative attitudes towards personal debt still exist, especially regarding high interest debts like payday loans or credit card debt.

When individuals default on their loans or file for bankruptcy, this can increase the risk and costs for lenders, which may consequently lead to higher interest rates or stricter lending policies for all borrowers.
High levels of personal debt can impact a nation’s economy. If many individuals are putting a large portion of their income towards debt repayment, they’ll have less disposable income for consumption, which can slow economic growth.
The scaling of personal debt can lead to financial crises. An excess of bad loans (loans not being repaid) can cause financial institutions to fail, impacting the wider economy.

Debt is often higher amongst lower income groups, creating and exacerbating social inequalities. Those with lower incomes are more likely to resort to high-cost forms of borrowing like payday loans, due to limited access to mainstream lending services.
Often, people from marginalised communities have less access to financial education, making them more likely to fall into debt.

The government plays an important role in regulating the lending practices of financial institutions to safeguard individuals from unfair practices and exploitative interest rates.
Government policies and laws can influence the amount of personal debt in society. For example, policies aimed at making higher education or homeownership more affordable could reduce the need for individuals to take on large amounts of debt.
Governments may also provide services or resources to help individuals manage or get out of debt, like financial advice services or income-based repayment plans for student loans.