How debt problems can be minimised in society

More and more people in Sweden are living with large debt issues. New research from MDU highlights several reasons for this and also some solutions. By investing resources in budget and debt counselling, increasing cooperation between authorities and healthcare facilities and reducing opportunities for expensive consumer loans the problem of debt can be reduced.

Over the past 30 years, we have seen a huge increase in the number of people living with significant debt problems in Sweden. Previously, the trend seemed to be decreasing, but after inflation and interest rate developments in recent years, it has increased again. According to Julia Callegari, Researcher and Associate Senior Lecturer in Social Work at Mälardalen University, the question about why this has increased is complicated, however, a major contributing factor is that since the 1990s, it has become easier to get an expensive loan more quickly.

Julia Callegari and her research colleagues focus on issues related to debt problems, financial insecurity and the interventions that are designed to support individuals with financial worries.

“Developing and living with severe debt problems creates a great deal of financial and social suffering,” says Julia Callegari.

Even though the number of individuals with debt problems has increased over the past 30 years, very little research has been done in this area. Julia Callegari points out in particular that there is a lack of knowledge in three areas:

• How people living with severe debt experience their situation
• How they can seek help
• What the available help looks like and how it works

“Our research contributes with exactly this knowledge and can hopefully mean that more heavily indebted individuals can get help to restore their personal finances sustainably.”

Many reasons for debt problems

“Few people end up directly with severe debt problems, but there are various reasons that can jointly lead to this,” says Julia Callegari.

“Unemployment, divorce or ill-health are often triggering factors, especially if it happens where personal finances are already strained or debt-ridden.”

But severe debt problems can affect absolutely anyone,” she emphasises.

“A sudden loss of income or a sharp increase in interest expenses can make an initially manageable debt burden unsustainable. Simultaneously, research has demonstrated that it is households which have previously strained finances that are most at risk of developing major debt problems.”

Make it more difficult to get payday loans

Julia Callegari and her research colleagues are also interested in what kind of help is offered to people who are seriously in debt.

“We have discovered that public sector activities that are aimed specifically at people with debt problems, where the resources for municipal budget and debt counselling have been allocated very differently around Sweden. This means, for example, that the queue time to receive help, and what the help then in turn comprises, varies depending on where in the country you live. Those who work as budget and debt advisors believe that the activities need to be invested in to be made more equal and that there needs to be increased cooperation with other authorities and healthcare institutions. This is precisely because of the complexity of the causes behind debt problems; individual indebtedness is often linked to other social or health problems," says Julia Callegari.

Those people who have high debts believe that this type of cooperation could have been important in solving debt problems. But the most significant measure from society’s standpoint would have been to make it more difficult to take out quick consumer loans, such as payday loans.

“We live in a society where credit has become so accessible. People must have an understanding of what it means to take out a loan and pay interest. Still more can also be done at the political level to regulate the ability of creditors to lend money to people who are already heavily indebted,” says Julia Callegari.

Switch the focus from the individual to the societal level

Julia Callegari believes that it is also necessary to review whether the current social safety nets in society, such as social insurance and unemployment benefits, provide sufficient protection in the event of a sudden loss of income. Thereby, we would reduce the risk of the individual turning to credit in the event of sudden illness or unemployment.

It's about breaking the stigma and norms around debt problems, according to Julia.

“It’s important that we in society move away from the idea that debt problems are a result of careless handling of money or overconsumption. Research shows that instead, other factors can trigger debt problems. Feelings of shame and the feeling that you have done something wrong prevent many people from seeking help in time.”

“By understanding the underlying causes, we can reduce the shame surrounding debt problems and make more people willing to talk about and seek help for their situation,” says Julia Callegari.